(The above table are the top 10 FDs with the best FD rates on offer across banks and across tenures for regular citizens. Interest rates updated on 20th June 2021)
Along with offering assured returns at flexible tenure, another feature of fixed deposits is a credit card against FD. These are secured credit cards that are issued against fixed deposit and are a good option to add to one’s purchasing power while building/improving the credit score.
Fixed Deposits or FDs are one of the most popular investment products in India. They are largely preferred by individuals who have low to no risk appetite and want guaranteed returns on their investments. The highest FD rate available currently is 8% by Muthoot Capital for a tenure of 5 years. Among the large banks in India, RBL, SBM, YES, and Indusind are currently giving the best FD rates i.e. 6.5% for regular customers and up to 7.25% for senior citizens.
As can be seen, small finance banks are currently offering the best FD rates, higher than most large banks. While some customers may choose to invest in large and established banks, they should note that deposits made in Small Finance Banks (just like commercial banks) are covered under the depositor insurance program of Deposit Insurance and Credit Guarantee Corporation (DICGC). This means that bank deposits (commercial as well as small finance banks) of up to Rs. 5 lakh, including fixed, recurring, savings and current deposits, per depositor per bank, are insured.
Fixed Deposits with Tax Saving Benefit
A tax-saving fixed deposit is a type of fixed deposit that is eligible for tax deduction under section 80C of the Income Tax Act.
*Interest rates updated on 20th June 2021
Important: Interest earned on your fixed deposit is taxed as per your income tax bracket. TDS was formerly paid at a rate of 10% if the interest income on an FD exceeded Rs 10,000 in a financial year (until the annual year 2019-20). The TDS deduction cap on fixed deposits was raised to Rs 40,000 a year in the interim budget of 2019 (applicable from the annual year 2020-21). However, for senior citizens, the threshold limit for TDS on interest is Rs. 50,000. Moreover, they enjoy deduction under Section 80TTB up to Rs 50,000 for all interest received from banks, post offices, among others, including FD interest.
Best FD Rates 2021 offered by Large Banks
Given below are the highest FD rates 2021 from large banks for deposits below Rs. 2 crores:
|
Bank Name |
FD Interest Rates | Deposit Tenure | |
| Regular Customers |
Senior Citizens (60 years and above) |
||
| SBM | 6.5% | 7% | 1 year to 1 year 1 month |
| RBL | 6.5% | 7% | 60 months to 60 months 1 day |
| YES | 6.5% | 7.25% | 5 years and up to 10 years |
| DCB | 6.5% | 7% | 36 months to 120 months |
| IndusInd | 6.5% | 7% | 1 year to 5 years |
| IDFC First | 6% | 6.5% | 3 years 1 day to 5 years |
| Axis | 5.75% | 6.5% | 5 years to 10 years |
| ICICI | 5.5% | 6.3% | 5 years 1 day to 10 years |
| HDFC | 5.5% | 6.25% | 5 years 1 day up to 10 years |
| SBI | 5.4% | 6.2% | 5 years and up to 10 years |
| Kotak Mahindra | 5.3% | 5.8% | 5 years and up to 10 years |
| Bank of Baroda | 5.25% | 5.75% | Above 5 years and up to 10 years |
(Interest rates updated on 20th June 2021)
As you can see, SBM Bank, RBL, YES Bank, DCB, and IndusInd are currently offering the best FD rates i.e. 6.5% for regular customers and up to 7.25% for senior citizens.
Click Here to view All Banks FD Rates 2021
Fixed Deposits by Small Finance Banks
Small Finance Banks are banks that provide banking services to un-served and underserved sections including small business units, small and marginal farmers, micro and small industries, and unorganized entities. These banks, like all commercial banks, can engage in other basic banking practices such as lending and accepting deposits.
