1-Year Fixed Deposits Now Offering Up to 7.4% Interest: Check Top Banks and TDS Rules
If you are looking for a safe investment option with stable returns, short-term Fixed Deposits (FDs) continue to be one of the top choices in 2025. Several banks are currently offering attractive interest rates up to 7.4% for a 1-year FD, especially for investors below 60 years of age.
These rates are applicable on deposits up to ₹3 crore, based on Paisabazaar.com data updated till 19 November 2025. Among the top-paying institutions are small finance banks that are leading the interest-rate chart.
Top 1-Year FD Interest Rates (General Citizens)
| Bank | Interest Rate |
|---|---|
| Suryoday Small Finance Bank | 7.40% |
| Jana Small Finance Bank | 7.25% |
| Ujjivan Small Finance Bank | 7.25% |
Source: Paisabazaar.com
These returns are currently higher compared to many large private and public sector banks, making them attractive for short-term depositors.
TDS Rules on FD Interest: What Investors Must Know
Tax Deducted at Source (TDS) is applicable only if:
➡ Your total interest income from FDs in a bank exceeds ₹1 lakh in one financial year.
Important point:
✔ TDS is not an extra tax.
It is adjusted later when you file your Income Tax Return (ITR).
If your final tax payable is zero, you may even get a refund of the deducted amount — along with interest.
Can You Avoid TDS Using Form 15G/15H?
Many investors assume Form 15G or 15H prevents TDS in every case — but that’s not correct.
Form 15G/15H works only if both conditions are met:
1️⃣ Your total tax liability for the financial year must be NIL
2️⃣ Your taxable interest income must not exceed the basic exemption limit
Exemption limits:
-
Old Tax Regime: ₹2.5 lakh
-
New Tax Regime: ₹4 lakh
📌 Example
If your total income becomes NIL under Section 87A but FD interest alone exceeds the exemption limit, the bank must deduct TDS — even if final tax payable remains zero.
Giving Form 15G/H incorrectly may be treated as false declaration, leading to penalties.
Quick Summary for Investors
| Investment Factor | Impact |
|---|---|
| Return potential | Up to 7.4% on 1-year tenure |
| Risk level | Very low (bank-secured) |
| TDS | Deducted only if interest > ₹1 lakh |
| Best for | Short-term savers and senior citizens (higher rates available) |
Should You Invest Now?
With interest rates expected to soften gradually in the coming months, locking FDs now at higher 1-year rates may be a smart move for:
✔ Conservative investors
✔ Those parking surplus funds
✔ Short-term financial goals
