A Tax Saver fixed deposit (FD) also known as is a type of fixed deposit specifically designed to help individuals save on income tax. Investors can deposit a lump sum amount for a fixed tenure, with a lock-in period of 5 years. The investment in such FDs qualifies for deductions up to ₹1.50 Lakhs under Section 80C of the Income Tax Act, 1961.
Here are the rates for tax-saving fixed deposits from some FD issuers:
Bank |
Non-senior Citizen (p.a.) |
Senior Citizen (p.a.) |
YES Bank |
7.25% |
8.00% |
7.25% |
7.75% |
|
7.20% |
7.70% |
|
SBI |
6.50% |
7.50% |
ICICI Bank |
7.00% |
7.50% |
HDFC Bank |
7.00% |
7.50% |
PNB |
6.50% |
7.00% |
Axis Bank |
7.00% |
7.75% |
Bank of Baroda |
6.50% |
7.15% |
Disclaimer: The above tax-saver FD interest rates are subject to change at the issuer’s discretion.
Enjoy deductions on investments up to ₹1.5 Lakhs under Section 80C of the Income Tax Act, 1961
Fixed and assured interest rates throughout the FD tenor, providing predictable returns.
Mandatory lock-in period encourages disciplined savings for at least 5 years.
Ideal for risk-averse investors seeking a secure investment option with tax benefits
Simple application process and accessibility through various banks and financial institutions
You cannot prematurely withdraw the sum in your deposit either partially or completely till the 5-year tenor is complete
Tax-saver FDs also offer the option of joint account holding. However, note that the tax benefits can be availed only by the first or primary account holder.
The eligibility criteria and documents required for a tax saving FD may vary slightly between banks, but generally, they adhere to certain common principles.
Residential status - Resident Indians, including salaried and self-employed individuals
Age - At least 18 years old
Individuals and Hindu Undivided Families (HUFs)
Documents |
Details |
KYC documents |
|
Explore the income tax benefits of Section 80C by channelling funds into a tax-saving fixed deposit, allowing you to invest up to ₹1.5 Lakhs
This investment scheme not only offers attractive returns but also guarantees capital protection, providing a secure financial avenue for your savings
While enjoying the advantages, be mindful that the interest income derived from the fixed deposit is subject to full taxation. Your tax liability hinges on your total income for the fiscal year and your applicable tax slab.
Banks implement Tax Deducted at Source (TDS) if the interest accrued surpasses ₹40,000 in a fiscal year across all your accounts with the bank
Please note that the interest income will be classified under 'Income from Other Sources,' impacting your tax assessment accordingly.
Avoiding TDS on fixed deposits involves strategic financial planning. Here are some strategies:
You can submit Form 15G for individuals below 60 years or Form 15H for senior citizens to the bank to declare that your total income is below the taxable limit. This exempts you from TDS.
Distribute your investments across multiple banks or branches to keep the interest earned from each FD below the ₹40,000 threshold. This way, no single account will exceed the TDS limit.
Consider opening joint FDs, especially with family members. The interest income will be attributed to both account holders, potentially keeping it below the TDS threshold.
Plan the maturity dates of your FDs to ensure that the interest income in any given financial year remains below the ₹40,000 limit.
Investment |
Lock-in period |
Expected Returns |
Unit-linked insurance plans (ULIPs) |
5 years |
Market-linked |
National Pension Scheme (NPS) |
Until retirement |
Market-linked |
National Savings Certificate (NSC) |
5 years |
7.70% |
Sukanya Samriddhi Yojana (SSY) |
21 years |
8.00% |
Public Provident Fund (PPF) |
15 years |
7.10% |
Equity Linked Savings Scheme (ELSS) |
3 years |
Market-linked |
In conclusion, tax saver fixed deposits serve as a prudent financial tool, combining the dual benefits of tax savings and capital protection. With a mandatory lock-in period of 5 years, these deposits provide a disciplined approach to wealth accumulation.
By understanding eligibility criteria, required documentation, and potential tax exemptions, investors can harness the advantages of tax saver FDs to build a secure financial foundation while optimising tax liabilities.
Once your tax-saving FD matures, the maturity amount, which includes the principal and the interest, is directly transferred to your linked bank account.
Market fluctuations do not impact the returns from a tax-saving FD, making them fairly risk-free. The amount invested is secure with the financial institution, while you enjoy stable returns at the predetermined tax-saving FD rates provided by the partner banks and NBFCs of Bajaj Finserv Direct Limited.
The minimum deposit amount in a tax-saving FD varies according to the terms and conditions of the financial institution. However, you can deposit a maximum of ₹1.5 Lakhs in a financial year.
No, tax saver fixed deposits typically have a mandatory lock-in period, and premature withdrawals are not allowed during this period.
Individuals and HUFs (Hindu Undivided Families) can invest in tax-saver FDs.