A fixed deposit is a financial investment offered by financial institutions to provide investors with interest rates which are higher than the normal savings account upon its maturity. In most cases, it does not require that the investor should create a new bank account.
In India and the UK, Fixed Deposits are also referred to as bonds. The Savings in an FD cannot be withdrawn until it is mature. They are known to be a very safe form of investment with minute risks when compared to other forms of investments.
Banks may provide its investors in FD with other services such as loans on their FD certificates at interest rates that are highly competitive. During uncertain economic conditions, interest rates offered by banks may become very low. In consideration of this fact, the interest rate is not fixed but ranges from 4% to 7.5%.
The tenure of the Fixed Deposit may take from 7, 15 or 45 days to 2 years to 10 years. It will interest you that FD investments are safer as compared to Post Office Investment Schemes as they offer tax benefits and are insured by DICGC.
WHAT ARE FIXED DEPOSITS?
Fixed deposits are investments or deposits that are made in banks or companies to yield a fixed rate of return over a given time. These deposits are accepted by Financial institutions, manufacturing companies, and other Non-Banking Finance Companies (NBFCs).
BANK FIXED DEPOSITS-
A fixed deposit is a form of savings which is provided by banks to account holders for a fixed tenure and a fixed interest rate. This scheme allows the account holder to deposit with the bank an acceptable amount of funds in an account known as a Fixed Deposit. At the end of the tenure, the interest accrued is calculated and total sum when added to the principal is offered to the depositor. Other names for fixed deposits are ‘term deposits’ and ‘time deposits’. If you intend to add more funds to your fixed deposit account then you need another FD account. However, the key features of a Fixed Deposit Account are as follows:
- They can be opened by all categories of persons including minors.
- Two persons who will lay claims to the funds on the death of the owner are chosen in the forms.
- They cannot be withdrawn until its complete tenure. However, premature withdrawal is permitted on moments of emergency after paying the prescribed penalty fee.
- There are services offered by banks which allows the depositor to link his savings account to the fixed deposit account which enables automatic transfer of funds from savings to FD accounts while enjoying the interests on the FD account with the savings account and can withdraw from the FD at any time.
- FD accounts avails you the opportunity to obtain loans to meet up with your financial needs.
FIXED DEPOSITS INTEREST RATES FOR TOP BANKS 2018
The table below indicates the interest rates that are offered by banks in India for regular individuals.
|Bank||Tenure (Min-Max)||Interest Rates (%)|
|IDFC Bank||366 days||7.50|
|Lakshmi Vilas Bank||1 year – 5 years||7.30 – 7.35|
|DCB Bank||1 year – 5 years||7.00 – 7.25|
|RBL Bank||1 year – 5 years||7.15 – 7.25|
|Deutsche Bank||1 year – 5 years||7.00 – 8.00|
|Bandhan Bank||1 year – 5 years||7.00 – 7.10|
|Karur Vysya Bank||1 year – 5 years||6.75 – 7.00|
|Tamil Mercantile Bank||1 year – 5 years||6.90 – 7.00|
|Karnataka Bank||1 year – 5 years||6.50 – 7.25|
|HDFC Bank||1 year – 5 years||6.25 – 7.00|
|Induslnd Bank||1 year – 5 years||6.50 – 7.00|
|Oriental Bank of Commerce||1 year – less than 2 years||6.60|
|Yes Bank||1 year – 10 years||6.75 – 6.90|
|Union Bank||10 months – 10 years||6.50 – 6.75|
|Axis Bank||1 year – 10 years||6.25 – 6.85|
|ICICI Bank||1 year – 10 years||6.5 – 6.75|
|IDBI Bank||1 year – 5 years||6.5 – 6.75|
|Kotak Bank||1 year – 5 years||6.5 – 7.00|
|Vijaya Bank||1 year – 5 years||6.5 – 6.75|
|Punjab National Bank (PNB)||1 year – 10 years||6.25 – 6.75|
|Bank of Baroda (BOB)||1 year – 10 years||6.60 – 6.70|
|State Bank of India (SBI)||1 year – 10 years||6.40 – 6.75|
BEST BANK FD RATES IN INDIA 2018
Deutsche Bank offers the highest interest rate which is 8% for a tenure of 5 years per deposit in an account. IDFC offers the second highest interest rate of 7.5%. Other banks such as RBL bank, Lakshmi Vilas Bank, Bandhan Bank, Tamil Mercantile Bank and Karur Vysya Bank provide interest rates of 7% and above. In considering the rates and tenures provided by the banks, Bandhan Bank offers 7.10% for deposits from 2 to 5 years tenure while SBI provides interest at the rate of 6.75% but at a tenure of 5 to 10 years per account.
In addition to this, most banks provide FD for tenures as short as 7 days to a 10-year period.
FD INTEREST RATES CALCULATOR
The Fixed Deposit calculator uses the formula for calculating of interest which is based on the compound interest and frequency.
