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Fixed Deposit
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Fixed deposit or FD is an investment instrument which is offered by banks and non-banking financial companies (NBFCs). This allows customers to safely park their savings and earn interest at a fixed rate thus giving them the much sought after stability. FD interest rate is higher than what customers get on depositing their money in a regular savings account.

Fixed deposits are called as term deposits in banking parlance since these deposits are maintained for a specific period (usually ranging from 7 days to 10 years). 

Furthermore, these are secured under the insurance cover of up to Rs. 5 lakh by the Deposit Insurance and Credit Guarantee Corporation or the DICGC.  

Why Invest in Fixed Deposits (FD)?

Fixed deposits come with various features and benefits that make investing in fixed deposits a sound decision, especially for risk-averse investors. These are mentioned below:

  1. Guaranteed Returns on Investment

FD provides guaranteed returns on investments. The fixed deposit interest rate applicable (at the time of investment) is what the bank commits to pay on the investments and is always risk-free. It is because the FD interest rates are not market-influenced but fixed. 

  1. Risk-free Investment 

Money put into a fixed deposit account with banks (commercial & small finance banks) is 100% safe (up to Rs. 5 lakh). DICGC, a fully owned subsidiary of RBI, guarantees to pay a compensation of Rs. 5 lakh (per bank), if the bank goes into liquidation. This deposit insurance is inclusive of the principal amount as well as the interest earned.

  1. Affordability

Fixed deposit is a highly affordable investment option as you can start investing from as little as Rs. 100. However, the majority of the top banks in India allow a minimum deposit of Rs. 1,000. 

  1. Flexible Tenure 

Investors can choose to deposit their savings anywhere from 7 days to 10 days. Some banks (e.g. IDBI Bank) offer an extended period of up to 20 years. The interest rates vary with different tenure options. 

However, if you are looking to save on income tax, many consider the tax-saving fixed deposit schemes where savings are locked for a minimum of 5 years and the investment made here qualifies for 80C deduction of the IT Act, 1961. 

Suggested Read: Best Tax Saving FD Rates 2020

  1. Higher Returns

Fixed deposit interest rates are higher than the savings account interest rates. Where most of the banks limit the interest rate on a savings account at 3% - 4.5%, fixed deposit interest rates can go up to 9% p.a. This rate depends on the bank/company, age of the investor (senior citizens generally get 0.5% higher rate of interest) and tenure that one invests for (generally 1 year – 3 years of tenure fetches better rates). 

Suggested Read: Best FD Interest Rates in 2020

  1. Easy Calculation of Returns

Since the parameters (interest rates and tenure) of a fixed deposit are fixed, it becomes easy to predict returns. This, in turn, helps in better financial planning. 

With the help of online free tools like FD calculator by Paisabazaar.com, anyone can easily check and calculate estimated returns on FD investments.

  1. Loan against Fixed Deposit (FD)

Investors can apply for a loan on their FD investments in times of need. Instead of opting for high-interest personal loans, if you have invested in a fixed deposit, you can avail Loan against FD. This loan can be taken for up to 90% of the FD amount (approximately). This means if you have an FD of Rs. 10 lakh, you can easily get a loan of up to Rs. 9 lakh (approximately). 

Useful Article: Loan against FD

  1. Credit Card against Fixed Deposit

If you have a fixed deposit, you can avail a secured credit card against it. However, the availability depends on the bank or NBFC involved. Its limit is set in line with your FD amount, thus making it secure.  

Suggested Read: Credit Card against Fixed Deposit

  1. Premature or Partial Withdrawal

FDs with premature withdrawal facility allow the depositors to close it before maturity (e.g. an FD booked for 3 years withdrawn after only 1 year). However, account holders are required to pay a premature penalty to the bank for withdrawing the FD amount before deposit tenure. This penalty usually goes up to 1-2%. 

Suggested Read: How to close an FD

In order to choose the best fixed deposit scheme, you should consider all the aforementioned points thoroughly. 

