The highest interest rate is offered by Deustche Bank (for 5 years) at 8.25% and IDFC Bank (for 5 years) at 8.25% followed by Suryoday Small Finance Bank (for 5 years) at 8.25%.
Fixed deposit also known as term deposit, is a financial product offered by the banks for investment to their customers. Banks offer higher interest rate on FD account investments than that of on savings account. There is no lock-in period in FD except for Tax-saver FDs. FD Investment is more favoured by those investors who want safer and easy to handle investment option. Its tenure ranges between 7 days and 10 years.
You can achieve different financial objectives by investing in FDs. FD account holder can avail loan against his/ her fixed deposit account at lower interest rate in case of emergency of funds. Investors can also close the fixed deposit account prematurely i.e. before the tenure ends by paying a certain penalty.
Tax rebate u/s 80C of Income Tax Act is also available, if you invest in an FD at least for 5 years or more. This rebate is available upto Rs 1.50 lakhs per financial year at present. Banks offer more returns to their senior citizen clients. Senior Citizens get at least 0.50% to 1% more interest on bank FDs than that provided to non-senior citizen customers.
- 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: 5 Years
- Income Tax Rebate u/s 80C: Yes upto Rs 1,50,000/- p.a., but on FD with a lock in period of 5 or more years
- Maturity Value: Taxable
- Premature Withdrawals: Entire amount, anytime but after charging a certain penalty
- Risk: Risky as compared to PPF
Taxability & TDS on Fixed Deposit
(1) Taxability on FD
Interest income arising out of an FD is taxable according to tax slab of the investor. If you are in 20% tax slab, you need to pay 20% tax on interest income of your FD.
(2) TDS Applicability
TDS will be applicable when the interest earned on an FD is beyond Rs.10,000 in a given financial year (from April 1 to March 31).
(3) TDS Applicability for Senior Citizen
For Senior Citizens (who are 60 years or older), TDS will be deducted only when the interest income exceeds Rs.50,000 in a given financial year.
(4) TDS Rate
If you have interest income of Rs.10,000 in a given financial year, TDS at the rate of 10% will be deducted by the bank.
(5) Increased TDS Rate
In absence of a valid PAN or if you fail to provide the PAN information to the bank/ post office, TDS at the rate of 20% is made which is 10% more than the standard TDS rate.
(6) Avoiding TDS on Fixed Deposits
Whenever the interest income is over Rs 10,000 in a given financial year, banks deduct TDS. One can avoid such deduction by submitting Form 15G/ 15H, if one's income is non-taxable.
(7) TDS on Joint FD Account
For a joint FD account, TDS will only be deducted against the primary (first) account holder as interest income will be treated to be earned by him/ her and not by the joint holder. Therefore, the joint holder of FD will not have any TDS related issue.
(8) Issuance of TDS certificate
Banks generate and send TDS certificates to the FD account holders mentioning the amount of deduction and the rate of deductions that are made.
(9) Time of Deduction of TDS
Deduction of TDS is made either at the end of a quarter or before paying the interest to the FD Account Holder. It varies from bank to bank.
(10) Refund of TDS
If the tax liability of the FD Account Holder has not arisen but bank has deducted TDS on the interest earned on his/ her FD account then the person can claim refund of TDS while filing of income tax return (ITR).