The highest interest rate is offered by ESAF Small Finance Bank (for 1 year) at 8.75% and Equitas Small Finance Bank (for 1 year) at 8.50% followed by North East Small Finance Bank (for 1 year) at 8.50%.
Disclaimer: The Fixed Deposit Interest Rates keep on changing. You are advised to check the interest rates with banks before making your FD. Source: Bank Websites
What is a Fixed Deposit?
Fixed deposits is one of the most popular investment options in India. FD offers higher interest rate for flexible tenures ranging from 7 days to 10 years. FD can be opened to achieve your financial goals. It is considered good for short term as well as for long term investors. It is very popular product offered by all the banks in India. There are many private non-banking financial companies (NBFCs) which offer fixed deposit schemes to the customers at slightly higher interest rate as compared to banks.
Fixed Deposit Highlights
- Maximum Investment Amount: No such limit
- Interest Rates Variable: From 7 to 9% based on term
- Interest earned is taxable: Yes
- Lock in Period: No
- Tenure: 1 Year
- Maturity Value: Taxable
- Premature Withdrawals: Entire amount, anytime but after charging a certain penalty
- Risk: Risky as compared to PPF
Benefits of Fixed Deposit
Whenever you open an FD account, it is booked at prevailing interest rate. This interest is a guaranteed interest given by the bank till the maturity of the FD
The interest earned can be taken on a monthly or quarterly basis as per the need of the investor. It is a secondary monthly income for the investors.
Reinvestment of Interest
Apart from monthly payout facility of FD, the interest can also be reinvested, if the investor does not require any payout of interest portion. It can be accumulated and can be received along with maturity proceeds of the FD.
More Returns to Senior Citizens
Higher interest rate is offered on FD for senior citizen investors. They get around 0.50% higher interest on FDs than the normal investors.
No TDS upto Rs 10,000 per financial year
There is no deduction of TDS for interest amount of upto Rs 10,000 per financial year. If the interest amount exceeds Rs 10,000 in a financial year then only a TDS will be made by the banks. Persons who are not tax liable, can avoid TDS by submitting Form 15G/ 15H. TDS certificate is issued by the banks at the end of the financial year.
Availability of Loan against FD
One can take loan against FD at lower interest rate, in case of urgent need of money. Remember, this type of loan does not affect the credit score at all as it is given against security of FD. One can take a loan against FD upto 90% of FD value.
Auto Renewal Facility
Returns can be increased through Auto Renewal facility. There is no need to keep track of maturity date, it will be renewed automatically by the bank.
Premature Closure of an FD is also allowed. At times, you can have an emergency and you need money urgently say for medical treatment, etc. On such occasions, you can get your FD closed before its maturity date after paying a nominal penalty.
FDs generates higher returns than some of the investment avenues. It is considered safe and convenient instrument of investment.
Majority of banks provide online facility on their portals for opening an FD. There are very minimal documentation requirement and the investment can be made by following very easy steps.