Last year many banks had lowered their fixed deposit interest rates in response to the Reserve Bank of India's decision to hold the repo rate at 4%. This has become a source of concern for many risk-averse investors who fixate strongly on fixed deposit returns to achieve their financial objectives. For absolute risk reduction, many investors favour government banks to private, foreign, or small finance banking. Hence, if you are looking to invest in fixed deposits (FDs) here are the top 10 public sector banks that offer higher interest rates on FDs.
List of the best public sector banks that offer higher interest rates on FDs
Please keep in mind that for each of the public sector banks listed in the table below, we have only provided the highest reported interest rates. Bear in mind that all the interest rates listed below apply to deposits of less than Rs 2 crore.
|Sr No.||Banks||Regular FD Rates in %||Senior Citizen FD Rates in %|
|3||State Bank of India||5.40||6.20|
|4||Bank of India||5.30||5.80|
|5||Punjab National Bank||5.30||5.80|
|6||Punjab & Sind Bank||5.25||5.75|
|7||Bank of Baroda||5.25||5.75|
|8||Indian Overseas Bank||5.20||5.70|
Tax benefits on fixed deposit
Individuals are eligible for a maximum income tax deduction of Rs 1.5 lakh u/s 80c each financial year. This tax advantage is only applicable to the account's first holder in the case of a joint account. A tax-saving fixed deposit requires a minimum contribution of Rs 100 and a gross investment of Rs 1.5 lakh per financial year. And apart from FDs, there are a slew of other tax-saving investment options to consider, including ELSS, PPF, NSC, SCSS, Post Office Time Deposit and so on. Interest income from FD is classified as "Income from Other Sources." As a result, if the interest earned in a fiscal year surpasses Rs 40,000 for regular investors and Rs 50,000 for senior citizens from all accounts kept with the bank, the bank deducts TDS. To check the specifics of the deduction, a TDS certificate will be provided. If your fixed deposit income surpasses Rs 40,000 or Rs 50,000, and you furnish the bank with your PAN, the bank may subtract 10% TDS from the interest earned. If you do not submit your PAN to the bank, the bank will subtract 20% of your fixed deposit income as TDS. When the total income is less than the required taxable amount, no TDS is deducted. That being said, where you submit Form 15G or 15H to claim interest income without TDS, the bank will not subtract TDS. To escape the inconvenience of additional TDS deduction, Form 15G (for non-senior citizens) and 15H (for senior citizens) should be submitted at the start of each financial year at your bank.
Should you invest in fixed deposits?
Exploring the current investment climate as an investor can be fraught with risk. It can be difficult to determine when the market is ready for investment while still seeking to forecast returns and align yields with the objectives. In this situation, smart portfolio allocation is critical because you don't want to leave all of your objectives untouched. Exploring the current investment climate as an investor can be fraught with risk. It can be difficult to determine when the market is ready for investment while still seeking to forecast returns and align yields with the objectives. In this situation, smart portfolio allocation is critical because you don't want to leave all of your objectives unfunded. A fixed deposit is a tried-and-true fixed-income strategy that risk-averse investors especially senior citizens always consider. Though the repo rate i.e. 4% has been kept untouched by RBI in its most recent bi-monthly monetary meeting on April 7, 2021, your portfolio's yields still surge if you use FD as a [art of your investment. Because of the guaranteed returns that FDs offer, it's impossible to overlook them while considering investment instruments. FDs play an important role in an environment flooded with negative-yield holdings particularly if you're risk-averse and looking to achieve guaranteed returns. Unlike market-linked investments, which need regular tracking, most investors consider investing in a fixed-income investment that is a fixed deposit.