Are you looking to maximise your savings through fixed deposits? Several public sector banks are currently offering attractive interest rates on fixed deposits, with the Bank of India leading the pack. Senior citizens can earn 7.95 per cent interest for a tenure of 400 days, while other customers receive 7.45 per cent. Union Bank of India and Bank of Baroda are also offering reasonable rates, making it a good time for depositors to lock in their investments.
Here are the interest rates and tenures from the top five public sector banks:
Click here to connect with us on WhatsApp
1. Central Bank of India
>7.45% for 444 days
>6.85% for 1-year tenure
>6.75% for 3-year tenure
>6.50% for 5-year tenure
2. Union Bank of India
>7.40% for 333 days
>6.80% for 1-year tenure
>6.70% for 3-year tenure
>6.50% for 5-year tenure
3. Bank of Baroda
>7.30% for 399 days (Monsoon Dhamaka scheme)
>6.85% for 1-year tenure
>7.15% for 3-year tenure
>6.50% for 5-year tenure
For senior citizens, the interest rate ranges from 4.75 to 7.80 per cent. These rates have been effective since September 5, 2024.
4. Indian Overseas Bank
>7.30% for 444 days
>7.10% for 1-year tenure
>6.50% for 3 and 5-year tenure
5. Punjab & Sind Bank
>7.30% for 666 days
>6.30% for 3-year tenure
>6% for 5-year tenure
Special 400-day retail term deposit offer
The Bank of India is currently offering an interest rate as high as 8.10 per cent per annum for super senior citizens, 7.95 per cent for senior citizens, and 7.45 per cent for others under non-callable deposits (for amounts exceeding Rs 1 crore). For callable deposits, where premature withdrawal is allowed, rates stand at 7.95 per cent for super senior citizens, 7.80 per cent for senior citizens, and 7.30 per cent for other customers.
However, public sector banks offer lower interest rates as compared to small savings or private banks. So, why do many still choose them over others?
“Government assurance and high safety are key reasons why investors opt for public sector banks,” says Adhil Shetty, CEO of Bankbazaar.com, an online financial marketplace. For many in Tier-II, III, and IV cities, these banks are the only financial institutions nearby. “Large institutions like the Government of India and state governments hold salary and current accounts in PSBs, and they’re often viewed as the safest and most reliable choice,” Shetty said.
Risk-averse investors, especially those parking large sums in FDs, also prefer the stability of these banks. “They don’t want to take unnecessary risks and would rather stick to stable, well-reputed institutions,” Shetty adds.
How is FD interest taxed in India?
The tax on FDs is based on the interest earned, not the principal amount. “The interest is added to your total income and taxed as per your income tax slab. If the interest earned exceeds Rs 50,000 for senior citizens (Rs 40,000 for others), 10 per cent TDS is deducted by the bank, which increases to 20 per cent without a PAN,” says Shetty.
Consider Mumbai-based 45-year-old woman, Gita. She earns Rs 75,000 annually from her FD interest.
Her total interest earned: Rs 75,000
Her TDS threshold: Rs 40,000 for general citizens
Her TDS deducted by the bank: 10% of Rs 75,000 = Rs 7,500
Gita’s total interest of Rs 75,000 will be added to her taxable income and taxed according to her slab rate. However, if her total income is below Rs 2.5 lakh, she won’t have to pay additional tax. To avoid TDS, Gita can submit Form 15G at the start of the financial year, declaring her income below the taxable limit. This will prevent the bank from deducting TDS upfront.
First Published: Sep 27 2024 | 5:32 PM IST
