A detailed comparison of fixed deposit interest rates offered by major Indian banks in 2026, including special rates for senior citizens, tax implications and how to maximise your FD returns.
Fixed deposits remain one of the most popular savings instruments in India. Despite the rise of mutual funds, equities and alternative investments, crores of Indians still park a significant portion of their savings in FDs because they offer guaranteed returns, capital safety and simplicity. In a country where bank deposits total over Rs 200 lakh crore, understanding current FD interest rates and how to get the best deal is practical knowledge that directly affects your wealth.
This article compares FD interest rates across major banks in India for 2026, explains how taxation works, and shares strategies to maximise your returns.
Current FD interest rates: major banks comparison
The table below shows general category interest rates for key tenures. Senior citizens typically get an additional 0.25 to 0.75 percent above these rates. Rates are indicative and based on publicly available data as of mid-2026. Always verify with the bank before investing.
### Public sector banks
| Bank | 1 year | 2 years | 3 years | 5 years | |---|---|---|---|---| | SBI | 6.80% | 7.00% | 6.75% | 6.50% | | Bank of Baroda | 6.85% | 7.05% | 6.50% | 6.50% | | Punjab National Bank | 6.80% | 7.00% | 6.50% | 6.50% | | Canara Bank | 6.85% | 7.05% | 6.50% | 6.50% | | Union Bank of India | 6.80% | 7.00% | 6.70% | 6.50% |
### Private sector banks
| Bank | 1 year | 2 years | 3 years | 5 years | |---|---|---|---|---| | HDFC Bank | 6.60% | 7.00% | 7.00% | 7.00% | | ICICI Bank | 6.70% | 7.00% | 7.00% | 7.00% | | Axis Bank | 6.70% | 7.10% | 7.10% | 7.00% | | Kotak Mahindra Bank | 6.65% | 7.10% | 7.10% | 6.70% | | IndusInd Bank | 7.25% | 7.25% | 7.25% | 7.25% | | IDFC First Bank | 7.25% | 7.25% | 7.00% | 7.00% |
### Small finance banks
| Bank | 1 year | 2 years | 3 years | 5 years | |---|---|---|---|---| | Unity Small Finance Bank | 8.00% | 8.00% | 7.75% | 7.50% | | Ujjivan Small Finance Bank | 7.70% | 7.75% | 7.25% | 7.25% | | AU Small Finance Bank | 7.25% | 7.50% | 7.25% | 7.25% | | Equitas Small Finance Bank | 7.50% | 7.50% | 7.25% | 7.00% |
Small finance banks consistently offer higher rates than large banks. The deposit insurance limit of Rs 5 lakh per depositor per bank (under DICGC) applies equally to all scheduled banks, so spreading your deposits across multiple small finance banks while keeping each below Rs 5 lakh is a strategy some savers use to get higher returns with insurance protection.
Senior citizen FD rates
Senior citizens (aged 60 and above) receive a premium of 0.25 to 0.75 percent over regular rates at most banks. Some banks offer special limited-period schemes exclusively for senior citizens with even higher rates.
For example, SBI's Wecare FD scheme has historically offered an additional 0.50 percent for senior citizens on specific tenures. HDFC Bank and ICICI Bank typically offer 0.25 to 0.50 percent extra. Always check for dedicated senior citizen schemes when comparing rates.
Use our FD calculator to compute exact maturity amounts at different rates and tenures.
How FD interest is calculated
Most banks compound FD interest on a quarterly basis. The formula is:
Maturity amount = Principal x (1 + r/n)^(n x t)
Where r is the annual interest rate, n is the number of compounding periods per year (4 for quarterly), and t is the tenure in years.
For a Rs 5 lakh FD at 7 percent for 3 years with quarterly compounding, the maturity amount is approximately Rs 6,14,946 — meaning you earn Rs 1,14,946 in interest. Our FD calculator does this computation for you instantly.