Fixed deposit rates vary from one bank to another and also for different deposit tenure. To know which option would make as the top FD scheme for you, check the list below:

Best Fixed Deposit Rates in India by Top Banks – Up to 1 year 

Bank/NBFC

FD Interest Rate*

Regular Individuals

Senior Citizens

Fincare Small Finance Bank

6.95%

7.45%

Utkarsh Small Finance Bank

7.75%

8.25%

Suryodaya Small Finance Bank

7.25%

7.75%

Equitas Small Finance Bank

7.10%

7.70%

Jana Small Finance Bank

7.50%

8.00%

DCB Bank 

7.00%

7.50%

IDFC First Bank 

7.25%

7.75%

RBL Bank

7.20%

7.70%

HDFC Bank

5.25%

5.75%

Axis Bank

5.45 

6.10%

State Bank of India

5.10%

5.60%

Bank of Baroda

5.10 %

5.60%

Data updated on 24th July 2020.

Note: These rates are applicable on the amount below Rs. 2 Crore.

Fixed Deposit Interest Rates in India by Top Banks – Up to 3 years

Bank

Rate of Interest*

Regular Individuals

Senior Citizens

Fincare Small Finance Bank

7.20%

7.70%

Ujjivan Small Finance Bank

6.50%

7.00%

RBL Bank

7.25%

7.75%

Yes Bank

6.75%

7.25%

DCB Bank

6.95%

7.45%

Axis Bank

5.50%

6.00%

IndusInd Bank

6.75%

7.25%

Deutsche Bank

4.75%

4.75%

IDBI Bank

5.40%

6.00%

State Bank of India

5.40%

6.20%

Data updated on 24th July 2020.

Note: Aforementioned FD interest rates are applicable on the amount below Rs. 2 Crore.

Top 10 Bank Fixed Deposit Interest Rates in India – Across Tenure

Bank

Regular Citizens

Senior Citizens

Deposit Tenure

Suryodaya Small Finance Bank

9.00%

9.25%

5 years

Utkarsh Small Finance Bank

8.00%

8.50%

700 days

Fincare Small Finance Bank

7.50%

8.00%

48 months 1 day to 59 months

RBL Bank

7.50%

8.00%

36 months to 36 months 1 day

IndusInd Bank

7.00%

7.50

1 year to below 3 years

Yes Bank

7.20%

7.75%

2 years to less than 3 years

Axis Bank

5.50%

6.15%

2 years < 30 months

HDFC Bank

5.50%

6.25

5 years 1 day - 10 years

Canara Bank

6.50%

6.00%

1 year

State Bank of India

5.40%

6.20%

5 years and up to 10 years

Data updated on 24th July 2020.

Top 10 Bank 5-year Tax Saver FD Rates in India

Bank

Rate of Interest*

Regular Individuals

Senior Citizens

IDFC First Bank

7.25%

7.75%

RBL Bank

6.75%

7.25%

IndusInd Bank

6.75%

7.25%

Yes Bank

6.75%

7.25%

DCB Bank

6.95%

7.45%

ICICI Bank

5.50%

6.00%

State Bank of India

5.50%

6.20%

IDBI Bank

5.50%

6.20%

Bank of Baroda

5.30%

5.80%

Data as on 23rd July 2020

Note: Listed fixed deposit interest rates are applicable on the amount below Rs. 2 Crore.

Company Fixed Deposits, also known as Corporate Fixed Deposits, are provided by non-banking financial companies (NBFCs). Features of a company/corporate fixed deposit are:

  • Tenure 

Unlike regular bank FDs, company FDs offer tenure ranging from 12 months to 120 months. There are limited options available as compared to bank fixed deposits. 

  • Interest Rates

Companies generally offer better FD interest rates as compared to the likes of SBI FD rates, HDFC FD rates and Axis Bank FD rates, etc. However, small finance banks like Fincare Small Finance Bank and Utkarsh Small Finance Bank are currently offering FD rates at par or in some cases, higher than those offered by company deposits. 

  • Tax Deduction 

Tax on company/corporate fixed deposits is deducted @10% like bank FDs. However, the limit is set at Rs. 5,000. This means that if your interest income exceeds Rs. 5,000 in a financial year, income tax (TDS) will be deducted.

