Tax Saving Deposits are a good way to get tax deduction under Section 80C of the Income Tax Act, 1961. You can claim a deduction of up to a maximum of Rs. 1,50,000 by investing in them. The booking period for tax-saving fixed deposits is a minimum of 5 years and a maximum of 10 years. No partial or pre-mature withdrawal is allowed. Also, as an investor, you can nominate/authorize someone to withdraw your deposit before or post maturity in the event of your death. However, tax-saving FD is the same as other bank fixed deposits as any redemption on maturity comes directly to your bank account.
Many banks such as ICICI Bank, IDBI Bank, SBI, HDFC Bank and Axis Bank offer high interest on tax-saving fixed deposit schemes. As on October 23rd, 2019.
Interest Rates of Tax Saving FD
| Banks | Tax-Saver FD Interest Rates* | |
| General | Senior Citizens | |
| ICICI Bank | 6.75% | 7.25% |
| State Bank of India | 6.25% | 6.75% |
| Axis Bank | 6.75% | 7.25% |
| HDFC Bank | 6.75% | 7.25% |
| IDBI Bank | 6.40% | 6.90% |
| IDFC First Bank | 7.75% | 8.25% |
| Yes Bank | 7.25% | 7.75% |
| Kotak Mahindra Bank | 6.25% | 6.75% |
| Deutsche Bank | 8.00% | 8.00% |
| IndusInd Bank | 7.15% | 7.65% |
*Data as on October 23rd, 2019.
Despite the recent cuts in fixed deposit interest rates, FDs still continue to top the chart when it comes to tax-saving investments. Investing in a flexible and secure fixed deposit scheme can help you save tax on your annual income. Banks offer different interest rates for regular depositors including individuals, senior citizens, NRIs, and bank staff. The interest rates vary depending on different categories of applicants.
Let’s have a look at interest rates offered by some banks on Tax Saving Fixed Deposits:
ICICI Bank
ICICI Bank offers two tax saving FD plans – one is ‘traditional plan’ that pays interest on a monthly or quarterly basis. The ‘reinvestment plan’ that pays interest compounded quarterly and reinvested with the principal amount. The bank allows the investor to make a minimum investment of Rs. 10,000 and a maximum of Rs. 1,50,000 for a duration of 5 years. ICICI Bank offers 6.75% interest per annum on a tax saver fixed deposit for general/individual investors and 7.25% for senior citizens.
State Bank of India (SBI)
State Bank of India offers tax saver fixed deposits with a lock-in period of 5 years. The investor can invest up to Rs 1,50,000 each year and claim benefits under Section 80C of the Income Tax Act, 1961. As per the SBI Tax Savings Scheme, 2006, it offers 6.25% for general depositors and senior citizens get a 0.50% extra interest rate on tax saver fixed deposits. The minimum deposit allowed is Rs. 1,000 and the maximum limit is Rs. 1,50,000. Deposits can be made in multiples of Rs. 1,000. Depositors can open SBI fixed deposits online by logging into their net banking account.
Axis Bank
Axis Bank offers two types of tax saver fixed deposits – one providing for quarterly compounding/reinvestment of interest and the other providing for a quarterly payout of interest to the designated operative account of the depositor. These fixed deposit schemes are for a lock-in period of 5 years commencing from the date of receipt. Axis Bank offers an interest rate of 6.75% per annum for regular depositors and 7.25% for senior citizens.
HDFC Bank
HDFC Bank also offers a tax saving fixed deposit scheme with a lock-in period of 5 years on a monthly or quarterly payout basis. The bank offers 6.75% interest per annum to regular depositors and 7.25% to senior citizens. Depositors can start with a minimum of Rs. 100 and invest up to a maximum of Rs. 1,50,000. Deposits have to be in multiples of Rs. 100.
IDBI Bank
IDBI Bank offers Suvidha Tax Saving Fixed Deposit scheme wherein an investor can invest up to Rs. 1,50,000 for 5 years and get a lump sum amount as saving on maturity. The bank offers a 6.40% interest per annum for regular depositors and 6.90% interest per annum for senior citizens.
IDFC First Bank
The Tax Saving FD of IDFC First Bank offers an interest rate of 7.75% for regular citizens and 8.25% for senior citizens. An investor has to deposit a minimum of Rs. 10,000 to open the Tax Saver FD account.
Yes Bank
The Tax Saving FD interest rate for Yes Bank is 7.25% for regular citizens whereas senior citizens get interests at a rate of 7.75%. The interest on the deposit is paid either on a monthly basis or on a quarterly basis.
Kotak Mahindra Bank
Kotak Mahindra Bank offers a Tax Saving Fixed Deposit option where the depositor can not only earn good interest on his/her deposits but also save tax. The bank offers a 6.25% interest rate on Tax Saving FDs for normal citizens and 6.75% for senior citizens. The minimum investment is Rs. 100 and depositors can deposit up to Rs. 1,50,000 under this scheme.
Deutsche Bank
Deutsche Bank offers high-interest rates of 8.00% on Tax Saving FDs for regular citizens as well as for senior citizens. The minimum investment amount is Rs. 20,000 and the maximum sum that a person can invest in a financial year is Rs. 1,50,000. No loan is allowed against this FD scheme.
IndusInd Bank
The Indus Tax Saving FD helps depositors to save taxes and earn more through their investments. IndusInd Bank offers 7.15% interest rate on this scheme for normal citizens and 7.65% for senior citizens. Depositors can invest up to a maximum of Rs. 1,50,000 under the Tax Saver FD scheme.
Therefore, investing in a tax-saving fixed deposit scheme may prove beneficial for you as it is a good option to save income tax. Also, senior citizens enjoy preferential interest rates on tax-saving fixed deposits and other deposits as well.
