No matter to what extent the equity and mutual fund cult proliferates in India, the good old fixed deposit is never going out of fashion. They provide predictable interest income in a much more secure manner than market-linked products such as equity and equity-oriented mutual funds.
Tax deduction benefits
Fixed deposits with 5-year tenure are of special significance to depositors. They provide deductions on income tax as well. Therefore, the actual benefit of a 5-year FD goes beyond the interest income it provides. Let’s see what interest rates are being offered by major banks.
SBI and HDFC Bank
State Bank of India, the big daddy of Indian banks, is offering 6.50% interest for general depositors and 7.50% for senior citizens for the 5-year FD. The biggest private sector bank in the country, HDFC Bank, offers 7% and 7.5% for non-senior and senior citizens respectively.
ICICI Bank and Axis Bank
For ICICI Bank the interest rates for non-senior and senior citizens are 7.25% and 7.80% on 5-year tax saver FDs. Axis Bank offers 7% and 7.75% interest rates for non-senior and senior citizens.
PNB and BoB
Punjab National Bank (PNB) and Bank of Baroda (BoB) are two major PSU banks. While PNB is offering 6.5% and 7% on tax-saver FDs for non-senior and senior citizens respectively, BoB is offering 6.5% and 7.15% for these two age groups.
Bandhan Bank and Kotak Bank
Bandhan Bank offers 7% and 7.50% for general customers and senior citizens respectively for 5-year FDs. Kotak Bank offers interest rates of 6.20% and 6.70% for non-senior and senior citizens respectively on this instrument.
Canara Bank and Bank of Maharashtra
Canara Bank is offering 6.70% and 7.20% on 5-year FDs for general customers and senior citizens. Bank of Maharashtra is offering interest rates of 6.50% and 7% for non-senior and senior citizens respectively.
Maximum deposit
If a person has his/her eyes on income tax deductions, he/she cannot deposit anything more than Rs 1.5 lakh a year, since according to Section 80C of the Income Tax Act 1961, that is the ceiling of investment in a 5-year FD.
It is an incorrect notion that only risk-averse investors put their money into fixed deposits. Financial strategists advise every investor to include debt instruments in the portfolio. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
