Summary : Karnataka Bank Limited’s domestic term-deposit schedule effective 8 June 2026 includes a special 555-day callable tenure for deposits below ₹3 crore. The published annual rate is 7.00% for the general category and 7.40% for eligible senior citizens. The rate row must be read with the bank’s governing deposit and interest-rate policies, the chosen payout option, booking date, completed tenure on premature closure and tax instructions. A headline rate is not a promised net return: interest may be taxable, TDS can apply under section 393 of the Income-tax Act, 2025, and an early closure can change both the applicable tenure rate and the penalty. Karnataka Bank is a bank covered by the deposit-insurance framework, but DICGC protection is capped at ₹5 lakh for principal and interest together per depositor per bank in the same right and capacity. This neutral guide explains the verified rate, documentation, premature-closure mechanics, tax treatment and insurance aggregation. It does not rank the deposit or recommend it to any person.
- Verified 555-Day Rate Effective 8 June 2026
- Eligibility and Booking Evidence
- Senior-Citizen Status Must Be Recorded Correctly
- Callable Status Means Early Closure Is Possible, Not Costless
- Premature Closure Uses the Completed-Tenure Rate
- Interest Is Taxable Even When the Bank Does Not Deduct TDS
- Section 393 Thresholds for Tax Year 2026-27
- Form 121 Does Not Make Interest Exempt
- DICGC Cover Is Aggregated at the Bank Level
- Documents and Controls to Retain
- Neutral Decision Checks Before Booking
- Frequently Asked Questions
- What is Karnataka Bank’s published rate for the 555-day special FD?
- Is the 555-day Karnataka Bank deposit callable?
- What premature-closure penalty applies below ₹2 crore?
- What if the deposit is ₹2 crore or more?
- What are the section 393 TDS thresholds?
- Does filing Form 121 make FD interest tax-free?
- How much DICGC protection applies?
- Will renewal preserve the 555-day rate?
- Key Takeaways
Verified 555-Day Rate Effective 8 June 2026
The current Karnataka Bank domestic deposit table checked for this article identifies a 555-day special callable tenure for deposits below ₹3 crore. The general rate is 7.00% per annum and the senior-citizen rate is 7.40% per annum. The immediately adjacent bands carry different rates, so an early closure or a booking under another tenure cannot be valued by simply retaining the 555-day headline rate. The deposit receipt and the bank’s live schedule on the booking date are the controlling operational evidence.
| Published tenure | General rate | Senior-citizen rate |
|---|---|---|
| 1 year to 554 days | 6.50% p.a. | 6.90% p.a. |
| 555-day special callable deposit | 7.00% p.a. | 7.40% p.a. |
| 556 days to 2 years | 6.40% p.a. | 6.80% p.a. |
These rates are the published annual rates, not maturity yields after tax. A cumulative option generally retains interest for compounding according to the bank’s rules, while a non-cumulative option pays interest at the selected interval. Monthly payout may use a discounted-value convention rather than one-twelfth of the annual interest. The application and receipt should state the principal, tenure, rate, maturity date, payout instruction, customer category and nomination.
Eligibility and Booking Evidence
Senior-Citizen Status Must Be Recorded Correctly
The additional senior-citizen rate is available only when the depositor satisfies the bank’s eligibility and documentation rules. Age, residential status, ownership pattern and the relevant product conditions should be confirmed at booking. A joint deposit should not be assumed to qualify merely because one holder is a senior citizen; the bank’s rule for the first or primary holder and the precise account constitution should be checked. The receipt should display the applied rate so any mismatch can be corrected promptly.
Callable Status Means Early Closure Is Possible, Not Costless
The cited special tenure is callable, so premature closure is permitted subject to the bank’s policy and the actual deposit mandate. Callable does not mean the contracted 555-day rate continues if the deposit is broken early. The bank identifies the rate for the completed tenure and applies the applicable penalty framework. A depositor who may need liquidity should obtain a bank-generated premature-closure quotation rather than estimating the amount from the original maturity value.
