19 Nov 2020 | 6 min read
The fixed deposit is one of the safest and most popular investment schemes.
Not only does it help you save money but also helps you gain interest in it. Interest rates from Bank FDs enable the depositor to achieve a reasonable return on investment over a fixed term. Under the fixed deposit system at the moment of opening the account, the depositor can invest the money only once.
The Interest rate on fixed deposits varies based on various factors. Following are the top bank fixed deposits interest rates in India:
Tenure: 1 year
Banks |
Interest Rate (% p.a.) |
IndusInd Bank |
7.00 |
RBL Bank |
6.75 |
DCB Bank |
6.65 |
Ujjivan Small Finance Bank |
6.50 |
Lakshmi Vilas Bank |
6.00 |
Tenure: 2 years
Banks |
Interest Rate (% p.a.) |
IndusInd Bank |
7.00 |
RBL Bank |
6.75 |
DCB Bank |
6.80 |
Ujjivan Small Finance Bank |
6.50 |
AU Small Finance Bank |
6.50 |
Tenure: 3 years
Banks |
Interest Rate (p.a. %) |
IndusInd Bank |
6.75 |
RBL Bank |
7.15 |
DCB Bank |
6.95 |
Ujjivan Small Finance Bank |
6.50 |
AU Small Finance Bank |
6.75 |
Tenure: 5 years
Banks |
Interest Rate (p.a. %) |
IndusInd Bank |
6.75 |
RBL Bank |
6.50 |
DCB Bank |
6.95 |
Lakshmi Vilas Bank |
6.00 |
AU Small Finance Bank |
6.50 |
The interest rate offered on fixed deposits (FD) will depend on the period for which you are investing in the FD and will also differ for FDs for the same tenure from bank to bank. Higher interest rates are usually provided to senior citizens. You may choose either a cumulative option or a non-cumulative option to earn interest payments.
Under the cumulative option, interest earned on the deposit is re-invested and paid along with the principal amount at the time of maturity.
In the case of a non-cumulative option, interest is credited to the account of the depositors at the pay-out period selected at the time of placing an FD. Generally, one can choose from the options offered by the bank to earn interest on a monthly, quarterly, semi-annual, or annual basis.
Taxes
In the possession of the investor , the interest earned on the FD is completely taxable. The rates applicable to your revenue tax slabs would be charged. As per current tax laws, TDS will be deducted by the bank if the interest payment exceeds Rs 10,000 in a single financial year. It is necessary to apply Form 15G or Form 15H (as applicable) to the bank to prevent TDS.
Early withdrawals
One can withdraw his or her FD before the maturity date in the case of any urgent requirements. The bank may impose a penalty on premature withdrawals. The sum of the penalty varies from one bank to another.
The rules about premature withdrawals must be reviewed during the placement of an FD. Banks also sell FDs without an early withdrawal facility, as well as FDs without a premature withdrawal penalty.
Loan Facility
FD may be used as collateral to secure a loan. The maximum loan sanctioned is generally a certain percentage of the principal deposit. This proportion can vary from bank to bank.
The Fixed Deposits (FDs) nomination facility is also available.
Automatic Renewals
Most banks automatically renew the FD at maturity if no clear instructions are issued, for the same period for which it was initially placed at the interest rates prevailing on the date the FD matures. If you do not want your FD to be automatically renewed, you must select this option on the account opening form.
If you forget to mention it then on the day of maturity, you can visit the bank branch and ask them to credit the proceeds to your savings account.
Placement by Net-banking
Banks now provide the facility to open an FD account online via your account through Net Banking. Without having to visit a branch physically, one can invest in FD. Know, however, that if you invest electronically, your bank can not give you a printed FD receipt/advice.
You will want to know how much interest you will receive upon maturity on your FDs. By using an FD calculator available on the internet, it can be easily measured and you will find out the cumulative interest you will receive at the end of the tenure. Alternatively, with the formula given below you can find out the return on your FDs:
A = P * (1+ r/n) ^ n*t
Where,
I = A – P
A = Maturity amount
P = Principal amount
r = Interest rate
t = Tenure
n = Compounded interest frequency
= Interest earned
It is known that a fixed deposit is a safe investment option that guarantees consistent interest rates, various interest payment options, and no market-related risks, with income tax deductions. However, it is crucial to compare available fixed deposit rates before making a decision. We hope that you got the information you were looking for in this article.