Short-term fixed deposits (FDs) are a good option for investors looking for stable returns with low risk in a short period of time. The duration of these FDs typically ranges from 7 days to 12 months, giving you flexibility while allowing you to grow your money without committing to a long-term contract.
Here are some important tips to maximize short-term FD returns in India.
Compare prices
Interest rates for short-term FDs vary depending on banks and financial institutions. Smaller private banks and non-banking financial companies (NBFCs) often offer higher interest rates compared to larger public sector banks. Before investing, compare rates from different institutions to make sure you’re getting the best deal.
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Ladder FD
If you don’t know your future liquidity needs, laddering up FDs can be a wise strategy. Instead of locking all your funds in one FD, split your investment into multiple FDs with different maturities. This provides regular liquidity and reduces reinvestment risk.
Beware of early withdrawal penalties
Although short-term FDs offer flexibility, withdrawals before maturity can incur penalties and usually result in lower interest income. Be sure to understand these penalties before investing and avoid early withdrawals unless absolutely necessary.
Check tax implications
Interest earned on FDs is taxable and falls under ‘income from other sources’ in your tax return. If your income in a financial year is more than Rs 40,000 (Rs 50,000 for senior citizens), banks will deduct TDS (tax deduction at source).
The table below compares interest rates on FDs up to one year. You can review and choose the one that suits your financial needs.
Short Term Fixed Deposit Interest Rate (%) Bank Name 6 Months – < 1 Year Public Sector Banks Bank of Baroda 5.60%-7.10% Bank of India 6.00% Bank of Maharashtra 5.25%-6.90% Canara Bank 6.15%-6.25% Central Bank of India 6.0%- 6.25% Bank of India 3.85%-7.05% Indian Overseas Bank 5.75% Punjab and Sindh Bank 5.25%-7.15% Punjab National Bank 6.25%-7.05% State Bank of India 6.25% -6.50% UCO Bank 5%-7.30% Union Bank of India 5%-7.40% Private Bank Axis Bank Ltd. 5.75%-6% Bandhan Bank Ltd. 4.50% Catholic Syrian Bank Ltd. 4.25%-7.25% City Union Bank Ltd. 6 %-7.5% DCB Bank Ltd.6.2%-7.25%Dhanlaxmi Bank Ltd.5.00%Federal Bank Ltd.5%-6.50%HDFC Bank Ltd4.5%-6%ICICI Bank Ltd.4.75%-6%IDBI Bank Limited5. 50%-7.05% IndusInd Bank Ltd5%- 6.50%IDFC First Bank Ltd.4.5%-5.75%Jammu & Kashmir Bank Ltd.5.5%- 6.25%Karnataka Bank Ltd6.25%-6.75%Karur Vysya Bank Ltd.6%- 7.4%Kotak Mahindra Bank Ltd.6%-7%Nainital Bank Ltd.4.95%- 5.75%RBL Bank Ltd.4.75%- 6.05%South Indian Bank Ltd.4.50%-5%Tamilnad Mercantile Bank Ltd.6.00%YES Bank Ltd.5 %-6.35 %Note- Data was retrieved from each bank's website as of October 3, 2024.
Compiled by Bankbazaar.com
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