Tax Saving FD – Know About Tax Saving Fixed Deposit

Tax Saving FD – Know About Tax Saving Fixed Deposit

As per the income tax laws, a salaried professional, as well as a business person, is expected to pay taxes. We also try to save tax lawfully in some or the other way. For most taxpayers, that’s the most confusing issue. An investment in tax-saving investment plans is one of the ideal ways to save tax which also helps in meeting financial targets efficiently.

A variety of investment avenues are present on the market, offering either tax exemptions or deductions. Choosing the most effective and correct tax-saving investment is not at all straightforward. To select the most appropriate plan, multiple variables such as safety, returns and liquidity, among other items, need to be assessed.

Investments under section 80C are a prevalent tax-saving investment choice among taxpayers. Investments up to ₹ 1.5 lakhs can be claimed as a deduction, as per section 80C of the IT Act, 1961. A tax-saving fixed deposit allows a deduction up to ₹ 1.5 lakhs under section 80C. The sum invested in tax saving FD is deducted from the overall aggregate income to meet net taxable income.

Let us hear about some of the critical points you need to remember before investing in Tax Saving Fixed Deposit.

  • Investing in tax saving FD is offered to individuals and the Hindu Undivided Family (HUF). A minor may, however, jointly invest with an adult.
  • It is possible to open tax-saving fixed deposits with a minimum deposit sum that vary from bank to bank. In a financial year, the maximum amount set for investing in tax-saving FDs under section 80C of the IT Act is ₹ 1.5 lakh.
  • There is a five years lock-in period for these FDs.
  • Premature withdrawals and availing loan against these FDs is not permissible.
  • It is only through private or public sector banks; you can invest in these FDs. Rural banks and co-operative banks are not allowed to offer these FDs.
  • Investing in Post Office Time Deposit of Five-year is also counted for deduction under section 80(C) of the Income Tax Act, 1961. Post office Fixed Deposits can be transferred from one post office to another post office. It is possible to open these FDs either in a ‘single’ or ‘joint’ holding mode. If the account is joint, then the primary account holder will have rights to the tax benefits.
  • The Fixed Deposit Rate for tax savings instruments differ from bank to bank. The interest rate varies from 5.5% to 7.75%. Many banks provide much higher interest rates to senior citizens on fixed deposits (compared to the interest rate paid to a non-senior citizen on the same FD). The post office does not, however, offer senior citizens higher tax-saving Fixed Deposit Rates.
  • Nomination facilities are offered for tax saving FDs. In the event of a deposit being sought and held by or on behalf of a minor, the nomination facility is not available.
  • According to the investor’s tax bracket, the interest gained on the Tax saving fd is taxable (TDS). The interest on these deposits can either be paid out on a monthly/quarterly basis or reinvested. Investors can avoid TDS by submitting Form 15G or Form 15H for senior citizens. If the total earned interest exceeds ₹ 40,000 in a financial year without any change in the taxation of interest income, TDS is applicable. Senior citizens can claim tax deduction up to ₹ 50000 on the interest earned from FDs under section 80TTB.

The main benefit of investing in FDs for tax savings is that they are less risky compared to equity. Since this type of FD is offered by most of the leading banks, let us learn about its details.

Leading Banks offering tax saving FDs

SBI’s Tax Saving Fixed Deposit

The interest rates for regular accounts and senior citizen accounts are 5.40 and 6.20 percent. The scheme also offers tax benefits and a term of 5 years. The minimum deposit amount for SBI tax saving FD is about ₹ 1,000, and the overall deposit sum is about ₹ 1.50 Lakh. Through net banking, investors can make multiple deposits, as well.

HDFC Bank’s Tax Saving Fixed Deposit

For regular investors, the HDFC tax saving FD has an interest rate of 5.50 percent and an interest rate of 6.25 percent for senior citizens along with a 5-year lock-in term. The maximum deposit ₹ 1.50 Lakh, equivalent to SBI and the minimum sum is ₹ 100 with a monthly or a quarterly payout option.

ICICI Bank’s Tax Saving Fixed Deposit

In this scheme, investors can make their investments in traditional or the reinvestment plan. In the standard plan, there is an option for monthly or quarterly payout, whereas the reinvestment plan pays compounded quarterly interest which is reinvested with the principal sum.

The tenure of the ICICI tax saver FD is five years, and the overall deposit cap is ₹ 1.50 lakhs like SBI and HDFC. The minimum deposit amount is ₹ 10,000. The regular investors get the interest rate of 5.50 percent and senior citizens, 6.30 percent.

Kotak Bank’s Tax Saving Fixed Deposit

The bank offers its regular investors an interest rate of 4.90% and senior citizens, 5.40%. The duration of lock-in is five years, the maximum deposit allowed is ₹ 1.50 Lakh, and the minimum deposit amount is ₹ 100.

Axis Bank’s Tax Saving Fixed Deposit

Axis Bank tax saving FD has a term of 5 years and an overall cap of ₹ 1.50 Lakh. It proposes an interest rate for general accounts of 5.50 percent and senior citizen accounts of 6.05 percent.


Above were the descriptions of the leading banks providing tax savings FDs. Potential investors should carefully assess each alternative and pick the right one after the due research. To get the necessary information, visit the bank’s official website.

You can contact MyLoanCare if you want to learn more about FD tax benefits or want to know about other safe investing opportunities. Remember to read the fine print that “the Investments in the stock market and mutual funds are subject to market uncertainties, before investing, read all relevant information carefully.”

Clare Louise