Premature Closure Uses the Completed-Tenure Rate
Karnataka Bank’s interest-rate policy states that premature interest is based on the rate applicable for the period for which the deposit actually remained with the bank or the contracted rate, whichever is lower, with a penalty. For term deposits below ₹2 crore, the policy states a 0.50 percentage-point penalty on the applicable rate. For deposits of ₹2 crore and above, it states a 1 percentage-point penalty. Because this article covers the below-₹3-crore rate table, customers between ₹2 crore and ₹3 crore must not assume the lower penalty.
| Deposit amount / event | Policy treatment | Practical control |
|---|---|---|
| Below ₹2 crore, premature closure | Applicable completed-tenure/contracted rate, whichever is lower, less 0.50 percentage point | Request a dated closure quote |
| ₹2 crore and above, premature closure | Applicable completed-tenure/contracted rate, whichever is lower, less 1 percentage point | Confirm bulk-deposit terms and authorisation |
| Death of depositor | Policy provides specific premature-payment treatment without penalty, subject to conditions | Submit claim, KYC and succession/nomination documents |
| Maturity renewal | New tenure and rate depend on instructions and the rate then available | Check the renewed receipt rather than assuming 7.00% or 7.40% |
The completed-tenure comparison means an early closure can move the deposit into a lower rate band before the penalty is applied. The exact computation also depends on the bank’s day count, interest already paid, payout frequency and recovery of excess interest. An illustrative calculation that ignores these factors can materially overstate the closure proceeds, so this article does not provide a promised maturity or closure amount.
Interest Is Taxable Even When the Bank Does Not Deduct TDS
Interest on a bank fixed deposit is generally taxable according to the depositor’s applicable income-tax method and status. For an individual following the usual cash basis for such income, interest received or credited may be reported accordingly; other taxpayers or accounting methods may require accrual. The bank’s interest certificate, Form 26AS and Annual Information Statement should be reconciled with the return. The deposit principal, accumulated interest and TDS should not be conflated.
Section 393 Thresholds for Tax Year 2026-27
For Tax Year 2026-27, section 393 of the Income-tax Act, 2025 sets the threshold for the relevant bank-interest category at ₹50,000 for a person other than a senior citizen and ₹1,00,000 for a senior citizen, subject to the statutory conditions and aggregation rules. Where TDS applies and a valid PAN is available, the ordinary rate is 10%; a higher rate may apply if PAN or other compliance requirements are not met. Threshold testing applies to the payer-level interest covered by the provision, not separately to each receipt or branch.
Form 121 Does Not Make Interest Exempt
Eligible persons expecting nil tax liability may examine Form 121, which replaces the earlier self-declaration architecture under the new income-tax framework. Acceptance of a valid declaration affects deduction at source; it does not convert taxable interest into exempt income. The depositor must satisfy the statutory eligibility, estimate total income correctly and submit the prescribed form through the available channel. If tax is deducted, credit should be claimed only after matching the tax statement and bank certificate.
DICGC Cover Is Aggregated at the Bank Level
Deposits with Karnataka Bank are within the DICGC framework applicable to insured banks. The maximum insurance amount is ₹5 lakh for principal and interest together for each depositor at one bank in the same right and capacity. All eligible balances held in the same right and capacity across branches of Karnataka Bank are aggregated; opening multiple deposits or using different branches does not multiply the cover. Balances in genuinely different rights and capacities are treated under DICGC’s rules, and the legal constitution must be real and properly documented.
DICGC insurance is not a guarantee of market liquidity, uninterrupted access or recovery above the ceiling. The statutory mechanism is triggered by specified bank events and operates through the prescribed process. Interest included in the insured claim counts toward the same ₹5 lakh cap. Deposit splitting should therefore be evaluated using the depositor-bank aggregation rule, not the number of receipts.
| DICGC question | Correct treatment |
|---|---|
| Are principal and interest separately insured up to ₹5 lakh each? | No. The ₹5 lakh ceiling covers principal and interest together. |
| Does each branch receive a separate limit? | No. Eligible deposits across branches of the same bank are aggregated in the same right and capacity. |
| Do multiple FD receipts multiply cover? | No. Receipt count does not change the depositor-per-bank aggregation rule. |
| Is an NBFC-style no-insurance warning applicable here? | No. Karnataka Bank is a bank; bank deposits fall within DICGC rules, unlike public deposits accepted by NBFCs. |
Documents and Controls to Retain
- Application or digital booking confirmation and the final term-deposit receipt.
