Making a living is hard, and we all know that, and in order to get the best out of our finances, we need to work on saving wisely for the future. How would you feel taking a workshop on mountain climbs without the safety ropes? That is exactly how it would feel going on in life without safety ropes; life being the mountain climb, safety ropes being the savings, and you being you.
But, if you have come to terms with starting your journey of saving, then you are pretty much on the right track. But for starters, you can start off simple. And when you are confused between choosing between two major hosts of saving; you need to go for the analysis. So firstly, let us go over the rates in the market today.
Indian Bank FD Interest Rates 2021
Here are some of the major banks of the country, and the interest rates on their fixed deposits.
- State Bank of India: From 2.90% to 6.20%
- Punjab and Sind Bank FD: From 3.00% to 5.80%
- ICICI Bank FD: From 2.50% to 6.30%
- Punjab National Bank FD: From 2.90% to 5.75%
- HDFC Bank FD: From 2.50% to 6.25%
- Canara Bank FD: From 2.90% to 5.75%
- Axis Bank FD: From 2.50% to 6.50%
- Bank of Baroda FD: From 2.80% to 6.25%
- IDFC Bank FD: From 2.50% to 5.75%
- Bank of India FD: From 2.85% to 5.55%
Indian Savings Schemes Interest Rates 2021
Here are some of the most invested savings schemes of the country and their interest rates.
- Policy Provident Fund: Compound Interest of 7.1% per annum
- National Saving Certificate: 6.8% per annum
- Post Office Monthly Income Scheme: 6.6% per annum
- Senior Citizens Savings Scheme: 7.4% per annum
- Kisan Vikas Patra: 6.9% per annum
- Sukanya Samruddhi Yojana: 7.6% per annum
- Employee Provident Fund: 8.5%
- Voluntary Provident Fund: 8.5%
- Retirement Scheme for Government Employees: 7.00% per annum
Now that you are aware of both Indian Bank FD Interest Rates 2021 and savings schemes, you can understand that Interest rates vary. They also change every year, and from scheme to scheme. But you can find out which is the best one for you – a savings scheme or a fixed deposit.
Factors you Need to Know to Choose an FD or Savings Scheme
Safety of the Saving
Bank FDs and modest savings programs both provide investors with financial security. Banks are well-known for offering moderate returns on deposits while maintaining strong capital safety. Deposits with well-capitalized, stable banks are extremely safe. Investments in small savings schemes are also quite safe due to the government of India’s sovereign guarantee. As a result, they are nearly risk-free.
In most cases, modest savings schemes provide a higher interest rate than bank FDs. Banks, on the other hand, provide for more freedom in the choosing of tenures, as well as investments for ultra-short tenures ranging from 7 days to 1 year. Furthermore, senior citizen FD investors typically receive preferential rates of up to 50 basis points above the applicable regular rates.
Except for post office time deposits, most small savings programs include a lock-in period. Bank FDs, on the other hand, allow for partial or complete withdrawal benefits that can be obtained after forfeiting a tiny amount of the interest income as a penalty. With the exception of tax-saving FDs, which have a mandated lock-in term of 5 years, bank FDs often offer better liquidity than modest savings plans.
Tax-saving bank FDs provide a tax deduction benefit of up to Rs 1.5 lakh under Section 80C of the Income-Tax Act; however, they do not permit premature withdrawals, loans, or overdrafts. Small savings schemes, such as PPF and NSC, offer tax benefits under Section 80C to their investors, who can also borrow against them if certain conditions are met.
Normal bank FDs, on the other hand, do not provide any tax benefits. Furthermore, their interest income is taxed at the investor’s applicable slab rate. However, while interest income from modest savings schemes like PPF and SSY is tax-free, interest income from NSC, KVP, and five-year post office time deposit returns is taxable.
There is a maximum investment limit in modest saving schemes such as PPF and SSY. You cannot invest more than Rs 1.5 lakh in them in a fiscal year. You can invest more than Rs 1.5 lakh in NSC, but the tax benefit does not apply to the excess amount. SCSS has a total investment threshold of Rs 15 lakh. When you invest in a bank FD or a post office fixed deposit scheme. However, there is no maximum limit.
Bank fixed deposit programs, as the name implies, allow investors to receive the same interest rate throughout the investment period, which is set when the deposit is initiated. Small savings plans, such as post office time deposits, NSC, and KVP, offer the same interest rate throughout the investment period.
However, interest in schemes such as PPF and SSY fluctuates for current and new investments anytime the government changes the interest rate. Every quarter, the interest rates for small savings plans are updated.
Have you asked yourself those questions yet? Questions such as can I lock my money in for this period, how do I want the interest rates to be, will I be needing liquid cash, and much more. If not, please do. These things matter.
I could speculate all of the things you would want to know when you have to choose between the two because the best choice becomes relative from one individual to another. But these are the core aspects of both the plans, through which you can conduct your analysis.
So, in other words, if you want to save for retirement, for which you know you have a lot of time left, you might want to choose one of the best retirement savings schemes. And if you have a lump sum and want to lock it in for 24 months, you can choose the best bank you trust with an FD.