Despite the recent cuts in fixed deposits interest rates, FDs still continue to top the chart when it comes to tax-saving investments. Investing in a flexible and secured fixed deposit scheme can help you save tax on your annual income. Tax-Saving Fixed Deposits are same as other bank fixed deposits as any redemption on maturity comes directly to your bank account.
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. They are of two types – single-holder and joint-holder type deposits. The booking period for tax saving fixed deposits is a minimum of five 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.
Many banks such as ICICI Bank, IDBI Bank, SBI, HDFC Bank and Axis Bank offer great tax-saving fixed deposit schemes. As on June 1, 2017, banks are offering 5.75% to 7.5% interest rate for general public and 6.25% to 8.00% for senior citizens.
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 fixed deposit plans – ‘traditional plan’ that pays interest on a monthly or quarterly basis, and ‘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 maximum of Rs 1,50,000 for a duration of five 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 five years. The investor can invest up to Rs 1,50,000 each year and claim benefits under Section 80C. As per the SBI Tax Savings Scheme, 2006, it offers 6.25% for general depositors and senior citizens get 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 quarterly payout of interest to the designated operative account of the depositor. These fixed deposit schemes are for a lock in period of five years, and the maturity period shall also be 5 years commencing from the date of receipt. Axis Bank offers an interest rate of 6.25% per annum for regular depositors and 6.75% for senior citizens.
- HDFC Bank
HDFC Bank also offers a tax saving fixed deposit scheme with a lock-in period of five years on a monthly or quarterly payout basis. The bank offers 6.00% interest per annum to regular depositors and 6.50% 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 five years and get a lump sum amount as saving on maturity. The bank offers 6.00% interest per annum for regular depositors and 6.50% interest per annum for senior citizens.
- IDFC Bank
The Tax Saver Fixed Deposit of IDFC Bank offers an interest rate of 7.2% for regular citizens and 7.70% 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 Saver Fixed Deposit interest rate for Yes Bank is 7.10% for regular citizens whereas senior citizens get interests at a rate of 7.60%. 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 deposits but also save tax. The bank offers 6.00% interest rate on Tax Saving FDs for normal citizens and 6.50% 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 7.50% db Tax Saver FDs for regular citizens and 8.00% 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 1,00,000. No loan is allowed against this FD scheme.
- IndusInd Bank
The Indus Tax Saver Scheme helps depositors to save taxes and earn more through their investments. IndusInd Bank offers 6.75% interest rate on this scheme for normal citizens and 7.25% for senior citizens. Depositors can invest up to a maximum of Rs 1,50,000 under the Tax Saver FD scheme.
Table for interest rates of Tax-saving Bank FDs
|Banks||Tax-Saver FD Interest Rates|
|State Bank of India||6.25%||6.50%|
|Kotak Mahindra Bank||6.00%||6.50%|
Therefore, investing in a tax-saving fixed deposit scheme may prove beneficial for you as they are a good option to save income tax. Also, senior citizens enjoy the maximum benefit for enrolling into tax saving fixed deposits.