Fixed Deposits

Savings comes naturally to Indians. A bank deposit is a popular instrument for saving your hard-earned money. Banks offer different kinds of deposits, such as savings deposits and fixed deposits (FD). Fixed deposits are the oldest and most secure investment instruments. Both savings and fixed deposits have their benefits and features. If savings deposits are liquid instruments, the fixed deposits offer a higher rate of interest. It is necessary for an individual to diversify their investment portfolio into savings and fixed deposits.

Why Choose Fixed Deposit?

Fixed Deposit is a regular source of investment. It is a financial instrument where the investor places a specific sum of money in a bank or company for a predetermined tenure ranging from 7 days to up to 10 years. The financial institution provides interest at a specified rate on the fixed deposit. There are different options to pay the interest such as monthly, quarterly, or at the end of the fixed deposit tenure. Here are some convincing reasons for investing in fixed deposits.

  • Guaranteed and risk-free investment

    Fixed deposits are safe investment options that guarantee a fixed and regular source of income. Unlike the investment in stocks and bonds of companies, the fixed deposits offer guaranteed returns because they do not depend on market fluctuations. The bank or company providing the deposit is obligated to pay the interest at the rate mentioned on the fixed deposit receipt.

  • Higher interest rate

    As compared to savings deposits, fixed deposits offer a higher rate on the investment. Secondly, investment in fixed deposits yields better returns than the investments done in other risk-free instruments like Government bonds or Treasury bills.

  • Flexibility

    Fixed deposits are the most flexible investment opportunities. Banks offer fixed deposits for periods ranging from 7 days to up to 10 years. The investor is free to choose their tenure at the time of investing.

  • Liquidity

    Savings and current deposits are the most liquid of all deposit instruments because of the facility to withdraw the deposit on demand. In comparison, fixed deposits are less liquid. However, banks offer facilities of premature withdrawal of fixed deposits at any time during its tenure. Depositors are also eligible to avail loans against their fixed deposits if required.

  • Availability of flexible interest payouts

    Facilities to receive interest at periodical intervals such as monthly or quarterly, are available. Hence, fixed deposits offer a regular source of income to the depositor.

  • Tax-Saving Instruments

    Fixed deposits also offer investment opportunities to save tax. Sec 80C of the IT Act 1961 allows people to save income tax by investing in Tax Saving Deposits for a minimum period of 5 years up to 1.50 Lakhs every year.

Points to Consider When Investing in Fixed Deposits

  • Instead of investing a bulk amount in a single deposit, it is advisable to split the amount into smaller amounts. It helps the depositor in an emergency because it enables you to break a small portion while allowing the balance amount to gain interest and keep growing.
  • Splitting the deposit into smaller amounts and investing it for varying tenures can help you to earn better interest. It is because banks keep changing their deposit interest rates at frequent intervals. Secondly, it ensures liquidity because of the varying maturity periods.
  • It is important to note that certain fixed deposits like the Tax-Saving deposits come with a lock-in period. Withdrawal of the deposit is not permissible before the due date. Similarly, loans and overdrafts are not available on these tax-saving deposits.
  • Premature withdrawals can attract penalty depending on the amount of withdrawal and the period for which it remained with the bank. Hence, your returns can be lower in the case of premature withdrawal.
  • The interest received on fixed deposits is taxable at source. As on date, the banks have to deduct TDS on the interest paid on fixed deposits if it exceeds 40,000 in one financial year. In the case of senior citizens, the ceiling is 50,000.
  • Depositors have the option of submitting Form 15G or 15H along with their PAN details to ensure that banks do not deduct TDS. Under such circumstances, the depositor has the responsibility of paying income tax on the interest earned during the financial year.
  • Senior citizens have the advantage of getting a higher rate of interest as compared to the general depositors.
  • The Reserve Bank of India (RBI) has freed the fixed deposit interest rates from its control. Hence, banks can offer different rates of interest on fixed deposits depending on their liquidity position.

Top 10 Bank Fixed Deposit Interest Rates in India for up to 1,2,4,6 Year Tenure

There is intense competition between the private and public sector banks in offering higher rates of interest on fixed deposits for varying periods. Private and cooperative banks offer a higher rate of interest as compared to public sector banks.