  • Security 

The company fixed deposits are not covered under the DICGC insurance of up to Rs. 5 lakh. This means that if the company goes into liquidation, your money might be at stake. Therefore, it is important to check the credit rating before investing in a corporate fixed deposit.

Top 5 Company Fixed Deposit Providers in India

    1. PNB Housing Finance Limited 
    2. Shriram Transport Finance Co. Ltd.
    3. Mahindra Finance
    4. Bajaj Finserv
    5. Kerala Transport Development Finance Corporation Limited

Suggested Read: Corporate/Company Fixed Deposits

Best Company FD Rates 2020

Company/NBFC

Rate of Interest*

Deposit Tenure

Regular Individuals

Senior Citizens

Mahindra Finance

7.30%

7.55%

40 months

Shriram Transport Finance

8.18%

8.43%

60 months

Bajaj Finserv

7.10%

7.35%

36 – 60 months

Sundaram Finance Company

7.00%

7.25%

24 – 36 months

Kerala Transport Development Finance Corporation Ltd

8.00%

8.25%

1 – 3 years

LIC Housing Finance FD

6.10%

6.35%

3 – 5 years 

PNB Housing FD

7.35%

8.60%

72 months – 120 months

ICICI Home Finance FD

6.85%

7.10%

>=48 months to <120 months

HDFC Ltd.

6.45%

6.70%

66 months

HUDCO 

7.50%

7.75%

12 – 36 months

*Data updated on 24th July 2020. The above-stated fixed deposit rates are applicable to Cumulative Fixed Deposit Schemes. Check Non-Cumulative Company Fixed Deposit Interest rates here.

Note: HUDCO has not been accepting fresh applications from 1st July 2019.

    • Cumulative Fixed Deposit
    • Non-Cumulative Fixed Deposit
    • Tax Saving Fixed Deposit

Cumulative Fixed Deposit

In cumulative fixed deposits, the interest is compounded monthly, quarterly, half-yearly or yearly. This interest keeps on accumulating and is paid in the maturity amount at completion of the FD tenure. 

In other words, the interest accrued is kept with the bank which is further reinvested in the next cycle at pre-fixed rates. This leads to exponential returns.

This option is good for those who have a stable cash inflow and are not looking for a top-up to their existing income like salaried people. 

Non-Cumulative Fixed Deposit

Non-cumulative FD works exactly the opposite of cumulative. Here, interest is paid off to the deposit holder at regular intervals. This frequency can range from monthly to yearly. However, most of the depositors choose the monthly option. 

This acts as regular income for individuals like pensioners, freelancers and homemakers, etc.

Suggested Read: Cumulative vs Non-Cumulative FD

Tax-Saving Fixed Deposit

Tax-saving FD is a type of fixed deposit where one can save on the income tax. An investor can deposit up to Rs. 1.5 lakh every year. This amount can then be claimed as deductions at the time of filing ITR u/s 80C of the Income Tax Act, 1961.

It should be noted that the interest earned on any tax-saving fixed deposit is taxable

This type of fixed deposits comes with a minimum of 5 years of the lock-in period. This means that one cannot prematurely withdraw a tax saver FD. However, the depositor can nominate someone to withdraw the accrued deposit amount before or post maturity in the event of his/her demise. 

The nomination is to be filed at the time of application.

Suggested Read: Tax Saving Fixed Deposits

Income Tax on Fixed Deposit Interest

Interest earned on Fixed Deposit is added to the investor’s annual income and is fully taxable under the income tax slab applicable. FD interest income is considered under ‘Income from Other Sources’ category in the Income Tax Return.

Under Union Budget 2019 announcement, the government raised the TDS (Tax Deducted at Source) threshold limit on interest earned on bank/post office deposits from Rs. 10,000 to Rs. 40,000. So, from April 2019, banks will not deduct TDS if income earned by interest is up to Rs. 40,000. On FD interest income more than Rs. 40,000, banks will deduct 10% TDS.

Earlier, banks used to deduct TDS on interest income of more than Rs.10,000. Any individual who is earning FD interest income up to Rs. 10,000 was not deducted any TDS. There used to be no TDS deduction on FD interest income up to Rs. 10,000, but the interest income was added to the annual income.

