Fixed Deposit

Fixed Deposit offers income certainty and capital protection, making it a popular investment choice, especially among new and conservative investors. These features also make fixed deposits an ideal instrument for realizing short-term financial goals and for parking emergency and post-retirement corpuses. FD interest rates of scheduled banks range from 2.10% p.a. to around 7.49% p.a. for the regular depositors for tenures ranging from 7 days to 10 years. Senior citizens are usually offered an additional interest of 0.50%-0.75% p.a. above the applicable FD card rates.

FD Interest Rates 2022

Small Finance Banks and NBFCs offer the highest FD rates. Following them are PSU Banks and large Private Sector Banks. However, Private Sector Banks like RBL Bank, DCB Bank, IndusInd Bank and Yes Bank offer higher FD slab rates than the FD rates offered by other private sector banks.

Fixed Deposit Interest Rates of Small Finance Banks

FD rates as of 29 June 2022

Fixed Deposit Interest Rates of Private Sector Banks

FD rates as of 29 June 2022

Fixed Deposit Rates of Public Sector Banks

FD rates as of 29 June 2022

Tax Saving Fixed Deposit Rates

FD rates as of 29 June 2022

Fixed Deposit Interest Rate of Leading Foreign Banks

FD rates as of 29 June 2022

Company/Corporate FD Rates 2022

*At Monthly Rests. Additional interest of 0.25% p.a. is applicable on all renewals where the deposit is matured. **Additional ROI of 0.10% p.a. will be applicable on Individual deposits of up to Rs. 50 Lakh per month per customer (other than RD) placed/renewed through HDFC’s online system and on auto-renewed deposits.

Interest rates as of 29 June 2022

The above-stated fixed deposit rates are applicable to Cumulative Fixed Deposit Schemes.
Check Non-Cumulative Company Fixed Deposit Interest rates here.

Why Invest in Fixed Deposits (FD)?

1. Guaranteed Returns on Investment

FD rates booked at the time of opening an FD account remains the same till its maturity, regardless of any changes in the banks’ FD card rates in the interim. For instance, if an individual opens a bank fixed deposit of 3 years tenure at 6% p.a., the interest rate will remain the same till the completion of its 3 years tenure. This offers a high degree of income certainty in FDs, even higher than those offered by most small saving schemes.

2. Capital Protection

Fixed deposits booked with the scheduled banks are covered under the deposit insurance program of DICGC, a subsidiary of RBI. The insurance cover is applicable on cumulative bank deposits, which include fixed deposits, savings account, recurring deposits and current account, of up to Rs 5 lakh per bank per depositor, in case of bank failure.

Suggested Read: DICGC – All about the Deposit Insurance

3. Tax deduction under Section 80C 

Many banks and NBFCs offer 5-year tax-saving FD scheme with lock-in period of 5 years. The principal component of up to Rs 1.5 lakh each financial year can be claimed as tax deductions u/s 80C of the Income Tax Act. However, the interest component is taxed as per the tax slab of the depositor.

Suggested Read: Best Tax Saving FD Interest Rates in 2022

4. Loan against Fixed Deposit (FD)

Depositors can leverage their FDs to avail loans. Loans against FD are usually offered in the form of overdraft facility, wherein the credit limit is sanctioned on the basis of the FD amount pledged as collateral and the interest is also levied only on the amount drawn till its repayment. Moreover, the borrower continues to earn interest on the pledged FDs during the loan tenure. Withdrawals can be made anytime up to the credit limit from their overdraft account and repay it as per their repayment capacity. These features of loans against FDs make them an excellent tool for mitigating frequent liquidity and cash flow mismatches, without requiring prematurely closing FDs and incurring premature withdrawal penalties.

