Best Banks for Fixed Deposits: Banks with Highest FD Rates

Fixed deposits (FD) are one of the safest ways to grow your money. You lock in a lump sum for a set period and earn fixed interest. FD is great if you are one of those who want low-risk and guaranteed returns. However, you need to choose the right bank to get the most out of it.

Knowing which bank is best for fixed deposit can help you earn higher returns. Banks offer different FD interest rates, so you have to compare. You’ll also want to consider the features of the bank, like withdrawal flexibility and special rates for senior citizens. Read on to find out FD interest rates in banks and everything you must know before you get on an FD.

Fixed Deposits (FD) Overview

What are Fixed Deposits?

A fixed deposit is a simple investment where you deposit a lump sum with a bank for a fixed period and earn a guaranteed interest rate. The rate remains the same throughout the term, so you know exactly how much you’ll earn. You can choose to receive interest monthly, quarterly, or annually, depending on what suits you best. Fixed deposits are a safe option if you want stability and predictable returns without taking on any risks.

Benefits of Fixed Deposits in India

FDs are popular in India because they offer a balance of safety, flexibility, and decent returns. When you compare FD rates in banks, they provide better returns than regular savings accounts, and that makes them a smart option for those seeking higher returns without risk.

1. Guaranteed Returns

One of the main benefits of FDs is the assured return. Unlike stocks or mutual funds, fixed deposits are not influenced by market ups and downs, which makes them ideal for people who don’t want to risk their savings. You will earn the interest promised at the time of deposit, and this does not change no matter what happens in the market.

2. Flexibility of Tenure

FDs allow you to choose a time frame, usually ranging from 7 days to 10 years, depending on what you need. Whether you want to park your money for the short term or long term, you can choose the best option based on your goals. This flexibility makes FDs an excellent fit for different types of savers.

3. Early Withdrawal

You also have the option to withdraw your FD early in case of emergencies. Some banks even offer partial withdrawals, so you don’t have to break the entire deposit.

4. Higher Interest Rates for Senior Citizens

Senior citizens often receive higher FD rates, allowing them to earn more on their deposits. This makes FDs a reliable option for retirees who need safe, regular income.

Choosing which bank is best for FD comes down to finding the one with competitive interest rates, flexible terms, and customer-friendly policies.

Best Banks for Fixed Deposits Based on Customer Needs

Best Banks for Senior Citizens

When it comes to senior citizens, a number of banks offer higher FD interest rates to help them earn more on their savings. If you’re looking for which bank gives the highest interest rate on FD for senior citizens, here are a few top options:

By Top Private Sector Banks

Note: Updated as of 6 November 2024 and are applicable to deposits below Rs. 2 crores.

By Top Small Finance Banks

Note: Updated as of 6 November 2024 and are applicable to deposits below Rs. 2 crores.

Best Banks for High Returns

If your focus is on earning the highest FD rates in banks, long-term deposits can yield significant returns. Here’s a look at the top banks for high returns:

Note: The rates are updated as of 11 November 2024

Overview of FD Rates in Major Banks (2024)

When choosing a fixed deposit, it’s essential to compare bank FD interest rates in 2024 across different banks. Here’s a quick snapshot of the current FD rates in public sector, private sector, and small finance banks.

FD Rates in Public Sector Banks

Public sector banks provide stable and competitive FD rates in banks, and that makes them a popular choice if you want security. Here's a comparison:

Note: The rates are updated as of 06 November 2024

FD Rates in Private Sector Banks

Private banks offer some of the highest FD rates in banks, especially for long-term investors. Here's a look at some top private sector banks:

Note: The rates are updated as of 06 November 2024

FD Rates in Small Finance Banks

Small finance banks tend to offer even better rates for those looking to maximize returns. Here's how they compare:

Note: The rates are updated as of 11 November 2024

Comparison of FD Rates Across Banks

When investing in a fixed deposit, one of the critical factors is the interest rate offered by different banks. Below is a table comparing the FD interest rates across several banks to help you decide which bank has the highest interest rate for fixed deposit. This can make a significant difference in your returns, especially for long-term deposits.