Following are the best FD interest rates from Small Finance Banks in India:
| Name of the bank | 1 year | 3 years | 5 years | |||
| Regular Customers | Senior Citizens | Regular Customers | Senior Citizens | Regular Customers | Senior Citizens | |
| Suryoday Small Finance Bank | 6.5% | 6.75% | 6.25% | 6.5% | 6.25% | 6.5% |
| Utkarsh Small Finance Bank | 6.75% | 7.25% | 6.75% | 7.25% | 6.75% | 7.25% |
| Equitas Small Finance Bank | 6.5% | 7% | 6.65% | 7.15% | 6.4% | 7.1% |
| Ujjivan Small Finance Bank | 6.5% | 7% | 6.75% | 7.25% | 5.8% | 6.3% |
| Jana Small Finance Bank | 6.25% | 6.75% | 6.50% | 7% | 6.75% | 7.25% |
| Fincare Small Finance Bank | 5.6% | 6.1% | 6.25% | 6.75% | 6% | 6.5% |
| AU Small Finance Bank | 5.25% | 6% | 6.5% | 7.25% | 6.25% | 7% |
(Interest rates updated on 20th June 2021)
Best FD Rates by Non-banking Financial Companies (NBFCs) in India
(Interest rates updated on 20th June 2021. Rates are given for the cumulative option only.)
*HUDCO Ltd. and Hawkins Cooker Ltd. are currently not accepting fresh public deposit applications.
To know more about Corporate/Company Fixed Deposits, Click Here
Please note: Unlike Fixed Deposits offered by Banks, there is no insurance for FDs from Non-Banking Financial Companies. Currently, Muthoot Capital, PNB Housing, and Shriram Transport are offering the highest fixed deposit interest rates (5.9% – 8%). However, the DICGC deposit insurance does not cover such corporate deposits.
Therefore it becomes important for you, as an investor, to check the credit rating of the company. It should not be below average (look for a ‘Stable’ outlook, at the very least). You may use websites like CRISIL, ICRA and CARE to check the company’s FD rating.
Post Office Fixed Deposit Rates
|
Tenure |
Rate of Interest* (p.a.) |
| 1 year | 5.5% |
| 2 years | 5.5% |
| 3 years | 5.5% |
| 5 years | 6.7% |
*Quarterly compounding; the aforementioned interest rates were effective from 1st April 2020 to 31st December 2020. New rates haven’t been announced yet.
Fixed Deposit Interest Rates For Senior Citizens (Aged 60 years & above)
As you must have noticed in the above table, fixed deposit interest rates for senior citizens are higher than general FD rates. Such deposits are a suitable investment option for senior citizens with low and/or irregular income. However, to obtain a senior citizen account and take advantage of the perks, one must provide valid proof of age.
Things you should know:
- At the time of account opening, the senior citizen must be 60 years old or older.
- Most of the banks provide senior citizens FDs with tenure ranging from seven days to ten years.
- A senior citizen FD will give you a better interest rate of 0.25 per cent to 0.75 per cent than a normal FD.
- Loans can be taken out against a senior citizen’s FD.
How to choose the best-fixed deposit in India?
Now that you have read about interest rates, here is a quick guide to help you choose the best-fixed deposit in 2021
- Compare the Interest Rates:
While choosing a fixed-term deposit plan, the first thing to do is compare the interest rates provided by various providers The interest rate is determined by several factors, including the size of the deposit, the candidate’s age, and the term selected.
Currently, small finance banks and private sector banks are providing the highest FD slab rates of 7% – 8.25% p.a., which is 2% – 2.5% higher than the highest FD slab rates provided by public sector banks and major private sector banks.
- Tenure and financial goals in mind:
The time for which you can deposit your money is an important aspect while choosing the best fixed deposit scheme. Banks provide fixed deposits for tenure ranging from 7 days to 10 years. When deciding the FD tenure, you should consider liquidity and the time horizon of your financial objectives. If you ignore your financial objectives and close your FD accounts prematurely in the event of financial emergencies, the bank will levy a premature withdrawal penalty of up to 1% on the effective interest rate. This will lower the net interest on your deposit.
- Provider’s Credibility:
Several banks provide higher FD interest rates but might indicate some risk. It is always advisable to make deposits in scheduled banks and NBFCs that are certified by ICRA, CRISIL, etc.
Also, if you want to invest in Corporate Fixed Deposits, you should consider company funds based on the credit ratings on deposits provided. Company Deposits with high credit ratings (for instance: FAAA, FAA) are considered safe. These ratings indicate a degree of safety regarding the timely payment of deposit amount (principal) and interest.
In case of emergencies, you might have to make a partial withdrawal from your FD. When you do so, certain providers incur a steep penalty or reduce the interest rate. Hence, you must consider the penalty amounts before choosing the right fixed deposit.