Suggested Read: Loan against FD

5. Credit Card against Fixed Deposit

Depositors having nil or low credit score can leverage their FDs to avail secured credit cards. As the transactions made through secured cards are reported to the credit bureaus, disciplined usage of secured credit cards can help in building or improving one’s credit score. Such cards can also be helpful for those who fail to avail regular credit cards due others reasons like inadequate income, unserviceable location, employer’s profile or job profile. Paisabazaar, in partnership with SBM Bank (India) Ltd., issues credit card against FD – Step UP Credit Card. It’s a secured credit card issued against fixed deposits opened with SBM Bank. The card is a credit score builder best suited for consumers lacking credit access due to ‘no’ or ‘damaged’ credit history. Other features available on this credit card incudes 100% credit limit on the fixed deposit amount and the facility to use the virtual credit card as soon as the FD is booked. The credit card also comes with attractive offers and discounts from top brands like Zomato, Swiggy, Nykaa, BookMyShow, Big Basket, Lifestyle, Yatra, Croma, Reliance Digital, etc.

Click to know more about Step UP Credit Card.

6. Tax Deduction under Section 80C

Tax-saving FDs are offered by banks and NBFCs with a lock-in period of 5 years. The principal component of up to Rs. 1.5 lakh per financial year can be claimed as tax deductions under Section 80C of the Income Tax Act. Please note that partial or premature withdrawal is not allowed in tax-saving fixed deposits.

Click to know more about tax saving fixed deposits.

Frequently Asked Questions (FAQs)

Q. Who can invest in a fixed deposit scheme in India?

A. Resident individuals, private and public limited companies, Hindu Undivided Families (HUF), partnership firms, societies, governments, local bodies, etc. can book fixed deposits.

Q. What are the minimum and maximum terms of FD schemes?

A. The tenure of FD schemes usually varies from 7 days to as long as 10 years. However, NBFCs offer FD investment for a period ranging from 12 months to 60 months and HFCs offer FD tenures of 12 months to 120 months of fixed deposits.

Q. What is the minimum lock-in period for a tax-saving fixed deposit?

A. Tax-saving FD schemes have a lock-in period of 5 years.

Q. What is the minimum deposit amount allowed for opening a fixed deposit?

A. The minimum amount set by banks and NBFCs for opening a fixed deposit is generally set at Rs. 1,000. Public sector banks may have lower minimum deposit criteria while some large private sector banks have set minimum deposit requirement of Rs 5,000. However, a tax-saving 5-year fixed deposit can be opened with an amount as low as Rs. 100.

Q. How much tax is deducted on FD interest income?

A. 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 has been set at Rs. 5,000.

Q. Is it compulsory to submit a PAN to open an FD?

A. 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).

Q. Is it safe to open FD in small finance banks?

A. Yes. Small finance banks are regulated by the Reserve Bank of India. Also, deposit insurance of up to Rs. 5 lakh by DICGC is provided on these fixed deposits.

Q. What is NRE fixed deposit?

A. The 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. The account is maintained in INR which means that the money deposited is converted as per the later forex rates.

Q. What is the difference between NRE FD and NRO FD?

A. NRE FD (Non-Resident External) is for NRIs to remit/transfer their foreign earnings to an Indian account. NRO FD (Non-Resident Ordinary) is for NRIs to manage their income earned in India.

Read: NRE vs NRO vs FCNR

Q. Can depositors get interests on a monthly basis?

A. Yes, non-cumulative fixed deposits have this option. You can choose to have interest in your account on a monthly basis.

Q. What benefits are offered to senior citizens under FD schemes?

A. Senior citizens get an additional interest (usually up to 0.50%, approximately) on the same FD scheme. Banks like SBI, ICICI Bank and HDFC Bank are offering extra interest of up to 0.30% on the existing preferential rates to the senior citizens.

Suggested Read: Senior Citizen Fixed Deposit Interest Rates.

Q. Does premature withdrawal negatively affect FD earnings?

A. 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 earnings. Click here to know more about the premature withdrawal of FD.

Q. Can minors open a fixed deposit account?

A. 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.