Name of Bank

Rates of Interest on Fixed Deposits

1-year

2-years

4-years

6-years

State Bank of India

7.00%

6.75%

6.70%

6.60%

HDFC Bank

7.10%

7.20%

7.25%

7.00%

ICICI Bank

6.90%

7.00%

7.25%

7.00%

Canara Bank

6.70%

6.40%

6.40%

6.00%

Punjab National Bank

6.80%

6.75%

6.25%

6.25%

Axis Bank

7.10%

7.30%

7.25%

7.00%

Kotak Mahindra Bank

7.00%

7.00%

6.75%

6.50%

Bank of Baroda

6.45%

6.55%

6.45%

6.45%

IDFC Bank

7.00%

8.50%

7.50%

7.25%

Bandhan Bank

7.35%

7.65%

7.65%

7.65%

*The interest rates are subject to change as per the bank's policy

Top 10 Bank Fixed Deposit Interest Rates in India for Senior Citizens

Senior citizens (aged 60 and above) get the benefit of a higher rate of interest. Usually, the rate of interest on a senior citizen FD is 0.50% more than that offered to general depositors.

Name of Bank

Rates of Interest on Fixed Deposits

1-year

2-years

4-years

6-years

State Bank of India

7.50%

7.25%

7.20%

6.10%

HDFC Bank

7.60%

7.70%

7.75%

7.50%

ICICI Bank

7.40%

7.50%

7.75%

7.50%

Canara Bank

7.20%

6.90%

6.90%

6.50%

Punjab National Bank

7.30%

7.25%

6.75%

6.75%

Axis Bank

7.75%

7.95%

7.75%

7.50%

Kotak Mahindra Bank

7.50%

7.50%

7.25%

7.00%

Bank of Baroda

6.95%

7.05%

6.95%

6.95%

IDFC Bank

7.50%

9.00%

8.00%

7.75%

Bandhan Bank

8.10%

8.40%

8.40%

8.40%

*The interest rates are subject to change as per the bank's policy

Top 10 Banks Tax-Saver FD Interest Rates in India

Sec 80C of the IT Act 1961 allows individuals to save income tax by investing up to 1.50 Lakhs in Tax-Saving Fixed Deposit Schemes for a minimum period of 5 years. The rates of interest on these fixed deposits are the same as that for general deposits. These tax-saving deposits come with a lock-in period of 5 years. Banks allow premature withdrawal of these deposits after the expiry of the lock-in period. The minimum amount of deposit can vary from one bank to another.

Name of Bank Rate of Interest for General Public Rate of Interest for Senior Citizen

State Bank of India

6.60%

7.10%

HDFC Bank

7.25%

7.75%

ICICI Bank

7.25%

7.75%

Canara Bank

6.00%

6.50%

Punjab National Bank

6.25%

6.75%

Axis Bank

7.00%

7.50%

Kotak Mahindra Bank

6.50%

7.00%

Bank of Baroda

6.45%

6.95%

IDFC Bank

7.75%

8.25%

Bandhan Bank

7.65%

8.40%

*The interest rates are subject to change as per the bank's policy

Company Fixed Deposit

Besides banks, companies are also allowed to accept fixed deposits. Financial institutions and non-banking finance companies (NBFCs) accept fixed deposits from the public for periods varying between 12 and 120 months. The Company Fixed Deposits have different features as compared to bank fixed deposits. 

What is a Company Fixed Deposit?

A company fixed deposit is the investment placed by investors with a company such as a financial institution or NBFC for a specified period. Section 58A of the Companies Act 1956 empowers companies to accept such deposits from the public. The applicable rate of interest on company deposits is usually higher than what banks offer for a similar tenure. However, one should note that the company deposits are unsecured. Hence, they are riskier as compared to bank deposits.

Features and Benefits of Company Fixed Deposits

  • Company Fixed Deposits offer a better rate of interest as compared to bank deposits
  • Though companies accept deposits for periods up to 120 months, the popular tenure for a company deposit is between 12 and 36 months.
  • Company deposits come with a lock-in period, whereby investors cannot withdraw during this tenure.
  • Premature withdrawals attract a specific penalty, usually up to 2% for the period that the deposit remained with the company.
  • Senior citizens can avail of better interest rates from company deposits as compared to the general investors.
  • The companies do not deduct TDS on interest income up to 5,000 during a financial year. Depositors can submit Form 15G or 15H to avoid deduction of TDS.

