What is a Tax Saving Fixed Deposit in India?
Fixed deposits are one of the most preferred investment options in India. This is because of their countless benefits and the many flexible options they offer to the investors for their needs. There are different types of FDs; some of them offer the highest FD interest rates, flexible maturity options, flexible interest payout options, and some help you save tax on your income.
In this article, we will learn about tax saving fixed deposits. This FD lets you save tax on your income and helps you grow your investment safely. Further, we will discuss about how to invest, eligibility, features, interest rate, benefits, etc.
Tax Saving Fixed Deposit
A tax saving fixed deposit is an investment scheme offered by banks in India where you can save on tax by investing under Section 80C of the Income Tax Act 1961. If you invest in it, you can avail tax exemptions up to 1.5 Lakh on your taxable income. Tax saving FD is the same as a regular FD. The main difference is that you have to invest for 5 years. The interest rate for this tax free FD scheme ranges from 5.5% to 7.90%.
But there is a condition that the interest you earn will be fully taxable. If you wish to save on taxes by investing in a safe and secure tax saving scheme and you have yet to find any, this is a good option for you to choose.
Interest Rates of Tax Saving Fixed Deposit
The interest rate offered by the Top Banks:
| Bank | Interest Rates (Regular Public) | Interest Rate (Senior Citizens) |
| State Bank of India | 6.50% | 7.50% |
| Kotak Mahindra Bank | 6.20% | 6.70% |
| HDFC Bank | 7.00% | 7.75% |
| Punjab National Bank | 6.50% | 7.30% |
| IDFC Bank | 7.00% | 7.50% |
| Deutsche Bank | 7.25% | 7.25% |
| Axis Bank | 7.00% | 7.75% |
| DCB Bank | 7.40% | 7.90% |
| Bank of Baroda | 6.50% | 7.15% |
| RBL Bank | 7.10% | 7.60% |
The interest rate offered by top Small Finance Banks Tax: The highest interest rates are provided on FDs for accounts under Rs.2 crore by small finance banks.
| Name of Bank | For General Citizens (p.a.) | For Senior Citizens (p.a.) |
| Suryoday Small Finance Bank FD | 9.10% | 9.60% |
| Ujjivan Small Finance Bank FD | 7.20% | 7.70% |
| ESAF Small Finance Bank FD | 6.25% | 6.75% |
| Unity Small Finance Bank FD | 8.25% | 8.75% |
| Jana Small Finance Bank FD | 6.00% | 6.50% |
| Utkarsh Small Finance Bank FD | 7.50% | 8.10% |
| Equitas Small Finance Bank FD | 7.25% | 7.45% |
| Fincare Small Finance Bank FD | 8.00% | 8.60% |
| AU Small Finance Bank FD | 7.00% | 7.50% |
| Capital Small Finance Bank FD | 7.10% | 7.75% |
| North East Small Finance Bank FD | 6.50% | 7.25% |
Tax Saving FD Features & Benefits
- Eligibility: Only individuals and HUFs are eligible.
- Deposit Amount: You can open this account with Rs 100 to Rs 1.5 Lakh.
- Deposit Tenure: The minimum tenure is 5 years, and the maximum it can go up to 10 years.
- Interest Payment: The interest on tax saver fd is compounded quarterly, and it is credited to the account at the end of every quarter.
- Premature Withdrawal: Premature withdrawal is not allowed before maturity. You can withdraw only after the maturity period is completed, which is 5 years.
- Renewal: Regular fixed deposits usually renew automatically, but tax-saving deposits don’t. After the tax-saving deposit matures, it becomes a regular fixed deposit for one year instead of renewing as a tax-saving deposit.
- FD Tax Benefit: When you invest in a tax saving FD, the amount you have invested will be deducted from your taxable income(maximum limit is 1.5 lakhs).
- No TDS Deduction: The interest earned is eligible for TDS deduction, which means interest earned is taxable. But, if your income is not taxable, you can submit Form 15H/15G, and the bank will not deduct TDS on interest.
- Interest Rate Benefits for Senior Citizens: This scheme offers additional interest benefits for senior citizens on deposits.
- Nomination Facility: You can easily nominate someone for the benefits in case something happens to you.
- Account Transfer Facility: You can request the bank to transfer your FD account to another branch in case you are relocating.
- Minor Accounts: It is possible to open a tax-saving fixed deposit for minors. These deposits help guardians to invest on behalf of minors for financial planning for the future of children while availing tax benefits.
Who is Eligible for Opening Tax Saving FD:
- Resident Indians
- Individuals
- Hindu Undivided Families (HUF)
- You can open a tax saver FD in a single or joint account.
Documents Required to open a Tax Saving FD:
To open a tax-saving deposit, you need to provide identity and address proof. You can submit any of the following documents for verification:
- Permanent Account Number (PAN) Card
- Aadhaar Card
- Driving Licence
- Passport
- Ration Card
- Voter ID Card
- Government-recognized address proof
- Proof of age (for senior citizens)
- Utility bills (electricity, water, gas)
- Bank statement
- Recent colour passport-size photographs
Advantages of Tax Saving FD Over Other Sec 80C Investments
Tax Saving Fixed Deposits offers several advantages compared to other Sec 80C investments.
- The first and main benefit is the safety and security of investment, which ensures the protection of invested funds.
- These offer a predictable return on investment, which makes it easy for investors to know exactly how much money they will receive on maturity.
- The process of investing in this scheme is easy & simple compared to others.
- Unlike other investment options related to the stock market, tax-saving FDs remain unaffected by market fluctuations.
- With a fixed lock-in period of 5 years, tax-saving FDs are well-suited for short to medium-term financial goals.
Conclusion
Tax Saving Fixed Deposits in India offers a safe way to invest money while getting tax benefits. You can get an income tax exemption under Section 80C if you invest up to Rs 1.5 lakh. This Fixed Deposit has a 5-year lock-in period where you can start investing with just Rs 100. Before investing, you can calculate the returns based on the interest rates, which will remain the same throughout the lock-in period. So, it’s a win-win situation if you are planning to invest while saving some taxes. You can choose Wint Wealth to invest in FDs for a really satisfying and rewarding experience.
