It is that time of the year when many investors look at last-minute tax-saving options to save some more money. While there are several avenues available in the markets for the same, tax-saving fixed deposits (FDs) are deemed one of the safest savings options of all. The amount invested in these is completely protected, and the returns are also guaranteed.
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Put simply- tax saving FD is a special category of the fixed deposit that allows investors to claim deductions under Section 80C of the Income Tax Act. Any investor can claim a deduction of a maximum of Rs 1.5 lakh by investing in tax-saving fixed deposits.
In the case of joint accounts, only the first holder is eligible for deduction from income under Section 80C of the Income Tax Act. These tax-saving FDs have a minimum lock-in period of five years. Investors can open tax-saving FD accounts online or by visiting a bank branch.
Just like other fixed deposits, returns on a tax-saving FD are fixed for the term of the FD. However, investors cannot make premature or partial withdrawals from tax-saver deposits.
Eligibility
Individuals and HUFs (Hindu undivided families) can invest in the tax-saving fixed deposit (FD) scheme. One can open a tax-saving FD in a single or joint account.
Interest rates
Different banks offer different interest rates on tax saving FDs. The interest rates for Indian citizens and HUFs vary from bank to bank. Senior citizens and bank staff members are offered higher interest rates.
| Bank | Interest Rates (Regular Public) | Interest Rate (Senior Citizens) |
| SBI | 6.25% | 7.25% |
| Kotak Mahindra Bank | 6.20% | 6.70% |
| HDFC Bank | 7.00% | 7.50% |
| Punjab National Bank | 6.50% | 7.00% |
| IDFC Bank | 7.00% | 7.50% |
| Deutsche Bank | 7.00% | 7.00% |
| Axis Bank | 7.00% | 7.75% |
| DCB Bank | 7.60% | 8.10% |
| Bank of Baroda | 6.25% | 6.90% |
| Lakshmi Vilas Bank | 6.25% | 6.75% |
The interest on income tax-saving deposits is payable on a monthly or quarterly basis. The interest amount earned can also be reinvested if the investor wants to.
Taxability
The interest is taxable, deducted at the source, and added to the income.
Who should invest?
Anyone looking for a shorter lock-in period and seeking a guaranteed return with a tax-saving option should invest in tax-saving fixed deposits.
ALSO READ | Tax-saving investment — How to avail benefits under National Pension System and steps to open it
First Published: Jan 20, 2023 3:42 PM IST
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