Tax-saving fixed deposits (FDs) are a great investment option because they are quite secure. Moreover, they allow depositors to save on the tax they have to pay. Most banks in India offer competitive tax-saving FD interest rates that depositors can invest in! After all, FDs are a great investment option and are highly popular due to the guaranteed returns they offer. But, which tax-saving FD must you invest in for better returns on your savings?
To help you learn more about the different tax-saving FD interest rates available, we have put together the following article. Here, we will discuss what tax-saving FD schemes are, their features, and the benefits they bring. We have also detailed a tax-saving Fd interest rates comparison to help you better visualise the options available.
What Are Tax-Saving FD Interest Rates Scheme?
Tax-saving FD schemes are a special type of investment scheme that helps depositors claim up to INR 1.5 lakh tax deductions as per Section 80C of the Indian Income Tax Act, 1961. These FDs are similar to regular FDs since depositors get the maturity amount directly credited to bank accounts. Moreover, these come with a lock-in period of 5 years and offer fixed returns for the term of the FD. Generally, tax-saving FD interest rates range between 5.5% to 7.75%.
Another point to remember is that you cannot make any premature withdrawals or partial withdrawals for tax-saving FD schemes. So, depositors do not get access to any loan facility against their tax-saving FD schemes. Remember that the interest earned from these tax-saving FDs is taxable. In conclusion, tax-saving FDs are a safe investment option and can easily help you save tax.
Features of Tax-Saving FD Interest Rates
Some key features of tax-saving FDs that you must keep in mind include: –
- A great way to save tax under Section 80C of the Income Tax Act
- Offers tax savings and high return benefits at the same time
- Minimum deposits for tax-saving FD schemes start from as low as INR 1000
- Maximum deposits for tax-saving FD schemes in one financial year is INR 1,50,000
- The lock-in period varies between 5 and 10 years
- Nomination facilities for tax-saving FD schemes are available
Benefits of Tax-Saving FD Interest Rates
To help you better determine whether you must invest in tax-saving FDs or not, we have listed their benefits. They are as follows: –
- The interest compounded over the tenure of the tax-saving FD scheme helps your investment grow faster
- Tax-saving FD schemes come with minimal risks making them a safe investment option
- The schemes carry fixed tax-saving FD interest rates so returns are guaranteed after the tenure and are not linked to the market
- Similar to regular FD schemes, senior citizen depositors can enjoy 0.25% to 0.5% higher tax-saving FD interest rates compared to regular depositors
- Depositors become eligible for tax deductions up to INR 1.5 lakhs as per Section 80C of the Income Tax Act
- The minimum deposit for tax-saving FD schemes starts at INR 1000
Tax-Saving FD Interest Rates Comparison
The following tax-saving FD interest rates comparison table will help you compare the different schemes available under each bank. This will ensure you can quickly find out the best tax-saving FD interest rates in India.
Bank Name | Tenure | Tax-Saving FD Interest Rates |
AXIS Bank | 6 months – 5 years | 5.75% – 7% |
SBI Bank | 3 months – 10 years | 3.00% – 6.50% |
Equitas Bank | 7 days – 10 years | 3.50% – 7.25% |
HDFC Bank | 3 months – 10 years | 4.50% – 7% |
ICICI Bank | 3 months – 10 years | 4.50% – 6.90% |
Canara Bank | 3 months – 10 years | 5.50% – 6.70% |
Bank Of Baroda | 3 months – 10 years | 4.50% – 6.50% |
Punjab National Bank | 3 months – 10 years | 4.50% – 6.50% |
IDBI Bank | 3 months – 20 years | 4.50% – 4.80% |
Indian Bank | 3 months – 10 years | 3.50% – 6.10% |
Although the above tax-saving FD interest rates comparison table does not list FD schemes and rates offered by all banks, it lists the best ones. As you can see, both the SBI tax-saving FD interest rate and HDFC tax-saving FD interest rate are high and can help depositors get great returns.
Eligibility for Tax-Saving FD Interest Rates
Indian residents above 18 years of age and Hindu Undivided Families (HUFs) can invest in tax-saving FD schemes. Minors are also allowed to invest in schemes offering tax-saving FD interest rates jointly with adults.
Documents Required for Tax-Saving FD Interest Rates
To open a tax-saving FD and take advantage of the competitive tax-saving FD interest rates available, you must submit an identity proof and an address proof to the bank or post office. You can submit any of these acceptable proofs to open a tax-saving fixed deposit.
Identity Proof
The documents that are acceptable as an identity proof include: –
- Passport
- PAN Card
- Voter ID Card
- Driving licence
- Any Government ID Card
- Senior Citizen ID Card (if applicable)
Address Proof
Documents that you can submit as your valid address proof include: –
- Bank Statement
- Passport
- Electricity Bill
- Telephone Bill
- ID Card or A Certificate Issued By The Post Office
- Voter ID Card
Conclusion
With so many banks offering FD schemes and competitive tax-saving FD interest rates, more and more people are investing in them. Moreover, their added security and guaranteed returns make them one of the best financial instruments available in the industry. Since these FD schemes have a lock-in period of 5 years, we recommend checking out the different 5-year tax-saving FD interest rates available before making your decision.
FAQs
The minimum amount varies from bank to bank, which is why it would be best to verify it with the bank where you’re opening an FD account.
No, premature withdrawal is not allowed in tax-saving FD schemes. Moreover, according to the Bank Term Deposit Scheme 2006, these tax-saving FD schemes cannot be broken before their 5-year expiry.
No, the interests received on tax-saving FD schemes are not free from taxation. It will get added to your income and the applicable tax slab for your income will also be applied to it. In case your interest exceeds INR 10,000 in a single financial year across all your bank accounts, the bank will deduct a 10% TDS from it. Failure to produce your PAN Card will increase the tax deduction rate to 20%.
No, tax-saving FD schemes are completely safe and offer fixed returns. They are not dependent on market conditions which makes them a great investment option.
Those looking for risk-free investment options that offer guaranteed returns on tax-saving options and a short lock-in period must invest in tax-saving FD schemes.