Best FD Interest Rates — May 2026
FD rates in May 2026 range from 6.25%–7.80% for general depositors and 6.75%–8.50% for senior citizens across regulated banks. Public sector banks are safer; small finance banks offer higher rates but with slightly higher risk.
SBI
6.60%
SC: 7.05%
5–10 years
HDFC Bank
6.50%
SC: 7.00%
3 years
ICICI Bank
6.50%
SC: 7.10%
3–5 years
Yes Bank
7.25%
SC: 7.75%
18 months
Bandhan Bank
7.25%
SC: 7.75%
1–3 years
Shivalik SFB
7.80%
SC: 8.30%
1–2 years
| Bank | Best General Rate | Senior Citizen Rate | Best Tenure | DICGC Insured |
|---|
| SBI | 6.60% p.a. | 7.05% p.a. | 5–10 years | Yes (₹5L) |
| HDFC Bank | 6.50% p.a. | 7.00% p.a. | 3 years | Yes (₹5L) |
| ICICI Bank | 6.50% p.a. | 7.10% p.a. | 3–5 years | Yes (₹5L) |
| Axis Bank | 6.70% p.a. | 7.20% p.a. | 2–3 years | Yes (₹5L) |
| Yes Bank | 7.25% p.a. | 7.75% p.a. | 18 months | Yes (₹5L) |
| Shivalik SFB | 7.80% p.a. | 8.30% p.a. | 1–2 years | Yes (₹5L) |
Source: Bank websites & PolicyBazaar, May 2026. Subject to change. All deposits insured up to ₹5 lakhs per bank per depositor by DICGC.
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DICGC Insurance Limit: Every bank deposit is insured only up to ₹5 lakhs per depositor per bank by DICGC. If you have ₹20 lakhs to invest, split it across 4 different banks — not 4 FDs in the same bank. This is especially important for small finance banks offering higher rates.
Tax on FD Interest — What You Actually Earn
FD interest is fully taxable as “Income from Other Sources” at your applicable income tax slab rate. There is no special flat rate — a 30% taxpayer pays 30% tax on FD interest.
| Rule | General Depositor | Senior Citizen (60+) |
|---|
| TDS threshold | ₹40,000/year per bank | ₹1,00,000/year per bank |
| TDS rate (above threshold) | 10% (with PAN) / 20% (without PAN) | 10% (with PAN) |
| Tax on interest | At your income tax slab rate | At your income tax slab rate |
| Avoid TDS below threshold | Submit Form 15G | Submit Form 15H |
| Tax-saving FD (5-year) | 80C deduction up to ₹1.5L | Same — plus higher interest rate |
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Form 15G / 15H tip: If your total income is below the taxable limit (₹12L for new regime / ₹2.5L for old regime), submit Form 15G (general) or Form 15H (senior citizen) to your bank at the start of each financial year. This prevents TDS deduction on your FD interest — you keep the full amount until you file your ITR.
📖 Real Example — ₹28,000 More by Splitting Across Banks
Ramesh, a retired government officer in Chennai, had ₹20 lakhs to invest. His first instinct was to put it all in SBI — safe, familiar, government bank. His son-in-law suggested comparing. SBI offered 6.60% for 5 years. Shivalik Small Finance Bank offered 7.80%.
Ramesh put ₹5 lakhs in SBI (DICGC insured) and ₹5 lakhs each in Yes Bank, Bandhan Bank, and Shivalik SFB — all DICGC-insured up to ₹5 lakhs. His blended rate worked out to approximately 7.25% vs SBI’s 6.60%. On ₹20 lakhs over 5 years, the difference was ₹28,000 in additional interest — by simply doing 30 minutes of comparison and splitting sensibly.