However, if an individual fall under 5% income tax slab, then the individual can file Income Tax Return and claim a refund. If an individual is not liable to pay any income tax as per the Income Tax Slabs applicable, then the individual can submit Form 15G with the bank to avoid TDS deduction. Senior citizens can submit Form 15H with their bank to avoid TDS deduction. 

However, if any individual falls under any income tax slab which is more than 10%, then he/she is liable to pay more tax (above TDS).

Apart from residents of India, fixed deposits are also available for those residing outside the country, i.e. Non-Resident Indians or NRIs. There are 4 types of NRI FDs available. These are: 

Type of NRI Fixed Deposit

Purpose

Interest Taxable in India (Yes/No)

Non-Resident External or NRE FD

  • To remit foreign earnings to India 
  • Deposits converted from foreign currency to Indian Rupee 

No

Non-Resident Ordinary or NRO FD

  • To manage income earned in India

Yes (TDS @ 30.90%)

Foreign Currency Non-Resident or FCNR FD

  • To park foreign earnings in Indian account 
  • Deposit not converted to Indian Rupee

No

Resident Foreign Currency or RFC FD

  • NRIs /PIOs who have returned to India can park their savings in this FD 
  • Deposits not converted to Indian Rupee

Yes

(When the depositor becomes Indian Resident)  

A Fixed Deposit Interest Calculator or an FD Calculator is a tool available online which calculates the interest one will earn on a fixed deposit investment. However, it should not be taken as the absolute value but an estimate.

A customer looking to invest in a fixed deposit should use the FD calculator to check and compare returns from various banks/companies at different tenure. This way, one can better know what to expect and make a more practical and well-informed investment.

How to use an FD Calculator?

Using an FD calculator is an easy task. Provide the following details in the fields given in the calculator and the calculator will give you an estimate in seconds:

  1. Deposit Amount: It is the amount that an individual wishes to invest in the FD. It starts from Rs. 100. However, many banks offer Rs. 1,000 as the minimum deposit amount.
  2. Rate of Interest: It is the interest rate offered by the bank or the company on the deposit amount for the chosen tenure.
  3. Deposit Tenure: This is the period for which the FD will be active and earn interest. It ranges from 7 days to 20 years. This can be selected in years or months.

Once all the details are filled, hit the “Calculate” button. 

Fixed deposit and recurring deposit are two of the very safe investment avenues open to investors who wish to earn decent returns and not wet their feet with market risks. Where FD allows one-time deposit, RD allows investors to deposit at monthly intervals.

Fixed Deposit (FD) vs Recurring Deposit (RD) – Which is better?

 

Fixed Deposit (FD)

Recurring Deposit (RD)

Investment Frequency 

One time

Monthly 

Minimum Investment Amount

Rs. 100 (varies from one bank to another)

Rs. 1,000 (varies from one bank to another)

Maximum Investment Amount

Up to Rs. 2-5 crore (This limit is not for bulk deposits)

Rs. 15 lakh (varies from one bank to another)

Deposit Term

7 days to 20 years

6 months to 10 years

Useful Article: FD Vs RD

Following is the list of KYC documents which are required for opening a Fixed Deposit Account:

Compulsory 

or

  • Form 60/61

Identity (ID) Proof (any one of the following)

Address Proof (any one of the following)

  • Passport
  • Telephone Bill
  • Electricity Bill
  • Bank Statement with a cancelled cheque
  • Aadhaar Card

Any individual can compare and open a Fixed Deposit Account online at Paisabazaar.com by following two simple steps:

Step 1: Fill the Fixed Deposit form on Paisabazaar with required personal data like the city that an individual resides in, name of the investor, date of birth, email address and contact number. Once submitted, the Fixed Deposit tool will list the best FD options to compare.

Step 2: Compare the best fixed deposit interest rates and choose the one that is suitable for you. Now, the depositor will be either redirected to the selected bank’s website or provided with a reference number. 

