A fixed deposit is a financial tool issued by banks or non-banking financial companies (NBFCs) that offers investors a higher rate of interest than a standard savings account. The interest rate on fixed deposits provided by banks and non-banking financial institutions is determined by factors such as the deposit amount, tenure, and type of depositor i.e. a senior citizen or a regular one. Fixed deposit rates for non-senior citizens vary from 5.25 percent to 6.5 percent for a period of three-years and are offered by India's leading public and private sector banks as of now. Senior citizens over the age of 60 can also open a fixed deposit account for a tenure of 3-years. The rate of interest on senior citizens' FD schemes is 0.25 percent to 0.75 percent higher than a regular fixed deposit. Jana Small Finance Bank currently offers the highest FD rate of 7.5 percent for a three-year term. On the other hand, public and private sector banks' 3-year FD rates for senior citizens range from 5.75 percent to 7% respectively. Hence, here we have compiled the 5 best public and private sector banks that are currently providing the highest returns on 3-year FDs for non-senior citizens.
Tax benefits on fixed deposits
Fixed Deposits are regarded as among the most satisfied and safe investment options after post office small savings schemes, and recurring deposits. To get a tax benefit, though, you must invest in a fixed deposit scheme for at least 5 years, which is the standard lock-in duration. This 5-year deposit is also termed as 'Tax-saving FDs (fixed deposits) which allows an investor to claim a tax deduction of a maximum of Rs. 1.50 Lakh. Individuals, senior citizens, non-resident Indians, and members of HUF (Hindu Undivided Family) can all benefit from the tax deduction for fixed deposits under section 80C. Premature or partial withdrawals from tax saver fixed deposits are not permitted due to the 5-year lock-in duration. Aside from these shortcomings, a loan facility is also not applicable against these tax-saving fixed deposits. The interest you receive on fixed deposits is effectively added to your overall annual income. The resulting amount is then considered to evaluate which tax bracket you fall into. The term TDS refers to tax deducted at source. If the returns exceed certain threshold limits, any organization or entity making the payment is entitled under the Income Tax Act to subtract tax at source. The bank, on the other hand, only deducts TDS if your fixed deposit returns surpass Rs 40,000 (Rs 50,000 for senior citizens) per year. If your fixed deposit returns surpass Rs 40,000 or Rs 50,000 and you furnish the bank with your PAN, the bank will subtract 10% TDS. If you do not submit your PAN to the bank, the bank will subtract 20% of your fixed deposit income as TDS. When the overall income is less than the required taxable amount, no TDS is deducted. If you submit Form 15G or 15H to receive interest income without TDS, the bank will not subtract TDS. To prevent the headache of additional TDS deduction and resulting refund from the Income Tax Department, Form 15G (for non-senior citizens) and 15H (for senior citizens) should probably be submitted at the beginning of each fiscal year.
Deposit insurance cover on fixed deposit
The Reserve Bank of India (RBI) raised the bank deposit insurance cover from Rs 1 lakh to Rs 5 lakh last year. Deposit insurance is a form of insurance against defaults on bank deposits if a bank goes bankrupt and is unable to repay its investors. The RBI's Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned subsidiary, provides deposit insurance benefit. Except for corporates, the deposit insurance scheme includes all banks operating in India, including the private sector, cooperative, and small finance banks. The DICGC insures bank deposits including those maintained in a depositor's savings account, current account, recurring deposit, bank fixed deposit, and so on. The Rs 5 lakh limit covers both the principal invested and the interest received.
5 Best 3-Year Fixed Deposits For Non-Senior Citizens
|Private Sector Banks||ROI in %|
|Public Sector Banks||ROI in %|
|Bank of India||5.3|
|Punjab & Sind Bank||5.25|
|State Bank of India||5.1|
|Source: Bank website|