Is it beneficial to invest in bank fixed deposit (FD)?
By Anupama Deshpande | October 3, 2017

We know that there are many options available in India where one can invest his/ her savings. Such instruments include Mutual Fund Investments, Stock Market Investments, Bank Fixed Deposits, Public Provident Fund, NSCs, Post Office Deposits, etc.

The returns generated by such instruments depend upon many factors such as risk, tenure, liquidity, etc. Among all, Bank Fixed Deposit (FD) or Term Deposit is one of the most popular instruments for saving the money for future needs. Under Bank's Fixed Deposit (FD), a fixed sum of money is deposited for a specified time usually for a period from 7 days to 10 years. A higher interest rate is offered on fixed deposit which varies from bank to bank according to the amount deposited and duration of investment.

Although the interest offered by the banks on FDs are reducing day by day, still people prefer bank's fixed deposit for investments over other instruments because it is considered more secured, comfortable and liquid. Further, it gives assured returns. So if you are also risk averse and want assured returns with easy liquidity anytime, it's always beneficial for you to invest in bank fixed deposit.

• Interest Rates Variable: From 4.5% to 6.80% based on term of deposit
• Maximum Investment Amount: No limit
• Lock in Period: Nil
• Tenure: 7 days to 20 years
• Premature Withdrawals: Entire amount, anytime but after charging a certain penalty
• Risk: Less risky
• Interest earned is taxable: Yes
• Tax deduction at source (TDS): TDS at the rate of 10% is deducted, if the interest earned on FD is more than Rs 10,000 in one financial year per bank
• Loan against the Fixed Deposit (FD) is available: Yes

People always wish to know which banks are paying higher interest rates on Fixed Deposits (FD) in 2017? Best Rate of Interest on Fixed Deposits in India? Comparative Bank Rates in India? Latest Deposit Rates of Banks in India 2017? Can someone provide the list of best interest rate offered by banks? Where can I get instant bank fixed deposit rates?

For your convenience, we are giving below top 8 public banks (PSU Banks) which offer you the best interest or the maximum rate of interest on Fixed Deposit.

It's always good to compare the interest offered by various banks on fixed deposit (FD) before investing your money. Above table will serve you as a ready reckoner for selecting the best bank for fixed deposit.

• Above interest rate is applicable for deposits upto Rs. 1 crore
• Majority of the banks in India offer extra 0.25% to 0.50% interest to senior citizens in addition to above
• Banks pay higher interest for deposits of Rs. 1 crore and above
• Banks charge a penalty for pre-mature withdrawal of Fixed Deposits
• You can rely on bank fixed deposits for regular income
• You can get Income Tax Rebate u/s 80C of upto Rs 1,50,000/- p.a., but only if the FD with a lock in period of 5 or more years

• Post Office Monthly Income Scheme (POMIS): It is a 5 year investment with a post office. Account may be opened by individual. Account can be opened by cash / Cheque. There is a maximum cap Rs 4.5 lakhs under single account and of Rs 9 lakhs under joint account. From 01.07.2017, interest rate is 7.5% per annum payable monthly. There is no tax benefit on POMIS investment and the interest earned is also fully taxable.
• Debt Schemes of Mutual Funds: It provides a regular and steady income to investors. The investment of such fund is made majorly in debt/ fixed income securities. It is best suited for those investors who require a regular income during the period of investment. It varies from very short term investments like in liquid funds & ultra short term funds to long duration debt schemes like govt. securities (gilt) funds, income funds and dynamic bond funds. Debt funds are very much tax-efficient as compared to bank fixed deposits.
• Public Provident Fund (PPF): As a long-term saving instrument PPF, backed by the Government of India, provides not only guaranteed returns but also generates tax-free maturity, is the best suited for those investors who require the old-age income security. It is the ideal option to the people whom safety of capital is of utmost importance.
• Fixed Maturity Plan (FMP): It is just like a long duration fixed deposit in a debt mutual fund. As it is closed ended, you cannot withdraw your investment before the fixed time period which is at least 3 years. You will get a benefit of Long Term Capital Gains & will be able to save much on taxes (as much as upto 80% to 90%). It generates decent returns but there is no guarantee of an assured returns.

• Interest offered by the banks on FDs are reducing day by day
• Interest on bank FD is taxable
• TDS at the rate of 10% is deducted, if the interest earned on FD is more than Rs 10,000 in one financial year per bank
• Banks charge a penalty for pre-mature or early withdrawal of Fixed Deposits
• For getting Income Tax rebate under section 80C of Income Tax, your FD will be locked in at least for 5 years

I am sure that above article will definitely help you understand the features, benefits and drawbacks of bank fixed deposit (FD). It will also be useful to selecting bank which provides highest bank fixed deposit interest rates in public, private and foreign banks. The article also provides alternative investment options to bank FDs.