Invest in tax saving FD and save taxes up to Rs 1.5 lakhs under section 80C. Tax saver fixed deposit has a lock-in period of 5 years with restriction on premature withdrawal.
| FD Scheme | Interest Rate | Senior Citizen Rates |
|---|---|---|
| DCB Bank FD | 7.4 % | 7.9 % |
| Canara Bank FD | 6.7 % | 7.2 % |
| Federal Bank FD | 6.6 % | 7.25 % |
| Dhanlaxmi Bank FD | 6.6 % | 7.1 % |
| Indian Overseas Bank FD | 6.5 % | 7 % |
| Bank of Maharashtra FD | 6.5 % | 7 % |
| Tamilnad Mercantile Bank FD | 6.5 % | 7 % |
| Union Bank of India FD | 6.5 % | 7 % |
| Central Bank of India FD | 6.5 % | 7 % |
| Bank of Baroda FD | 6.5 % | 7.5 % |
| Punjab National Bank FD | 6.5 % | 7.3 % |
| City Union Bank FD | 6.3 % | 6.5 % |
| Karur Vysya Bank FD | 6.25 % | 6.65 % |
| Punjab and Sind Bank FD | 6.25 % | 6.75 % |
| Indian Bank FD | 6.1 % | 6.6 % |
| South Indian Bank FD | 6 % | 6.5 % |
| CSB Bank FD | 6 % | 6.5 % |
| Bank of India FD | 6 % | 6.75 % |
| Karnataka Bank FD | 5.8 % | 6.3 % |
| Nainital Bank FD | 5.35 % | 5.85 % |
In India, Fixed Deposits are important as well as popular among investors. These are considered safe and can offer good interest rates. A Fixed Deposit is considered good for risk-averse investors and offers various interest rates depending on the tenure of the investment.
Fixed Deposit is a financial instrument wherein an investor can invest a lump sum amount with a bank at an agreed rate of interest on FD for a specified period of time(say from 7 days to 180 days). The amount can be invested for a period of 10 years. At the end of the tenure, the investor will receive the amount that was invested along with the interest.
It is a type of Fixed Deposit that offers a tax deduction under section 80C of the Income Tax Act, 1961. To calculate the potential returns from this term deposit, one can use a fixed deposit calculator. The fixed deposit calculator is available online and is free to use.
Investment in a tax saving FD can be done through offline and online modes. For offline investing, one can visit any bank and invest in tax saving FD. For online investing, one can use the internet banking facility.
Tax saving FDs do not have a premature withdrawal facility. Moreover, one cannot take a loan against a fixed deposit account (bank tax saver fixed deposits). There is a minimum lock-in period of 5 years for the investment made in Tax Saving Fixed Deposit and the interest earned is taxable as per the slab rate applicable.
You can claim a tax exemption against an investment in a tax saving fixed deposit. The Income Tax Act provides a tax deduction under section 80C of up to Rs 1.5 lakhs
Once investors invest in bank fixed deposits, the amount gets locked-in for the specified period of time. An investor can earn interest on the invested amount on a cumulative basis. There are multiple options for investment in a fixed deposit as these are available in various tenure.
Thus an investor can have one fixed deposit say for 90 days and another for 180 days. This helps in earning more interest and offers liquidity if required. Fixed deposits offer higher returns than bank savings account. The investment in bank tax saver FDs qualify for tax exemption. Fixed Deposit income tax exemption is available up to Rs 1.5 lakh under Section 80C of the Income Tax Act, 1961.
However, the interest earned on them is subject to tax as per individual’s income tax slab rates. Moreover, the interest in tax saver fixed deposits is subject to TDS of 10% if the interest income exceeds INR 40,000 (INR 50,000 for senior citizens).
An investor can open a tax saver FD account in the existing bank where he or she has an account, as well. An investor can talk to the relationship manager or visit the respective bank’s website and initiate the process.
You can invest in tax saver FD offered by a bank in which he does not hold a savings account. Here, the investor will have to complete your Know-your-customer(KYC) requirements.
Below are a few documents that are required to complete your KYC for FD account :
Once you complete the KYC requirements, you can easily start a tax-saving fixed deposit with that bank.
ELSS or Equity Linked Savings Scheme and tax saving fixed deposits are both good investment options but differ in terms of various aspects. Below is a table reflecting the differences between the same :
| Particulars | Tax-saving FD | ELSS |
| Meaning | A type of deposit made with a bank wherein investors put a specified sum of money for a fixed tenure. | A category of mutual fund in which funds are invested in the equity market. |
| Returns | Fixed deposit rates are fixed by the bank | Dependent on the market conditions and returns vary as per the performance of the market. |
| Liquidity | Cannot be liquidated before the specified period of 5 years. | It cannot be liquidated before the specified period of 3 years. |
| Lockin period | 5 years | 3 years |
One can invest in tax saving Fixed Deposit through online or offline mode. The documents required to open a tax saving fixed deposit account are:
The interest income on a tax saving fd is chargeable to tax and hence TDS is also applicable. However, the deduction of TDS is subject to the interest income earned by a taxpayer in the financial year.
| TDS Rate | Interest Earned For Normal Citizen | Interest Earned For Senior Citizen |
| 0% | Less Than Rs. 40,000 | Less Than Rs. 50,000 |
| 10% | More Than Rs. 40,000 | More Than Rs. 50,000 |
| 20% | More Than Rs. 40,000 (No Pan Card) | More Than Rs. 40,000 (No Pan Card) |
NOTE: If the total income (including FD interest) is less than Rs 2.5 lakh, TDs will not be deducted. This is due to the fact that TDS is deducted when income is chargeable to tax. And if the income is not chargeable to tax as a result of exempt tax slab, then deduction of TDS would not be useful. The taxpayer will unnecessarily have to bear the burden of TDS deduction and claim refund while filing ITR. Further, here the taxpayer will have to furnish Form 15G or Form 15H to claim interest without TDS.