Points to Note When Investing in Company Deposits

  • Company deposits are unsecured deposits. They are not secured by the assets of the company. These deposits do not have coverage from the Deposit Insurance and Credit Guarantee Corporation. Bank deposits, on the other hand, are insured up to a maximum of 1 Lakh. Hence, company deposits are riskier in comparison to bank deposits.
  • Companies are subject to scrutiny by rating agencies like CRISIL, CARE, ICRA, and many others. These agencies evaluate the company deposits based on their past performance, their current liquidity levels, the market position, the ability to repay, and many more factors.
  • Irrespective of the safety rating, company deposits are riskier to the bank deposits
  • Banks deduct TDS if the interest payable on the deposit exceeds 40,000 in a financial year. For companies, the corresponding figure is 5,000.
  • Company deposits are the best if you are looking for high-interest rates
  • Checking the background of the company before investing in it is advisable. If the company has a low rating, it is better to go for a short-term FD.

Top 10 Company Fixed Deposits Providers in India

NBFCs and other top companies offer fixed deposits facilities to customers. Here are the top 10 company fixed deposit providers in India.

Name of Company Salient Features

Bajaj Finance Ltd

  • Bajaj Finance Ltd (Bajaj Finserv) deals in different kinds of loans such as two/three-wheeler, car loans, and consumer durables finance. It also offers fixed deposits at attractive rates of interest.
  • Credit Rating: MAAA by ICRA and FAAA by CRISIL
  • Online portal available for investment
  • Minimum deposit: 25,000
  • Deposit tenure: 12 to 60 months
  • Get advantage of 0.10% over the booking rate on renewal of deposits
  • Senior citizens get the benefit of an additional 0.35%

Mahindra and Mahindra Financial Services Ltd

  • Mahindra and Mahindra Financial Services Ltd cater to all sections of people, including those in rural areas with a focus on tractor finance.
  • Credit Rating: FAAA by CRISIL
  • Cumulative and non-cumulative deposit schemes like Samruddhi and Dhana Samruddhi.
  • Deposit tenure: 12 to 60 months
  • New cumulative interest deposit scheme named Dhanvruddhi Cumulative Scheme.
  • An incentive of 0.25% on this scheme
  • Online portal available
  • Senior citizens get an additional 0.35% over the general public rates

Shriram Transport Finance Ltd

  • Shriram Transport Finance Ltd deals in the financing of commercial vehicles.
  • Credit Rating: MAA+ by ICRA and FAAA by CRISIL
  • Attractive interest rates on Fixed Deposits
  • Cumulative and non-cumulative deposits available
  • Deposit tenure: 12 to 60 months
  • Premature withdrawal allowed after a lock-in period of three months
  • An incentive of 0.25% on renewals of fixed deposits

Shriram City Union Finance Ltd

  • Shriram City Union Finance Ltd offers a range of loans such as housing, auto, business, two-wheelers, personal loans, and loans against gold jewellery.
  • Credit Rating: MAA+ by ICRA
  • Cumulative and non-cumulative FDs available
  • Minimum deposit: 5,000
  • Deposit tenures: 12 and 60 months
  • Premature withdrawal after a lock-in period of three months

KTDFC Ltd

  • Kerala Transport Development Finance Corporation Ltd
  • Government of Kerala undertaking
  • Deposits fully guaranteed by Government of Kerala
  • Various types of loans such as personal, two-wheeler, and housing loans.
  • Cumulative and non-cumulative deposit options available
  • Deposit tenures: 12 and 60 months
  • Premature withdrawals allowed after the three-month lock-in period
  • Loans against deposits available

PNB Housing Finance Ltd

  • A subsidiary of Punjab National Bank
  • Caters to home loans and loans against property
  • Credit Rating: FAAA by CRISIL
  • Deposits available at attractive rates
  • Deposit tenures: 12 to 120 months
  • Premature payment after three months allowed

ICICI Home Finance

  • Wholly owned subsidiary of ICICI Bank Ltd
  • Fixed deposits with attractive rates of interest
  • Credit Rating: FAAA by CRISIL, MAAA by ICRA, and AAA by CARE
  • Deposit tenures: 12 and 120 months
  • Cumulative and non-cumulative plans available
  • Loan up to 75% of FD available
  • Premature withdrawal after 3 months

Sundaram Finance Company

  • Leading NBFC and home and vehicle loan provider which is trusted by three generations.
  • Credit Rating: AAA
  • Cumulative and non-cumulative deposit options
  • Deposit tenure: 12 and 36 months
  • Minimum deposit of 10,000
  • Loans available against FDs
  • No premature payment within 3 months

Housing and Urban Development Corporation

  • Government of India Enterprise
  • Credit Rating: AAA by India Ratings and Research, AAA by CARE, and MAAA by ICRA.
  • Deposits accepted from the public
  • Individuals and non-individual deposit holder accepted
  • Tenure: 12 and 60 months
  • Tax Saver Deposit Scheme available
  • Loan against deposit available

