5-Year FD Interest Rates in India for 2023

A Fixed Deposit (FD) is an investment instrument accessible through banks, Non-Banking Financial Companies (NBFCs) and the post office. A fixed deposit is often considered a traditional way of saving and investing. It is one of the preferred investment options for many due to its simplicity, assurance and predictability of fixed returns.

As the name suggests, FDs are investments in which you can deposit a certain amount for a certain period, and in exchange, banks guarantee a specific interest rate as a return. The interest rates depend on the amount and the tenure of fixed deposits. Generally, a term of three to five years offers favourable interest rates.

This article has a comprehensive list of banks that offer the best 5-year FD interest rates. Read further to know more.

FD Interest Rates With a 5-year Tenure

Several banks provide competitive interest rates on fixed deposits with a 5-year tenure.

IndusInd bank, for instance, offers a 6.75% interest rate, one of the highest interest rates on 5-year FDs. Senior citizens get additional interest, typically between 0.5% and 0.8%, on most bank FDs.

Consider the following factors when investing in a 5-year FD:

• Many banks offer tax-saving 5-year fixed deposits. You can avail of a deduction on the deposit amount up to Rs. 1.5 lakh under Section 80C of the IT Act.
• FD interest earned above Rs. 40,000 per financial year is subject to 10% TDS. For senior citizens, the exemption limit is Rs 50,000. If your total income for the year is less than Rs. 2.5 lakh, you can submit form 15G/15H to avoid TDS on FD interest.
• It is imperative to note that 5-year tax-saving FDs have a 5-year lock-in period. Unlike regular FD, you cannot prematurely withdraw funds or opt for a loan or credit card against it. Therefore, a regular 5-year FD may be more suitable and flexible for you if tax saving is not your primary objective.

There is also an option of choosing a cumulative or non-cumulative 5-year FD. Here are some important points on what the two types of FD mean:

• A cumulative FD allows you to reinvest the interest. You will receive the total accumulated interest and principal amount when your FD matures, and the compounded interest will provide you with higher returns.
• For instance, if you deposit Rs.1 lakh for 5 years at a 6% interest rate, you will earn a cumulative interest of Rs. 34,686. On the other hand, when you choose a non-cumulative FD, you will receive quarterly interest payments of Rs. 1,500, which will translate to Rs. 30,000 interest in five years.
• A cumulative FD with a 5-year tenure could be an attractive option if you are not looking to receive periodic interest payments.
• However, a non-cumulative FD may better suit your needs, especially if you are a senior citizen and want to receive FD interest payouts periodically. A non-cumulative FD’s interest misses out on the power of compounding, resulting in a lower return than a cumulative FD.

Also Read: Experience financial growth with unmatched Bajaj Finance FD Rates

Top Banks Offering 5-Year Fixed Deposit

The FD interest rate for a tenure of five years typically ranges from 5.30% to 6.75% per annum. Take a look at some of the top banks’ 5-year FD interest rates for deposits less than Rs. 2 crores.

Note:  Interest rates are subject to change as per the bank’s policy and the prevalent repo rate

Key Highlights

• The State Bank of India (SBI) offers a 6.10% interest rate for 5-year fixed deposits. They provide senior citizens with a higher interest rate.
• The Post Office FD offers a 6.7% interest rate for 5-year deposits.
• Among banks, IndusInd Bank offers an attractive interest rate of 6.75% on deposits less than Rs. 2 crores. The interest rate it offers on 5-year FDs for senior citizens is among the highest at 7.25%.
• The minimum FD deposit required by banks may vary; it could be as low as Rs. 1,000.
• Most banks offer tax-saving fixed deposits at the same interest rate as term deposits.
• Almost all banks offer loans or credit cards against regular fixed deposits.

Final Thoughts

The interest earned on FDs differs based on the interest rate, account type and tenure. Most banks offer competitive interest rates on 5-year FDs. Additionally, senior citizens can benefit from a higher FD interest rate.

Besides the standard 5-year FD, you can also choose tax-saving FDs, which are advantageous if tax saving is your main objective. However, remember that this variant of FDs don’t allow premature withdrawals. It is also essential to compare cumulative and non-cumulative 5-year FDs to choose the best fit for your financial needs.

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