Are you looking to maximize your savings through fixed deposits? Several public sector banks are currently offering attractive interest rates on fixed deposits, with Bank of India leading the way. Seniors can earn 7.95 percent interest for a period of 400 days, while other customers receive 7.45 percent. Union Bank of India and Bank of Baroda also offer reasonable rates, making it a good time for depositors to consolidate their investments.
Here are the interest rates and tenors of the top five public sector banks:
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1. Central Bank of India
>7.45% for 444 days
>6.85% for 1 year of permanence
>6.75% for 3-year tenure
>6.50% for a 5-year stay
2. Union Bank of India
>7.40% for 333 days
>6.80% for 1 year of permanence
>6.70% for 3-year tenure
>6.50% for a 5-year stay
3. Bank of Baroda
>7.30% for 399 days (Dhamaka Monsoon scheme)
>6.85% for 1 year of permanence
>7.15% for 3-year tenure
>6.50% for a 5-year stay
For seniors, the interest rate ranges from 4.75 to 7.80 percent. These rates are effective as of September 5, 2024.
4. Indian Overseas Bank
>7.30% for 444 days
>7.10% for 1 year of permanence
>6.50% for 3 and 5 year tenures
5. Punjab and Sind Bank
>7.30% for 666 days
>6.30% for 3-year tenure
>6% for a 5-year term
400 Day Retail Term Deposit Special Offer
The Bank of India is currently offering an interest rate of up to 8.10 per cent per annum for senior citizens, 7.95 per cent for senior citizens and 7.45 per cent for other non-callable deposits (for amounts above Rs 1 crore). For demand deposits, where premature withdrawal is allowed, the rates are 7.95 percent for senior citizens, 7.80 percent for senior citizens and 7.30 percent for others customers.
However, public sector banks offer lower interest rates compared to small savings banks or private banks. So why do many still choose them over others?
“Government guarantee and high security are key reasons why investors opt for public sector banks,” says Adhil Shetty, CEO of Bankbazaar.com, an online financial marketplace. For many people 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 maintain salaries and current accounts in PSBs, and they are often considered the safest and most reliable option,” Shetty said.
Risk-averse investors, especially those who deposit large amounts in FDs, also prefer the stability of these banks. “They do not want to take unnecessary risks and prefer to stick with stable and reputable institutions,” adds Shetty.
How is FD interest taxed in India?
Tax on FDs is based on the interest earned, not the principal amount. “The interest is added to your total income and is taxed according to your income tax schedule. If the interest earned exceeds Rs 50,000 for senior citizens (Rs 40,000 for others), the bank deducts 10 per cent TDS, which increases to 20 per cent without a PAN,” says Shetty.
Consider Gita, a 45-year-old woman living in Mumbai. He earns Rs 75,000 per year from his interest in FD.
Your total interest earned: 75,000 rupees
Your TDS threshold: Rs 40,000 for general citizens
Your TDS deducted by the bank.: 10% of Rs 75,000 = Rs 7,500
The entire Gita interest of Rs 75,000 will be added to your taxable income and taxed at your fixed rate. However, if your total income is less than Rs 2.5 lakh, you will not have to pay additional tax. To avoid TDS, Gita can file Form 15G at the beginning of the financial year, declaring his income below the taxable limit. This will prevent the bank from deducting TDS in advance.
First published: September 27, 2024 | 17:32 IS
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