Note: The rates are updated as of 11 November 2024

Factors to Consider While Choosing a Bank for Fixed Deposits

When selecting the right bank for your fixed deposit, there are a few points to keep in mind to ensure your money grows safely and steadily.

• Security of deposits: Your deposits must be safe. Public sector banks or those insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC) are generally more secure. However, the DICGC provides insurance on deposits up to a maximum of Rs.5 lakh per depositor per bank. This includes all types of deposit accounts such as savings, current, recurring, and fixed deposits. Therefore, it is recommended to park your banking investments across different banks.

• Interest rate comparisons: One of the most critical factors to look at is the FD rates of banks. It’s wise to compare rates across banks since different institutions offer different rates for different tenures. Also, check which bank gives the highest interest rate on FD, as this will significantly impact your returns.

• Minimum deposit requirements: Banks have different minimum amounts to open an FD. Some require only Rs.5,000, while others may ask for higher deposits. This should fit your budget comfortably.

• Tenure flexibility: FD tenures can range from 7 days to 10 years. It’s essential to match the tenure with your financial goals. Banks often offer higher rates for longer tenures, but shorter ones may suit you if you need liquidity.

• Early withdrawal penalties: Before locking in your funds, ask about the penalty fees for early withdrawal. Most banks charge 0.5% to 1.5%, which could impact your returns if you need to access your funds in an emergency.

After evaluating these factors, you can confidently choose a bank that offers the right balance of safety, returns, and flexibility.

Taxation on Fixed Deposit Interest

The interest you earn from fixed deposits in India is fully taxable. The interest income is added to your total income and taxed according to your applicable income tax slab. It is essential to report the interest under the "Income from Other Sources" section when filing your Income Tax Return.

Banks deduct Tax Deducted at Source (TDS) on the interest earned if it exceeds Rs.40,000 in a financial year for individuals (Rs.50,000 for senior citizens). TDS is deducted annually, regardless of when the FD matures. So, if you have an FD for three years, the bank will deduct TDS at the end of each year.

For instance, if you have FDs with interest above Rs.40,000 at FD interest rates in banks, a 10% TDS is applied to the interest. Additionally, if you fall into a higher tax bracket, you may need to pay additional taxes when filing your returns beyond the TDS already deducted.

If your total income is below the taxable limit, you can submit Form 15G (Form 15H for senior citizens) to avoid TDS. 

Tax-Saving FDs

A Tax-Saving FD offers tax benefits under Section 80C of the Income Tax Act. You can claim a deduction of up to Rs.1.5 lakh per year by investing in this type of FD. However, the interest income earned on these fixed deposits is taxable and the deposits come with a five-year lock-in period, meaning you can't withdraw the funds early. 

While the interest earned is taxable, this FD provides an excellent option for risk-averse investors looking to save on taxes.

Several banks offer competitive tax-saving FD interest rates, with DCB Bank providing 8%, IndusInd Bank offering 7.85%, and HDFC Bank offering 7%. Check the table below for more:

Conclusion

Choosing the right bank for a fixed deposit is key to securing higher returns and meeting your financial goals. By comparing bank FD interest rates 2024, you can select the option that best fits your needs, whether you prioritize high returns, flexibility, or tax-saving features.

FAQs

Q. Can I open multiple fixed deposit accounts in different banks? 

A. Yes, you can open FDs in multiple banks to diversify and maximize your returns.

Q. Is the interest earned on fixed deposits subject to GST? 

A. No, GST does not apply to interest earned on fixed deposits.

Q. Can I take a loan against my fixed deposit? 

A. Yes, many banks offer loans against your FD, typically up to 90% of the deposit value.

Q. Is there a penalty for not renewing a fixed deposit after maturity? 

A. Most banks auto-renew or move the amount to your savings account if not renewed. Check with your bank for specifics.