To the average Indian investor, a Fixed Deposit (FD) scheme represents one of the safer investment opportunities. As a no-fuss investment product, FDs are much easier to understand and relatively easy to start. The best thing about them is that any local bank will have a fixed deposit scheme. But that doesn’t mean you should go with the first option you find. Before committing to a three-year fixed deposit scheme, always do your research. And you can start the research process with this read right here.
What are three-year fixed deposit schemes?
Three-year FD schemes are FDs with a three-year maturity period. Generally, three-year fixed deposit schemes are considered safe. That’s because they are offered by institutions regulated by the Reserve Bank of India (RBI). The interest rates of these schemes are fixed for the entire tenure, so the returns are predictable.
Additionally, fixed deposits are covered by the Deposit Insurance and Credit Guarantee Corporation (DICGC). So they come with an insurance cover of up to ₹5 lakh per depositor per bank.
However, it is essential to note that fixed deposits carry some risks, such as interest rates, inflation, and liquidity.
While there are tax-saving fixed deposit schemes, the three-year FD is not one such scheme. Investors can only claim deductions under Section 80C of the Income Tax Act, 1961, by investing in a five-year fixed deposit scheme.
The best fixed deposit schemes to invest in for three years
FDs are one of the more common investment options in India. However, there are many options, so choosing is hard. Here are some of the better options you can find in the market. Read about them here and elsewhere, and do ample research before investing.
1. Fincare Small Finance Bank fixed deposit
Fincare’s three-year FD scheme provides interest rates of close to 7% per annum. The interest rate depends on the amount invested. The scheme offered by Fincare Small Finance bank allows premature withdrawal, subject to a penalty of 1% of the applicable interest rate.
The bank also has an online facility for opening a fixed deposit account. The minimum deposit amount is ₹1,000.
2. KTDFC fixed deposit
The Kerala Transport Development Finance Corporation (KTDFC) offers a three-year fixed deposit scheme with an annual interest rate of 7%. The scheme allows premature withdrawal, subject to a penalty of 0.5% of the deposit amount.
KTDFC is a government-owned company and is considered safe for investment. The minimum deposit amount for the scheme is ₹10,000.
3. Shriram City fixed deposit
Shriram City Union Finance’s three-year scheme comes with interest rates of 7.86% per annum. The scheme allows premature withdrawal, subject to a penalty of 1% of the deposit amount. The minimum deposit amount for the scheme is ₹5,000.
The fixed deposit scheme offered by Shriram City is considered safe, and the company has a good credit rating.
4. Mahindra Finance fixed deposit
Mahindra Finance offers a similar scheme with an interest rate of around 8% per annum for senior citizens and 7.4% for others. The scheme allows premature withdrawals subject to a penalty of 1%. The minimum deposit amount is ₹5,000. Mahindra Finance is one of the more well-known private players.
5. HDFC bank fixed deposit
The HDFC Bank scheme offers an interest rate of 7% per annum. This scheme, too, allows premature withdrawal with a similar penalty of 1%. The fixed deposit account can be opened online. HDFC Bank is one of the more trusted banks, with a good credit rating.
6. ICICI bank fixed deposit
The three-year fixed deposit scheme by ICICI comes with competitive interest rates ranging from 6.9% to 7.00% per annum, depending on the applicant’s age. A higher rate is offered to senior citizens. Premature withdrawals are possible but are subject to a penalty of 1%. There is an online facility to open this type of account. The minimum deposit amount is ₹10,000.
Conclusion
While most investors believe fixed deposits to be risk-free, it is not exactly how things work. There is always an element of risk, irrespective of the type of investment. With fixed deposits, the risks could include the possibility of the bank defaulting on its payment or the chances of you withdrawing the amount before the FD matures.
Additionally, fixed deposits offer a lower return rate than other options, such as equities. But the options that come with higher returns also involve higher risks. So consider your investment goals, risk appetite, and financial situation before investing.
FAQs
How do you choose a good three-year FD?
It is essential to compare the interest rates various banks offer and select a fixed deposit that suits your investment goals and risk appetite. Also, consider other factors, such as the reputation of the bank, its financial stability, and the terms and conditions of the deposit.
Which bank is best for fixed deposit for 3 years?
The best bank for a 3-year fixed deposit may vary. Prominent options include Shriram City for senior citizens offering 7.80% interest and Bandhan Bank at 7.75%.
Which bank has highest FD rates 2024?
As of 2024, IDFC First Bank provides the highest FD interest rate of 7.5% for a tenure of one to two years, as per available information.
Is FD for 3 years taxable?
Yes, FD interest is taxable. Banks deduct TDS if the interest exceeds Rs 40,000 in a financial year. The tax rate is 20% with applicable surcharge/cess.