- Choosing between Cumulative and Non-Cumulative FDs
Choose whether you like periodic returns or interest at maturity, depending on your financial targets. Non-cumulative FDs provide payouts weekly, quarterly, or semi-annually, making them ideal for senior citizens looking for steady income. Cumulative fixed deposits, on the other hand, allow you to compound your interest over time and receive your earnings at maturity. In addition, as opposed to their counterparts, cumulative fixed deposit deposits pay out higher interest rates.
The application process differs from one FD provider to another. When choosing a provider, see if they have an online application process that allows you to open an FD from the comfort of your own home without having to go to a branch. It’s best to pick a provider that accepts applications both online and offline.
How to calculate interest on Fixed Deposit?
You can calculate the net interest you’ll receive after your term using the FD calculator.
There are two methods of calculation of interest on a fixed deposit, viz. Simple Interest and Compound Interest.
Simple Interest Formula: SI = P x R x T/ 100
Where,
- SI = Simple Interest
- P = Principal (amount invested)
- R = Rate of Interest (in %)
- T = Tenure (time for which deposit is kept in FD account)
For example, if a sum of Rs 10,000 is invested for 3 years at 10% interest rate per annum, then at the time of maturity,
SI = 10,000*10*3/100 = Rs 3,000 | Maturity Amount = Rs 13,000
Formula for Compound Interest: A = P (1+r/n) ^ (n * t)
Where,
- A = Maturity Amount
- P = Principal amount
- r = Rate of Interest (in decimals)
- n = number of compounding in a year
- t = number of years
For example, if a sum of Rs 10,000 is invested for 3 years at a 10% compound interest rate (quarterly compounding), then at the time of maturity,
A= 10,000 {1 + (0.1/4)} ^ (4 * 3)
A = 10,000 (1 + 0.025) ^ (12)
A = 10,000 (1.025) ^ (12) = Rs. 13,449 (approximately)
Compound Interest (CI) Earned over 3 years = Maturity Amount – Principal Amount
CI = 13,449 – 10,000 = Rs. 3,449
FAQs
Which bank is giving the highest interest rate on fixed deposits?
Currently, SBM Bank, RBL, YES Bank and IndusInd are offering the best FD rates of 6.5% for regular customers and up to 7.25% for senior citizens. Amongst NBFCs, Muthoot Capital FD is currently offering the best-fixed deposit rates i.e. 8% for regular customers and 8.5% for senior citizens.
What are the income tax benefits of investing in a fixed deposit?
On investing in a 5-year FD, you can claim up to Rs. 1.5 lakh as Deductions u/s 80 of the IT Act, 1961.
Is interest in FD taxable?
Yes, the interest on FD is fully taxable. The income earned is added to your total income and taxed as per your tax bracket. It is reflected under ‘Income from other sources in your ITR. Besides that, banks and NBFCs also deduct TDS on your interest income.
How to save tax on fixed deposit interests?
Submit Form 15G or Form 15H (for senior citizens) to your FD provider. This form needs to be submitted every year so as to avoid TDS. Please note that if your interest income is taxable but you instruct your FD provider against TDS, you will have to pay the same while filing the ITR.
Is FD a safe investment option?
Yes, an FD is a safe investment option for risk-averse investors who are seeking a stable investment avenue to grow their savings. You can get the best FD rates, flexible tenures, and select periodic payouts. You will also get guaranteed returns, without any effect of market fluctuations.
What are the premature withdrawal penalty charges for FD?
Banks and NBFCs charge a penalty of 0.5 % – 1% on premature withdrawals from FD accounts.
Can I take a loan against FD?
Loan against FD is an important feature of fixed deposits and thus most of the banks do offer this option to their customers. You can get a loan of up to 90% of the deposit amount (may vary as per your bank).
Can I prematurely withdraw a tax saving FD?
No. Tax saving fixed deposit comes with a lock-in period of 5 years. This can be prematurely liquidated in case of the death of the FD holder/primary account holder.
What is the minimum amount required to invest in a tax-saving FD?
You can start investing from Rs. 100 in a tax saving fixed deposit. However, most of the banks have kept Rs. 1,000 as the minimum deposit amount. It can go up to Rs. 1.5 lakh.
When is tax at source deducted on FD interest income?
If your fixed deposit interest income exceeds Rs 40,000 in a financial year, then your provider exercises TDS. For senior citizens, this limit is Rs 50,000. This can be avoided by submitting Form 15G/H. These limits are for bank fixed deposits or time deposits only.
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