FD vs SIP — Which Is Better?
| Factor | Fixed Deposit | SIP (Equity Mutual Fund) |
|---|
| Returns | 6.5–7.8% guaranteed | 10–14% (historical avg, not guaranteed) |
| Risk | Zero (DICGC protected up to ₹5L) | Market risk — can fall short-term |
| Tax | At slab rate (up to 30%) | LTCG 12.5% after 1 year (equity) |
| Liquidity | Premature withdrawal penalty | Redeem anytime (except ELSS) |
| Best for | Capital protection, senior citizens, emergency fund | Long-term wealth creation (5+ years) |
| Minimum amount | ₹1,000 | ₹500/month |
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InfoBuddy Recommendation: FD and SIP are not either/or — they serve different purposes. Keep your emergency fund (3–6 months expenses) and short-term goals (under 3 years) in FDs for guaranteed safety. Invest your long-term wealth-building money (5+ year horizon) in equity SIPs for higher inflation-adjusted returns.
Frequently Asked Questions
Is FD interest fully taxable in India?
Yes. FD interest is added to your total income and taxed at your applicable slab rate — 5%, 20%, or 30% depending on your income bracket. There is no special flat rate or exemption for FD interest (unlike LTCG on equity). TDS is deducted at 10% when interest exceeds ₹40,000/year (₹1,00,000 for senior citizens). You pay the balance or get a refund when you file your ITR.
What is a tax-saving FD and how does it work?
A 5-year tax-saving FD qualifies for Section 80C deduction up to ₹1.5 lakhs per year under the old tax regime. The investment amount is deductible — but the interest earned is still fully taxable. The FD has a mandatory 5-year lock-in and cannot be broken early. It is a good option for conservative investors who want both 80C benefits and guaranteed returns — though PPF (completely tax-free including interest) is often a better alternative for very long-term goals.
What happens to my FD if a bank fails?
DICGC (Deposit Insurance and Credit Guarantee Corporation) insures bank deposits up to ₹5 lakhs per depositor per bank. This includes principal + interest combined. If a bank fails, you receive up to ₹5 lakhs. If you have more than ₹5 lakhs to invest, spread it across different banks — not different branches or FDs in the same bank. This applies to all scheduled commercial banks including small finance banks and cooperative banks.
What is the penalty for breaking an FD before maturity?
Most banks charge a 0.5%–1% penalty on the interest rate for premature withdrawal. For example, if your FD rate is 6.5% and you break it early, you receive 6.0%–5.5% interest for the period you held it. Some banks charge a flat penalty fee instead. Tax-saving FDs (5-year) cannot be broken early — there is no premature withdrawal option at all.
Cumulative FD vs Non-cumulative FD — which is better?
In a cumulative FD, interest is compounded and paid at maturity — better for wealth building as interest earns interest. In a non-cumulative FD, interest is paid at regular intervals (monthly, quarterly, or annually) — better for senior citizens or anyone needing regular income. The maturity amount of a cumulative FD is always higher than a non-cumulative one at the same rate due to compounding. This calculator shows cumulative FD returns by default.
A Fixed Deposit is one of India’s most reliable savings instruments — guaranteed returns, DICGC protection, and zero market risk. The key is choosing the right bank, the right tenure, and understanding the tax impact on your actual returns.
Use the calculator above to compare rates across banks. Enable the senior citizen toggle if applicable. Check the year-wise table to understand compounding. And always split large deposits across banks to stay within the ₹5 lakh DICGC limit.
AK
Anshuman Kumar
FP&A Manager | MBA Finance, Bharti Vidyapeeth | 10+ Years in Financial Planning & Taxation
All calculator content on InfoBuddy is reviewed by Anshuman Kumar — a finance professional with 10+ years of experience in investment planning, taxation, and personal finance. He ensures every rate, tax rule, and calculation reflects current Indian market conditions and RBI/DICGC guidelines.
Disclaimer: FD maturity calculations use standard compound interest formulas and are for educational reference only. Interest rates shown are indicative as of May 2026 from bank websites and aggregator platforms, and are subject to change without notice. Tax calculations are based on the Income Tax Act 2025 provisions. TDS rules and thresholds are subject to revision. Always verify current rates and tax implications with your bank and a qualified financial advisor before investing. InfoBuddy is not a bank, SEBI-registered advisor, or AMFI-registered distributor.
