Top 10 Banks Providing Good Returns Up To 7.5% On 3-5 Years FDs

For risk-averse investors, mostly senior citizens when it comes to guaranteed returns, flexible tenures, and strong liquidity, fixed deposits are the most first choice for them. The recent proposal of the Reserve Bank of India to maintain the repo rate constant at 4 per cent, though, will indicate that bank FD interest rates are likely to stay low for the near future which may be a serious concern for regular income investors. Currently, there are some small finance banks and corporates that provide higher interest rates if compared to the leading commercial banks. Below are the banks that currently provide the best or highest rates on FDs with a maturity range from 3 years to 5 years to medium-term investors. The interest rates listed below are for the deposit amount of less than Rs 1 crore. Based on your age, preferred bank, tenure, deposit amount, and so on., the interest rates available to you may vary.

Facts to consider before investing in fixed deposits

Some aspects that you need to remember in order to select the right fixed deposit scheme for you are as follows:

• You must compare FD rates across multiple kinds of FDs provided by different banks or financial institutions before investing in fixed deposits.
• If you are going to invest in corporate FDs then you must go for deposit schemes that are AA or AAA rated by multiple credit agencies.
• FD's tenure is also a big factor in achieving good returns on fixed deposits. FD schemes generally have a term of between 7 days and 10 years. A number of banks have strong FD returns for up to three years of tenure as we have tabulated below.
• You must also review the monthly, quarterly, half-yearly, or annually interest payout option before going to invest in FDs.
• You must also review the penalties imposed for breaking the FD prior to the maturity date before investing in an FD scheme as the interest rates are lowered by NBFCs and banks in case of early withdrawal.
• The interest rate provided by banks and non-banking financial institutions on FD schemes depends on factors such as deposit amount, tenure and type of depositor i.e. whether non-senior citizens or senior citizens.
• Fixed deposits returns are not market-linked and thus provide guaranteed returns.
• According to the Income-tax slab thresholds, you are mandated to pay tax on your fixed deposits.  

TDS on fixed deposit

In compliance with the rules referred to in the Income Tax Act, fixed deposit interest earnings in a year encounter TDS, or Tax Deducted at Source. Interest income is then added under the heading "Income from Other Sources" during Income Tax Returns. The TDS will then be adjusted against your gross tax liability by the IT Department. Interest income, though, is only withheld when interest profits surpass Rs. 40,000 from all sources. And if your interest earnings are higher than Rs. 40,000, you can decide to submit Form 15G/H to your bank in order to avoid TDS. On the other hand, if an individual goes for a tax-saving FD, they can seek a tax deduction of up to Rs. 1.5 Lakh for the principal amount in a fiscal year.

Who should invest in fixed deposits?

When investing in market-linked securities to gain better returns, investors can be subjected to risks. Therefore, investors often need to pursue safer investment alternatives to ensure sustainable financial growth. Fixed deposits are stable and, as compared to highly risky instruments, contribute to assured returns. For potential investors, fixed deposits are ideal savings vehicles. In addition, such schemes will significantly benefit risk-averse citizens. There is almost no chance of principal failure, as FDs give guaranteed returns. That being said, investors should note that, as opposed to other high-risk alternatives, the rate of return on fixed deposit is set. In order to optimize interest income, you should also introduce what is called the FD laddering technique whereby you split your deposits into several FDs of varying tenures and keep reinvesting them if applicable. 

3 To 5 Year FD Rates

Sr No.	Banks	ROI for the general public	ROI for senior citizens
1	Jana Small Finance Bank	7.25%	7.75%
2	Suryoday Small Finance Bank	7.10%	7.60%
3	DCB Bank	6.75%	7.25%
4	Yes Bank	6.75%	7.50%
5	AU Small Finance Bank	6.50%	7.00%
6	IndusInd Bank	6.50%	7.00%
7	Fincare Small Finance Bank	6.50%	7.00%
8	Equitas Small Finance Bank	6.40%	6.90%
9	RBL Bank	6.25%	6.75%
10	Karur Vysya Bank	5.65%	6.15%