Fixed Deposits (FDs) have long been a preferred investment choice for those seeking a secure and predictable return on their savings. Some banks offer interest rates of 8% or more, making them an appealing option for risk-averse investors. For instance, Unity Small Finance Bank offers 9% interest for 1,001 days, while YES Bank offers 8% for 18 months.
Fixed deposits: Benefits
Fixed Deposits are a safe investment avenue, providing guaranteed returns over a fixed period. They are an excellent option for individuals looking to preserve their capital while earning interest, especially in comparison to more volatile investment options like stocks or mutual funds.
Banks offering 8% or more interest rates
Here's a breakdown of the banks that offer interest rates of 8% or higher on their fixed deposit schemes, according to Paisa Bazaar.
AU Small Finance Bank
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Highest slab: 8% for 18 months
1-year tenure: 7.25%
3-year tenure: 7.50%
5-year tenure: 7.25%
Equitas Small Finance Bank
Highest slab: 8.5% for 444 days
1-year tenure: 8.20%
3-year tenure: 8%
5-year tenure: 7.25%
ESAF Small Finance Bank
Highest slab: 8.25% for 2 years to less than 3 years
1-year tenure: 6%
3-year tenure: 6.75%
5-year tenure: 6.25%
Jana Small Finance Bank
Highest slab: 8.25% for 365 days to 1095 days
1-year tenure: 8.25%
3-year tenure: 8.25%
5-year tenure: 7.25%
Suryoday Small Finance Bank
Highest slab: 8.65% for 2 years 2 days
1-year tenure: 6.85%
3-year tenure: 8.60%
5-year tenure: 8.25%
Ujjivan Small Finance Bank
Highest slab: 8.25% for 12 months
1-year tenure: 8.25%
3-year tenure: 7.20%
5-year tenure: 7.20%
Unity Small Finance Bank
Highest slab: 9% for 1001 days
1-year tenure: 7.85%
3-year tenure: 8.15%
5-year tenure: 8.15%
Utkarsh Small Finance Bank
Highest slab: 8.50% for 2 years to 3 years; 1500 days
1-year tenure: 8%
3-year tenure: 8.50%
5-year tenure: 7.75%
DCB Bank
Highest slab: 8.05% for 19 months to 20 months
1-year tenure: 7.10%
3-year tenure: 7.55%
5-year tenure: 7.40%
RBL Bank
Highest slab: 8% for 18 months to 2 years
1-year tenure: 7.50%
3-year tenure: 7.50%
5-year tenure: 7.10%
YES Bank
Highest slab: 8% for 18 months
1-year tenure: 7.25%
3-year tenure: 7.25%
5-year tenure: 7.25%
Deutsche Bank
Highest slab: 8% for above 1 year to 3 years
1-year tenure: 7%
3-year tenure: 8%
5-year tenure: 7.50%
How to invest in a fixed deposit (FD)
Step 1: Check and compare FD rates
Interest rates on FDs vary across financial institutions. Generally, NBFCs and small finance banks offer higher rates compared to commercial banks. It's important to shop around and compare rates before making a decision.
Step 2: Pick a suitable deposit tenure
FD tenures range from 7 days to 10 years. Choose a tenure based on your needs. Experts often recommend laddering FDs across different tenures to spread risk and maintain liquidity. If you're looking for a long-term investment, consider a 5-year tax-saving FD, which can help you save tax under Section 80C of the Income Tax Act.
Step 3: Choose the frequency of interest payouts
After deciding on the tenure, select how often you want to receive interest payouts. The common options are:
Monthly
Quarterly
Half-yearly
Annually
Step 4: Select a mode of deposit
Choose the most convenient way to make your deposit. Most financial institutions allow you to deposit via internet banking or by visiting a local branch.
Taxability
Did you know the interest earned on FDs is fully taxable? You'll need to pay taxes on FD returns according to your tax slab. If your FD earnings exceed Rs 40,000 in a fiscal year, a 10% TDS will be deducted. For senior citizens, the threshold is Rs 50,000.
If your annual income falls below the tax bracket, you can avoid TDS by submitting Form 15G or Form 15H (for senior citizens). For tax-saving FDs or 5-year FDs, you can claim a deduction of up to Rs 1.5 lakh per fiscal year. However, these FDs come with a 5-year lock-in period and do not allow premature withdrawal.