- KYC, PAN, senior-citizen evidence and nomination or joint-holding instructions.
- Rate schedule applicable on the booking date and any special-tenure terms.
- Payout instructions, bank-account credit details and maturity/renewal mandate.
- Annual interest certificate, Form 26AS, AIS reconciliation and any Form 121 acknowledgement.
- Premature-closure quote and calculation if the deposit is broken before maturity.
- Aggregation schedule of all Karnataka Bank balances held in the same right and capacity.
Neutral Decision Checks Before Booking
A depositor should verify the effective rate, available payout options, callable status, liquidity needs, tax bracket, aggregation of uninsured balances and renewal instructions. Those checks do not establish that the product is suitable. The 555-day tenure may align or conflict with the depositor’s cash-flow needs, and breaking it early can reduce interest materially. Neither the bank’s published rate nor DICGC insurance removes reinvestment, liquidity, tax, operational or concentration considerations.
Frequently Asked Questions
What is Karnataka Bank’s published rate for the 555-day special FD?
The schedule effective 8 June 2026 shows 7.00% per annum for the general category and 7.40% per annum for eligible senior citizens for deposits below ₹3 crore.
Is the 555-day Karnataka Bank deposit callable?
Yes, the cited special tenure is callable, so premature closure is permitted subject to the bank’s governing terms and penalty calculation.
What premature-closure penalty applies below ₹2 crore?
The cited policy states 0.50 percentage point on the applicable rate, after applying the lower of the completed-tenure rate and contracted rate.
What if the deposit is ₹2 crore or more?
The cited policy states a 1 percentage-point penalty for premature closure of deposits of ₹2 crore and above, subject to the governing terms.
What are the section 393 TDS thresholds?
For the relevant bank-interest category in Tax Year 2026-27, the thresholds are ₹50,000 for a non-senior citizen and ₹1,00,000 for a senior citizen, subject to statutory conditions.
Does filing Form 121 make FD interest tax-free?
No. A valid declaration may prevent TDS for an eligible person, but the interest remains subject to the applicable income-tax rules.
How much DICGC protection applies?
Up to ₹5 lakh for principal and interest together per depositor per bank in the same right and capacity, aggregated across branches.
Will renewal preserve the 555-day rate?
Not necessarily. The renewed deposit uses the product, tenure and rate available under the bank’s instructions at renewal, so the new receipt must be checked.
Key Takeaways
- The verified 555-day callable rate is 7.00% for the general category and 7.40% for eligible senior citizens, effective 8 June 2026.
- Premature closure uses the lower applicable-rate comparison and the bank’s amount-based penalty.
- TDS thresholds do not determine the final tax liability or make interest exempt.
- DICGC protection is capped at ₹5 lakh for principal and interest together per depositor per bank in the same right and capacity.
- The rate schedule, receipt, tax records and aggregation of all bank balances should be retained.
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Disclaimer: This article is a neutral educational summary of Karnataka Bank Limited’s published domestic term-deposit rates and policy material checked for the 555-day special callable fixed deposit. It is not an offer, recommendation, ranking, solicitation, personalised investment opinion or promise that the product is suitable, continuously available, or capable of producing a particular net return. Rates, effective dates, deposit limits, senior-citizen eligibility, account constitution, payout options, compounding, day-count methods, premature-closure calculations, penalties, renewal instructions, nomination, loans against deposits and operational requirements may change or may be applied differently under the final application and deposit receipt. Tax treatment depends on residential status, accounting method, total income, payer-level aggregation, PAN and other statutory conditions; a TDS threshold or Form 121 declaration does not make interest exempt. DICGC protection is governed by statute and official rules, including the ₹5 lakh combined principal-and-interest ceiling and aggregation of deposits at the same bank in the same right and capacity. It does not assure immediate access, liquidity or recovery above the insured limit. Depositors should verify the live bank rate page, governing terms, receipt, Income Tax Department guidance and DICGC rules immediately before acting, and obtain qualified tax or financial advice appropriate to their circumstances. TaxGuru accepts no responsibility or liability for any rate change, calculation difference, tax consequence, denied declaration, premature-closure loss, uninsured balance, delayed access, bank action or other consequence arising from reliance on this article or from facts and rules that differ from those described.