The formula is as below:
A = P*(1+r/n)^n*t
I = A – P
A = Maturity Value; P = Principal amount; r = rate of interest; t = Number of years; n = Compounded interest frequency; I = Interest earned
HOW YOU CAN CHOOSE THE BEST BANK FD RATE SCHEME-
- Evaluate and compare outstanding factors like FD bank, tenure, interest and penalty for withdrawing before maturity of the tenure.
- Carefully evaluate the macro-economic factors that surrounds the interest rate trends. If your expected interest rate will soar in future, then invest in a FD with a shorter tenure. However, if your expected interest rate will drop in future, it is better to opt for a FD with a longer tenure and higher interest rate.
- It will be important for you to examine the tenure based interest rates offered by each of the banks on their FD accounts. Most banks offer higher interest rates on FD with shorter tenure than longer tenure FD. Higher rates must not basically translate to longer tenures and banks can decide to manage their internal liquidity by offering higher interest rates on a selected tenure.
- You should create FD if you will not need the money for your personal expenses before the maturity of the scheme.
BEST COMPANY FD SCHEMES-
The following are the best interest rates offered by companies in 2018.
|Company||Tenure (Min – Max)||Interest Rates (%)|
|Shriram Transport Finance UNNATI Scheme||3 – 5 years||8.00 – 8.50|
|KTDFC||1 – 5 years||8.00 – 8.50|
|DHFL Aashray Deposit Plus (Cumulative)||1 – 5 years||7.70 – 8.05|
|Bajaj Finance Ltd.||1 – 5 years||7.50 – 7.85|
|Mahindra Finance||33 Months||8.30|
|Post Office Time Deposit||5 years||7.40|
|LIC Housing Finance Ltd||1 – 5 years||7.30 – 7.45|
|PNB Housing Finance||1 – 5 years||7.45|
From the table above, the company with the best term deposit is Mahindra Finance with 8.3% interest rate. The second highest in interest rate is offered by KTDC with 8.25% on all deposits held between 1 to 3 years. DHFL Aashray Deposit offers an interest rate of 8.05% for a tenure ranging from 48 months to 120 months. From the analysis, it is seen that company deposits offers a higher pay than bank fixed deposits.
FIXED DEPOSIT RATES FOR SENIOR CITIZENS OF INDIA-
Period in this age group have limited source of Income and are more averse to risk, hence, fixed deposits are a good option for them. Senior citizens of India have the benefit of enjoying a higher interest rate for fixed deposits than the regular citizens.
Below are the interest rates on fixed deposits for Senior Citizens of India:
|Banks||Tenure (Min – Max)||Interest Rates (%)|
|IDFC Bank||366 days||8.00|
|RBL Bank||1 – 5 years||7.15 – 7.85|
|Yes Bank||3 months – less than 6 months||7.40|
|ICICI Bank||390 days – 2 years||7.25|
|HDFC Bank||1 year 17 days – 5 years||7.50|
|PNB||More than 1 year – 3 years||7.25|
|BOB||366 days – 400 days||7.05|
|SBI||3 years – less than 5 years||7.20|
INCOME TAX AND FIXED DEPOSIT INTEREST-
It is a fact that income from interest is taxable and you may wish to understand how income earned by interest is taxed. The principal and the interest are added and taxed. It is grouped under ‘Income from other Sources’ while filing the Income Tax Return.
TAX DEDUCTED AT SOURCE (TDS)
Banks deduct TDS on Income earned as the interest accumulates. When payments are made to an individual, it is legal that tax are deducted before the payments are made. The tax that is deducted is called TDS which must be deposited with the government. Many people believe that banks deduct these taxes at the time the money deposited matures and the interest is paid. However, banks deduct TDS after every financial year.
WHEN TO PAY TAX ON INTEREST EARNED
If an investor in fixed deposits earns large amount of income through its interest, the tax to be paid must be per quarter. However, every FD holder who wants to pay tax on income earned from the interest must do that before the expiration of each financial year which is on the 31 of March.
TOP BANK TAX SAVER FD INTEREST RATES
A tax saver Fixed Deposits offers several tax benefits to the investors who can make claims on tax deductions based on Section 80C of the Income Tax Act. According to this Act, an Investor on FD can claim up to Rs 1.5 lakh of the principal amount invested. The only difference between a tax saver FD and a normal FD is that has a minimum of 5 years of lock in period; but loan services and overdraft may be unavailable. Deutsche Bank tax saver deposits offers an FD interest rate of 8%.
The table below indicates the list of top banks for tax saver FD and their corresponding interest rates:
|Banks||Tenure||Interest Rate (%)|
|Deutsche Bank||5 years||8.00|
|IDFC Bank||5 years||7.20|
|Karur Vysya Bank||5 years||7.00|
|Standard Chartered Bank||5 years||6.50|
|Allahabad Bank||5 years||6.50|
|Bank of Baroda||5 years||7.00|
|Andhra Bank||5 years||6.50|
It is important to note that interest rates can be changed any time even without a prior notice from the company or the bank to the public.