 "Bank fixed deposit interest rates revised: You must lock in FDs now")
Three banks in India have announced revised interest rates on fixed deposits (FDs), offering both general and senior citizens varying returns depending on the tenure and deposit amount. Take a look:
Punjab & Sind Bank FD rates revised
Punjab & Sind Bank has also made changes to its fixed deposit rates, effective from November 14, 2024. The bank is offering a wide range of FD interest rates, with the highest rate of 7.50% per annum available on non-callable deposits with a tenure of 555 days.
Regular citizens:
Callable deposits: 4% to 7.45% per annum
Non-callable deposits: 4.25% to 7.50% per annum
Highest rate of 7.50% for non-callable deposits with a 555-day tenure
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Senior citizens:
Additional 0.50% interest on deposits for 180 days or more
Highest rate of 8% for 555-day non-callable deposits
Special rates for super senior citizens
In a move aimed at benefiting super senior citizens (those aged 80 and above), Punjab & Sind Bank is offering an extra 0.15% interest on specific FD tenures. The highest rate of 8.15% per annum is available on non-callable deposits of 555 days.
Super senior citizens:
8.15% for 555-day non-callable deposit
8.10% for 555-day callable deposit
Bank of Maharashtra joins the trend
The Bank of Maharashtra also updated its fixed deposit interest rates, effective from November 14, 2024. The revised rates range from 2.75% to 7.35% per annum for general citizens, depending on the FD tenure. For senior citizens, the interest rates range from 2.75% to 7.85%.
Regular citizens:
Interest rates range from 2.75% to 7.35% per annum
Special FD schemes:
6.90% for 200-day tenure
7.35% for 333-day tenure
7.10% for 400-day tenure
7.75% for 777-day tenure
Senior citizens:
Interest rates range from 2.75% to 7.85% per annum
Special FD schemes:
7.40% for 200-day tenure
7.85% for 333-day tenure
7.60% for 400-day tenure
7.75% for 777-day tenure
YES Bank updates FD rates
YES Bank has lowered its fixed deposit interest rates for tenures of less than Rs 3 crore. The changes, effective from November 5, 2024, include a reduction of 25 basis points on the 18-month FD tenure, now offering 7.75% per annum, down from 8%.
Regular citizens:
Interest rates range from 3.25% to 7.75% per annum
Highest rate of 7.75% for 18-month FD tenure
Senior citizens:
Interest rates range from 3.75% to 8.25% per annum
Highest rate of 8.25% for 18-month FD tenure
RBI interest rate cuts may affect FD rates
Recently, Finance Minister Nirmala Sitharaman and Commerce Minister Piyush Goyal expressed their view that the Reserve Bank of India (RBI) should consider cutting interest rates, arguing that food inflation should not be the sole factor in such decisions. Sitharaman stressed the need for more affordable bank interest rates to support India’s economic growth.
Meanwhile, the RBI has maintained its key policy rate at 6.5% since early 2019. A recent Reuters poll indicated that a narrow majority of economists anticipate the RBI will cut its key policy rate by 25 basis points to 6.25% in December 2024 to support slowing economic growth, as inflation is expected to moderate in the near term.
What this means for fixed deposit (FD) investors
In the event that the RBI decides to lower interest rates, this could be an opportune time for investors to lock in higher returns on fixed deposits. “For those with fixed deposits (FDs), now is an opportune moment to lock in high interest rates, as rates are expected to decline in the coming months,” said Adhil Shetty, CEO of Bankbazaar. “The prolonged period of high repo rates has resulted in attractive returns on FDs, with banks offering competitive interest rates to depositors. However, as the central bank prepares for a potential future rate cut based on inflation data and evolving economic conditions, these high FD rates may soon start to taper off. Locking in your deposits now ensures that you can secure the best possible returns for the long term, protecting your savings from future rate reductions.”
Shetty further added that by locking in higher rates today, investors can safeguard their returns and maintain financial security as interest rates are expected to decline in the coming months. With potential rate cuts projected for December 2024 and February 2025, acting now allows depositors to take advantage of the current favourable conditions.
How is FD interest taxed in India?
The tax on fixed deposits is based on the interest earned, not the principal amount. "The interest is added to your total income and taxed according to your income tax slab," says Adhil Shetty. He adds, "If the interest exceeds Rs 50,000 for senior citizens (Rs 40,000 for others), the bank deducts 10% TDS. Without a PAN, this rises to 20%."
Let's consider Mary, a 39-year-old Lucknow resident who earns Rs 75,000 annually from her FD interest.
Total interest earned: Rs 75,000
TDS threshold: Rs 40,000 for general citizens
TDS deducted by the bank: 10% of Rs 75,000 = Rs 7,500
Mary'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 need to pay any additional tax. To avoid TDS deductions, she can submit Form 15G at the start of the financial year, declaring her income below the taxable limit, which will prevent the bank from deducting TDS upfront.