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

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

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

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

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?

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

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