Top FD rates in January, 2025: 10 banks offering 8% or more interest

Fixed deposits (FDs) remain a popular choice for conservative investors due to their secure nature and higher interest rates compared to savings accounts. A range of banks, including small finance, private, and public sector institutions, currently offer attractive rates. Among the options, Unity Small Finance Bank and North East Small Finance Bank provide the highest rates, offering up to 9% for select tenures.  

 

Top rates from small finance banks

Small finance banks often provide competitive interest rates, making them a preferred option for those seeking higher returns.  

 

Unity Small Finance Bank: 9% for 1001 days  

North East Small Finance Bank: 9% for 546 days to 1111 days  

 

Suryoday Small Finance Bank: 8.60% for 2 to 3 years  

Utkarsh Small Finance Bank: 8.50% for 2 to 3 years  

Equitas Small Finance Bank: 8.25% for 888 days  

Jana Small Finance Bank: 8.25% for 1 to 3 years

Ujjivan Small Finance Bank: 8.25% for 12 months

AU Small Finance Bank: 8% for 18 months

 

Competitive offerings from private banks  

Private banks, though generally offering slightly lower rates than small finance banks, still present appealing options:  

 

DCB Bank: 8.05% for 19 to 20 months  

Bandhan Bank: 8.05% for 1 year  

RBL Bank: 8% for 500 days  

IndusInd Bank: 7.99% for 1 year 5 months to 1 year 6 months  

IDFC First Bank: 7.90% for 400 to 500 days  

HDFC Bank: 7.40% for 55 months  

ICICI Bank: 7.25% for 15 months to 2 years  

 

Public sector banks with steady returns  

Public sector banks focus on stability and long-term security, offering reasonable rates on fixed deposits:  

 

Canara Bank: 7.40% for 3 to 5 years  

Bank of Maharashtra: 7.35% for 333 days  

Indian Bank: 7.30% for 400 days  

Bank of India: 7.30% for 400 days  

Bank of Baroda: 7.30% for 400 days  

State Bank of India: 7.25% for 444 days  

Punjab National Bank: 7.25% for 400 days  

 

Why investors choose fixed deposits  

"The higher interest rates offered across banks make fixed deposits an attractive option for risk-averse individuals," said Adhil Shetty, CEO of Bankbazaar. By choosing longer tenures with small finance banks, depositors can enjoy rates exceeding 8%, while private and public banks cater to those prioritising long-term stability.

 

FD tax

 

Do note that the interest earned on fixed deposits is taxable. It is taxed based on the individual’s income tax slab and not the principal amount.

 

“The interest is added to your total income and taxed according to your income tax slab,” said Shetty. He further explained that banks deduct 10% TDS if the interest exceeds Rs 50,000 for senior citizens (Rs 40,000 for others). This rate rises to 20% if the PAN is not provided.

 

Let’s take Sarita, a 50-year-old resident of Ranchi, as an example:

 

Total interest earned: Rs 75,000 annually

TDS threshold: Rs 40,000 for general citizens

TDS deducted: 10% of Rs 75,000 = Rs 7,500

 

The Rs 75,000 interest will be added to Sarita's taxable income. If her total income is below Rs 2.5 lakh, no additional tax will be payable.

 

To avoid TDS deductions, Sarita can submit Form 15G at the beginning of the financial year. This declaration confirms her income is below the taxable limit, ensuring no upfront TDS is deducted.