Fixed Deposit

A fixed deposit is an investment option which helps you to keep your money safe and at the same time yields good returns. One of the major advantages with FDs is that it offers greater returns on the principal invested as compared to the returns generated from your regular savings account. What you need to do is: deposit a lump sum amount of money in for a particular period, and you can get the returns on a yearly/quarterly basis.

Well, the defining criteria for FD is- the money invested cannot be withdrawn before maturity time, but some clauses allow you to withdraw your money before maturity in some cases. 

FDs give you great returns when your money is invested for a longer period. But some people prefer fixed deposits (FDs) for short-term goals as they are safe and give assured returns. 

Prevailing FD Rates

It’s important to know that the returns you get from FDs depend on the bank or NBFC offering which you have opted for. This is because different banks provide different interest rates on deposits.

Senior citizen investors have special provisions with most of the banks which offer higher returns to them as compared to others.

However, the interest rate of FDs also varies based on the investor’s age, tenure of investment, and on the type of FD plan one opt for.

However, the cut in the repo rates by RBI over the past one year and falling GDP have resulted in a decline in the interest rate of fixed deposits. Last year SBI was offering 8% interest p.a for FDs but now it has fallen to 7%p.a.

Here is a list of few more banks that are offering 7% interest for a one-year investment made under FDs presently.

BankFD Interest Rate (p.a.)
RBL Bank7%
IndusInd Bank7%
Bajaj Finserv6.90%
Yes Bank6.75%
DCB Bank6.50%
Standard Chartered Bank6.30%
Bandhan Bank5.75%
Axis Bank5.45%
HDFC Bank5.10%*
ICICI Bank5%

*HDFC Bank offers upto 0.75% extra interest rate with Senior Citizen Care FD offer.

Lock-in Period in FDs?

All FDs have a lock-in period which denotes a time period during which investors cannot withdraw their deposits.

However, premature withdrawals are possible with some FDs but you need to pay penalties for it. So, before you choose your FD plan make sure to know the terms and conditions of your bank/financial institution.

Apart from this withdrawing early also leads to loss of interest earnings and hence it is always advised not to touch your FDs until it matures. 

Tax on Fixed Deposit

The interest earned from FDs is taxable. The tax deducted on FD can range from 0% to 30%, depending on the income tax bracket you fall in.  

However, according to the current income tax rules, under Section 80C of the Income Tax Act, an investor can claim a deduction for investments up to ₹ 1.5 lakh in a financial year in tax-saving fixed deposits. For this one needs to deduct the amount invested in FD from the gross total income.