Taxation of FD interest
FD interest is fully taxable as "Income from Other Sources" and is added to your total income for the financial year. The bank deducts TDS (Tax Deducted at Source) at 10 percent if your total interest income from that bank exceeds Rs 40,000 in a financial year (Rs 50,000 for senior citizens).
### Key tax points
- If your total income is below the taxable limit, submit Form 15G (or 15H for senior citizens) to the bank to avoid TDS deduction. - If you fall in the 30 percent tax bracket, the effective post-tax return on a 7 percent FD is only about 4.9 percent — barely above inflation. - Tax-saving FDs under Section 80C have a 5-year lock-in and qualify for a deduction of up to Rs 1.5 lakh. However, the interest earned is still fully taxable.
Use our income tax calculator to see how FD interest impacts your total tax liability.
FD vs other fixed-income options
| Instrument | Return (approx.) | Lock-in | Tax benefit | Risk | |---|---|---|---|---| | Bank FD | 6.5-8.0% | Flexible (7 days to 10 years) | 80C (5-year FD only) | Very low (DICGC insured up to Rs 5 lakh) | | Post Office TD | 6.9-7.5% | 1 to 5 years | 80C (5-year TD) | Sovereign guarantee | | PPF | 7.1% | 15 years | 80C, EEE tax status | Sovereign guarantee | | Senior Citizens Savings Scheme | 8.2% | 5 years | 80C | Sovereign guarantee | | Debt mutual funds | 6.5-7.5% | None (taxed at slab) | None | Low to moderate | | Corporate FDs | 7.5-9.0% | 1 to 5 years | None | Moderate (no DICGC cover) |
For guaranteed returns with tax-free interest, PPF remains unmatched for long-term savings, though the 15-year lock-in is a constraint. You can project PPF returns using our PPF calculator.
Strategies to maximise FD returns
### FD laddering
Instead of putting all your money in a single FD, split it across multiple FDs with different tenures — say one year, two years, three years and five years. As each shorter-tenure FD matures, reinvest it at the prevailing rate. This gives you regular liquidity while capturing higher rates on longer tenures.
### Choose the right tenure
Banks often offer their highest rates for specific tenures — commonly 1 year to 2 years and sometimes 444 days or 500 days. Avoid defaulting to a 5-year FD just because it seems safer. Compare rates across tenures and pick the one with the best rate for your needs.
### Consider small finance banks for higher rates
As shown in the table above, small finance banks offer 0.50 to 1.50 percent more than large banks. As long as you keep each deposit within the Rs 5 lakh DICGC insurance limit per bank, the additional return is worth considering.
### Opt for cumulative FDs when you do not need regular income
Cumulative FDs reinvest the interest, allowing it to compound. Non-cumulative FDs pay interest monthly or quarterly, which is useful for retirees who need regular cash flow but results in a lower total return because the paid-out interest does not compound.
### Time your FD with rate cycles
FD rates tend to follow the RBI repo rate. When the repo rate is high (as it has been through much of 2025-2026), lock in a longer-tenure FD to preserve the higher rate before the central bank begins cutting. When rates are falling, stick to shorter tenures so you can reinvest at better rates once the cycle turns.
When an FD is the right choice
- You have a specific goal within 1 to 5 years (down payment, child's education, emergency reserve) - You need guaranteed returns and cannot tolerate any capital loss - You are a senior citizen who needs predictable income - You want to park surplus cash temporarily while deciding on longer-term investments
When an FD is not the right choice
- Your investment horizon is 7 years or more (equity mutual funds typically outperform FDs over long periods) - You are in the 30 percent tax bracket (post-tax FD returns often trail inflation) - You need liquidity within a few months (premature withdrawal attracts a penalty of 0.50 to 1.00 percent)
The bottom line
Fixed deposits are not the most exciting investment, but they serve a critical role in every financial plan. They provide stability, guaranteed income and peace of mind — qualities that equity and crypto investments cannot offer. The key is to choose the right bank, tenure and structure to maximise your after-tax returns, and to complement your FDs with growth-oriented investments for long-term wealth creation.
This article is for educational purposes and does not constitute financial advice.