Alternatively, you can open a fixed deposit online at the official website/mobile application of the respective bank or NBFC. You can also opt to open FD offline by visiting the preferred bank’s branch nearby along with the required documents.

Who can invest in a fixed deposit scheme in India?
Resident individuals, private and public limited companies, Hindu Undivided Families (HUF), partnership firms and societies can book fixed deposits. 

What are the minimum and maximum tenure of FD schemes?
The tenure of FD schemes varies from as less as 7 days to as long as 10 years. Some banks may offer up to 20 years of term deposits. 

What is the minimum lock-in period for a tax-saving fixed deposit?
Tax-saving FD schemes have a lock-in period of 5 years. 

What is the minimum deposit amount allowed for opening a fixed deposit?
The minimum amount for opening a fixed deposit is generally set at Rs. 1,000. However, a tax saving 5-year fixed deposit can be opened with a bare minimum of Rs. 100.  

How much tax is deducted on FD interest income?
TDS @10% is levied on interest income of more than Rs. 40,000 for regular individuals and Rs. 50,000 for senior citizens. For company FDs, this limit is set at Rs. 5,000. 

Is it compulsory to submit a PAN to open an FD?
Yes. It is compulsory to quote your PAN when applying for a fixed deposit. However, if you do not have a PAN, you need to submit duly filled Form 60/61 (not being a company or a firm).

Is it safe to open FD in small finance banks?
Yes. Small finance banks are regulated by the Reserve Bank of India. Also, the deposit insurance of up to Rs. 5 lakh by DICGC is provided on these fixed deposits. 

What is NRE fixed deposit?
Full form of NRE FD is Non-Resident External Fixed Deposit. This FD is for Non-Resident Indians (NRIs). They can deposit their foreign earnings in an Indian Account. Interest earned on an NRE FD is not taxable in India. 

What is the difference between NRE FD and NRO FD?
NRE FD (Non-Resident External) is for NRIs to remit/transfer their foreign earning to an Indian account. NRO FD (Non-Resident Ordinary) is for NRIs to manage their income earned in India. 

Can depositors get interests on a monthly basis?
Yes, non-cumulative fixed deposits have this option. You can choose to have interest in your account on a monthly basis. 

What benefits are offered to senior citizens under FD schemes?
Senior citizens get an additional interest (up to 0.65%, approximately) on the same FD scheme. SBI FD, ICICI Bank FD and HDFC Bank FD, till 30th September 2020, are offering extra interest of up to 0.30% on the existing preferential rates to the senior citizens. Check here.

Check: Senior Citizen Fixed Deposit Interest Rates.

Does premature withdrawal negatively affect FD earnings?
Yes. You have to pay a penalty of up to 1% on premature closure. This 1% of penalty is levied on the effective rate of interest which reduces your earning. Click here for clarifications.

Can minors open a fixed deposit account?
Many banks and NBFCs offer FD investment options to minors with a parent/guardian acting as co-applicant.
Post Office FD or post office time deposits can be opened in the name of a minor (above the age of 10 years) and be operated by a legal guardian till the minor attains 18 years of age. Check the updated Post Office FD rates here.

4 / 5 (3 Reviews)

PaisabazaarFixed Deposits
4/5

Very good

I am using this SBI Fixed Deposit since 1 year and it is giving me highest interest rate. I applied for my deposit sceheme from Paisabazaar, the application process was very simple and quick. The documentation are hassle free without much complications. The services of SBI account also are very..Read more...


Posted on: Jan 11 , 2017
PaisabazaarFixed Deposits
4/5

Interesting site

I applied for my HDFC deposit scheme right now and I am surprised that the application process got over in just 5 mins. It is a very nice website and the services are really good. The website has a very good section of blogs and relevant information about personal finance. Very good job!


Posted on: Dec 30 , 2016
PaisabazaarFixed Deposits
4/5

Really good site

My HDFC Fixed Deposit scheme is really good and I can enjoy the benefits at a very good interest rate. The bank people are really nice and the services are really quick. I could apply for my deposit scheme very smoothly from Paisabazaar website. The website is very nice and informative. Good se..Read more...


Posted on: Dec 30 , 2016