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Private vs Public Sector Banks: Best 1-Year FDs With Returns Up To 5.95%

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For investors who are unwilling to take risks, fixed deposit deposits are perfect. Interest is accrued over a set amount of time on the amount invested. The interest rate for 1-year deposits below Rs.2 crore usually ranges from 4.25 per cent across public sector banks and 4 per cent across private sector banks as of now. The duration of tenure generally varies from 7 days to 10 years. Higher interest rates are provided to senior citizens which usually ranges from 0.25% to 0.65% compared to the general public. You can visit the bank where you already have a savings account to open a term deposit account. But even though you don't have a savings account with your bank, some banks across the country also allow you to open a fixed deposit account with them. With such banks, though, you have to go across a KYC procedure where you have to submit required documents, namely ID proof, address proof, salary proof and so on. Below are some leading private and public sector banks in India that are currently providing higher returns up to 5.95% on 1-year FD.

Eligibility required to open an FD account

Eligibility required to open an FD account

To open an FD account in India, the following eligibility criteria must be met by an individual:

  • Indian resident with a minimum age limit of 18 years
  • Minors
  • Foreign nationals residing in India
  • Senior citizens with a minimum age limit of 60 years

Documents required to open an FD account

The documents required to open an FD account are as follows:

  • Identity proof: PAN, Voter ID, Passport, Aadhaar Card, 2 passport size photographs
  • Address proof: Driving license, Voter ID Card, Aadhaar Card, Utility Bills of the last 3 months
  • Senior citizen card: A senior citizen card is authorized by the Social Welfare Department and is widely considered as an age proof for senior citizens.
Key benefits of fixed deposit
 

Key benefits of fixed deposit

There are many benefits of fixed deposits, and some of them are listed below:

  • Returns from fixed deposits are not influenced by the market.
  • The insurance cover provided by the DICGC presently covers all the various accounts operated by one depositor with various branches of the same bank for a limit of Rs 5 lakh.
  • At very low-interest rates, you can receive loans of up to 90% of your deposit amount. Typically, this will be around 2% higher than the applicable interest rate of FD.
  • You can quickly liquidate the FD in the event of an emergency and withdraw the funds prematurely.
  • You can choose from several payout options i.e. on a monthly, quarterly, or annual basis.
  • You can claim tax deduction up to Rs 1.5 lakh by investing a 5-year tax-saver deposit scheme.
  • Compared to general customers, senior citizens are given a higher interest rate.
  • One can select from flexible tenures which usually ranges from 7 years to 10 years respectively.
Tax on fixed deposit

Tax on fixed deposit

By investing up to Rs.1.5 lakh in a tax-saver fixed deposit account, you can reap the benefit of the income tax deduction clause under Section 80C of the Income Tax Act. Along with capital security, fixed deposit schemes provide guaranteed returns. That being said, you do remember that the interest income from a fixed deposit is completely taxable. For the financial year, the tax liability is totally contingent on the total income and according to your tax slab rate. Moreover, if the interest received reaches Rs.40,000 in a financial year from all the accounts kept with the bank, banks subtract TDS. In order to validate the specifics of the deduction, a TDS certificate must be submitted to the bank.

Taxation for senior citizens

Taxation for senior citizens

Income tax exemption of up to Rs 50,000 annually can be claimed by senior citizens earning interest income from FDs, savings account and recurring deposit account. No TDS is deducted by the bank in case the interest income received by a senior citizen with a bank is less than Rs 50,000 in a year from all fixed deposit accounts.

Who should invest in fixed deposits?

Who should invest in fixed deposits?

One of the strongest and best financial instruments issued by banks is fixed deposits. Fixed deposit interest rates are higher than the interest on savings usually. Every individual needs to diversify his or her investment portfolio across different types of streams of fixed income and flexible investments. Fixed deposits are a means of investment for regular income. Investments such as equities, mutual funds and so on can generate higher returns, but the risks involved with them are higher. There is always a higher risk factor with higher returns, which may also mean risking a significant amount of money in unfavourable market conditions at some point in time. However, a combination of risky and risk-free investments according to the risk tolerance capability and risk appetite of an investor is an optimal investment portfolio.

1 Year FD Rates

1 Year FD Rates

The current interest rates provided by top banks for deposit tenure of 1 year are listed below:

Public Sector Banks 1 Year FD Rates in %
Indian Overseas Bank 4.9
Bank of India 4.75
UCO Bank 4.7
Punjab & Sind Bank 4.55
Union Bank 4.5
Punjab National Bank 4.5
Canara Bank 4.45
Indian Bank 4.4
State Bank of India 4.4
Bank of Baroda 4.4
IDBI Bank 4.3
Bank of Maharashtra 4.25
Central Bank of India 4.25

Private Sector Banks

1 Year FD Rates in %

DCB Bank 5.95
IndusInd Bank 5.75
RBL Bank 5.75
The Tamil Nadu State Apex Co-operative Bank 5.75
Yes Bank 5.75
Bandhan Bank 5.25
Tamilnad Mercantile Bank 5.25
Karnataka Bank 5.2
Axis Bank 5.15
City Union Bank 5
South Indian Bank 4.75
Jammu & Kashmir Bank 4.5
Dhanlaxmi Bank 4.5
Federal Bank 4.4
HDFC Bank 4.4
ICICI Bank 4.4
Kotak Bank 4.4
IDFC First Bank 4
Karur Vysya Bank 4
Read more about: fd fds fixed deposit fixed deposits
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