Housing Development Finance Corporation

  • HDFC is the premier home finance company in India
  • Credit Rating: AAA by CRISIL and ICRA
  • More than 6 lakhs depositors
  • Cumulative and non-cumulative options available
  • Loan against FD
  • Deposit tenures: 12 and 84 months
  • Lock-in period of 3 months
  • Online deposit facility available

Top Company Fixed Deposit Interest Rates for Regular and Senior Citizens in 2019

Name of Company Rate of Interest for Individuals Rate of Interest for Senior Citizens

Bajaj Finance Ltd

8.60% to 8.95%

8.95% to 9.30%

Mahindra and Mahindra Financial Services Ltd

7.95% to 9.00%

8.30% to 9.35%

Shriram Transport Finance Ltd

7.95% to 9.25%

8.20% to 9.50%

Shriram City Union Finance Ltd

7.95% to 9.25%

8.20% to 9.50%

KTDFC Ltd

8.25% to 8.50%

8.50% to 8.75%

PNB Housing Finance Ltd

8.25% to 8.45%

8.50% to 8.70%

ICICI Home Finance

7.70% to 8.15%

7.95% to 8.40%

Sundaram Finance Company

7.75% to 8.00%

8.25% to 8.50%

Housing and Urban Development Corporation

  • 7.00% to 7.25% for non-individuals and
  • 7.25% to 7.50% for individuals

7.50% to 7.75%

Housing Development Finance Corporation

7.50% to 7.70%

7.75% to 7.95%

Cumulative Fixed Deposit and Non-Cumulative Fixed Deposit

Banks offer a range of deposits ranging from 7 days to up to 10 years. On the other hand, company deposits come with a tenure ranging between 12 and 120 months. Both banks and NBFCs offer cumulative as well as non-cumulative fixed deposit schemes.

Cumulative Deposits

As the name suggests, the interest is accumulated and paid at the time of maturity of the deposit. Hence, depositors get the benefit of compounding of interest. It implies that the total yield on the deposit is more than the contracted rate of interest on the fixed deposit.

The cumulative deposits offered by banks and NBFC's have a maturity period of a minimum of six months and up to 120 months. In this scheme, the interest is not payable to the depositor but added to the deposit account.

Non-cumulative Deposits

As opposed to cumulative deposit schemes, the interest on non-cumulative deposits is credited to the savings account of the depositor or paid to him at regular intervals. It can be monthly, quarterly, or half-yearly intervals as decided by the depositor at the time of placing the deposit. Since the interest is paid on accrual, these deposits attract a simple rate of interest. The advantage of non-cumulative deposits is that the depositor gets assured monthly, quarterly, or half-yearly payouts that can act as a regular source of income. In the case of monthly payout, the depositor receives a discounted rate that is less than the contracted rate of the fixed deposit.

Tax Saving FD for Sec 80C Deductions - Benefits and Interest Rates

Banks and NBFCs offer deposit schemes that enable customers to save on the income tax burden. Sec 80C of the IT Act 1961 allows income tax concessions on fixed deposits made in specific Tax Saving FDs in banks and NBFCs.

  • The Tax Saving FDs are available in all banks
  • The maximum deposit amount is 1,50,000
  • The deposit tenures range between 60 and 120 months
  • No premature payment is allowed before the expiry of 5 years from the date of the deposit
  • No loan is permissible on Tax Saving FDs before the completion of 5 years
  • After 5 years, the banks permit premature withdrawal
  • The amount invested in such deposits is deducted from the Gross Total Income to arrive at the taxable income for the specific year.
  • The rates of interest on Tax Saving deposits is the same as that offered on general deposits for the corresponding period.

Things to Know Before Investing in Tax Savings Deposits

  • Non-individuals cannot invest in Tax Savings FDs. Individuals and HUFs can invest in such schemes.
  • The minimum amount of deposit can vary from one bank to another
  • Co-operative and Rural banks cannot accept tax-saving FDs
  • Depositors can also invest in Post Office Time Deposit for five years to qualify for deduction under Sec 80C of the IT Act.
  • Deposits can be in Single or Joint mode. In the case of joint accounts, the tax benefit is available to the first holder alone.
  • TDS is applicable on the tax savings FD. Depositors can submit Form 15G or 15H to avoid deduction of TDS by the bank.
  • Nomination facility is available to Tax Savings Deposits
  • Senior citizens can avail the benefit of additional rate of interest on these tax-saving FDs, as well

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