Indian banks offer up to 7% FD rates, 5‑year tax‑saving lock‑in
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- State Bank of India (SBI) offers up to 6.05% for general investors and 7.05% for senior citizens on callable deposits up to ₹3 crore.
- Bank of Baroda offers regular FD rates ranging from 6.25%–7% for general customers and 6.95%–7.5% for senior citizens on three‑year deposits.
- Tax‑saving fixed deposits have a mandatory five‑year lock‑in period and allow a deduction of up to ₹1.5 lakh under Section 80C, but the interest earned is fully taxable.
- SBI offers tax‑saving FD rates of 6% for general depositors and 6.75%–6.90% for senior citizens, while private banks such as ICICI, HDFC, and Axis offer 6.25%–6.60% for general customers and 6.75%–7.20% for senior citizens.
- Non‑callable FDs provide higher rates but prohibit premature withdrawal except in exceptional circumstances like death of the depositor.
- Section 80TTB lets senior citizens claim a maximum deduction of ₹50,000 on interest income from deposits, with any remaining interest taxed at regular slab rates.
- ClearTax notes that tax‑saving FDs cannot be used for loans or overdraft facilities during the mandatory five‑year lock‑in, limiting liquidity compared to regular FDs.
Why it matters: Savvy investors and senior citizens benefit from the attractive yields and extra senior‑citizen premium, while the mandatory five‑year lock‑in on tax‑saving FDs limits liquidity and precludes loan‑against‑deposit options, making regular FDs more flexible for those needing quick access to cash in a volatile market.
