As we approach Budget 2025, a new proposal from SBI Research has sparked hopes for tax relief among fixed deposit account holders, including both general and senior citizens. In a recent pre-budget report, the SBI Research team suggested that the government might implement a flat tax rate of 15% on income generated from fixed deposits.

Additionally, the report recommended that the taxation of fixed deposits and other term deposits be aligned with the treatment of other asset classes. At present, the interest earned on fixed deposits is taxed annually at the highest applicable tax rate for the depositor, while investments in equity mutual funds enjoy lower tax rates of 20% for short-term gains and 12.5% for long-term gains.

If the government accepts SBI Research’s proposal, it could enhance the appeal of fixed deposits, offering much-needed tax relief to depositors, particularly senior citizens who depend on these investments for their post-retirement income.

Current FD interest rates show that leading banks offer annual interest rates ranging from 5% to 7.75% on fixed deposits, with terms varying from 7 days to 10 years. Here’s a summary of the FD rates provided by the State Bank of India (SBI), Axis Bank, and HDFC Bank:

SBI FD rates

When it comes to the biggest government bank in the country, they’re offering interest rates of up to 7.0% for regular customers and 7.50% for senior citizens on deposits of Rs 3 crore and above. Meanwhile, PNB is providing 7.25% for general customers and 7.55% for seniors on one-year deposits ranging from Rs 3 crore to Rs 10 crore.

HDFC Bank

For HDFC Bank, if you’re looking at deposits with tenures of 7 to 29 days, you’ll earn 4.75%, and for 30 to 45 days, it’s 5.50%. If you go for deposits lasting 46 to 60 days, you can snag 5.75%, and for 61 to 89 days, it’s 6%. They have a variety of deposit options available, with terms from just 7 days all the way up to 10 years.

Axis Bank

Axis Bank is offering up to 7.30% interest for the general public on deposits between Rs 3 crores and Rs 5 crores for terms of one year, 11 days to one year, 24 days. For longer deposits, you can get up to 7.0% for terms of two years to 30 months. Senior citizens can enjoy 7.80% for one year, 11 days to one year, 24 days, and 7.50% for deposits lasting two years to 30 months.