Best Tax saving Scheme in India

For the general public and senior citizens, the interest rate for Tax saving is 5.25 % to 6.90 % and 5.75 % to 7.45 %respectively. The minimum deposit permissible under this plan is less then 2 crore

Interest Rates on Tax saving FD

Given below are the latest interest rates offered by top banks under this FD category.

Name of Bank

For General Citizen (p.a.)

For Senior Citizen (p.a.)

Axis Bank Tax Saving FD

5.25% to 5.75 %

6.25% to 6.25 %

Bank of Baroda Tax saving FD

6.50% to 6.50 %

7.15% to 7.50 %

Canara Bank Tax saving FD

6.70% to 6.70 %

6.70% to 6.70 %

Central bank of india Tax Saver FD

6.25% to 6.25 %

6.75% to 6.75 %

Citibank Tax Saver FD

3.50% to 3.50 %

4.00% to 4.00 %

Federal Bank Tax Saver FD

6.60% to 6.60 %

7.25% to 7.25 %

HDFC Bank Tax Saver FD

5.30% to 5.30 %

5.80% to 5.80 %

IDBI Bank Tax saving FD

6.50% to 6.50 %

7.00% to 7.00 %

IDFC First Bank Tax saving FD

7.00% to 7.00 %

7.50% to 7.50 %

Indian Overseas Bank Tax saving FD

6.50% to 6.50 %

7.00% to 7.00 %

IndusInd Bank Tax saving FD

7.25% to 7.25 %

8.00% to 8.00 %

Punjab National Bank Tax saving FD

6.50% to 6.50 %

7.00% to 7.00 %

RBL Bank Tax saving FD

7.10% to 7.10 %

7.60% to 7.60 %

State Bank of India Tax Saving

6.50% to 6.50 %

7.00% to 7.00 %

UCO Bank Tax saving FD

6.20% to 6.20 %

6.70% to 6.70 %

Union Bank of India Tax saving FD

6.50% to 6.50 %

7.00% to 7.00 %

What is Tax Saving Fd Scheme?

In India, every resident earning an income has to pay taxes as per the income tax bracket they fall in. However, there are ways in which one can claim some tax deductions. Section 80C of the Income Tax Act 1961 provides particulars that tax saver options for tax-payers. This can be done for an amount up to INR 1,50,000 every year. Taxpayers who are contributing to investment schemes can claim tax benefits. The fixed deposit tax saving scheme is an investment opportunity that comes with tax saver options for investors. There is a locked-in period of 5 years before which one cannot make any withdrawals. Investors can apply for tax deductions with a tax-saving fixed deposit scheme.

Top 10 Tax-Saving Fixed Deposit Schemes in India

Various financial institutions in India offer Tax-saving Fixed Deposit schemes with an attractive interest rates. These competitive interest rates ensure healthy competition among the banks restricting monopolies while providing customers quality services. Here is a list of the top banks offering Tax Saver Fixed Deposits schemes with their respective interest rates. These rates are subject to change as per bank policies and market dynamics.

Name of the Bank Rate of Interest (%)
AU Small Finance Bank 6.50%
City Union Bank 6.00%
DCB Bank 6.95%
IndusInd Bank 6.75%
RBL Bank 6.50%
State Bank of India 5.40%
Kotak Mahindra Bank 5.30%
HDFC Bank 5.30%
Punjab National Bank 5.25%
IDFC Bank 5.25%
Deutsche Bank 6.25%
Axis Bank 5.75%
Bank of Baroda 5.25%
Lakshmi Vilas Bank 5.75%

Key Features of Tax Saver FD

Some of the best tax saver investment options for the customers comes with an array of convenient features and benefits. These are devised to provide investors with the appropriate solutions to their financial needs. On top of tax benefits, income tax saver fixed deposits also offer the following features.

  • Tax Saver FDs allow customers to open singularly and be started jointly with another customer. However, in this case, the beneficiary for tax deduction will be the primary account holder.
  • Tax Saving fixed deposits are open to all citizens of India, including NRIs and HUFs.
  • There will be no provision for holding tax-saver FD investment as collateral for availing personal loans.
  • Returns from the tax saver investment can be reinvested.
  • Generally, with the Tax saver investment FDs, there is a 5-year lock-in period. Customers will not be able to make any prior withdrawals.
  • Generally, Customers do not have the auto-renewal facility. However, this can change as per bank policies.
  • Investors can choose their payout frequency. They can use a recurring income or a cumulative payout structure.
  • Senior citizens get a specialised interest rate when investing in this tax saving scheme.

Key Benefits of Tax Saver FD

Customers opting to invest in Tax saver Fixed Deposits are eligible to avail of the benefits attached to the scheme. These benefits set them apart from the regular term deposits and stand as an investor’s popular choice for wanting to claim tax benefits as prescribed under Section 80C of the Income Tax Act 1961. Some benefits of investing in a tax saver investment scheme are as follows.

  • Tax Saver bonds offer higher returns than regular fixed deposit plans and savings accounts.
  • Investors will have the provision to make a one-time lump sum contribution of their monetary capital. Long-term investments are known to create substantial funds.
  • There will be a lock-in period of 5 years or more on such tax saver investment options.
  • With tax-saving FDs, customers will have the comfort of secure funds. The fixed interest rate will immune the funds from the fluctuating market prices.
  • Customers can choose their desired investment amount.
  • As per Section 80C of the Income Tax Act 1961, users can get tax benefits of up to INR 1,50,000.

Eligibility Criteria for Tax Saving Term Deposit

There aren’t many restrictions regarding who can open a tax-saving fixed deposit account. Here are some parameters investors need to adhere to start their tax saver scheme journey.

  • Any individual can start a tax-saving FD account.
  • Other than that, Hindu Undivided Families can open a tax saver scheme.
  • To start a tax saving term deposit, only private or public banks can be approached.
  • Applicant needs to possess valid identification documents.
  • Customers need to have a savings account with the bank in which they are applying for a tax saving FD.
  • Ideally, the applicant's minimum age should be between 18 and 21 years. However, minors can also open an account jointly with their guardians.
  • NRIs can also open a tax savings term deposit account.

Documents Needed to Open a Tax Saving FD Account

Investors who want to open a savings account need to provide the following documents to the respective financial institutions.

  • Government-recognised ID proof
  • Aadhaar Card
  • Driving License
  • Passport
  • Ration Card
  • Voter ID Card
  • Government-recognised address proof
  • Proof of age (for senior citizens)

Tax Deductible on Fixed Deposits

With the introduction of fixed tenures of 5 to 10 years on tax saving fixed deposits, there has been a visible increase in capital gain ratio. This is mainly because interest rates remain stable regardless of the market dynamics. The significant advantage of the tax saver bonds is that one can claim tax benefits up to INR 1,50,000. And this has been mentioned in Section 80C of the Income Tax Act of 1961. It has to be noted that the IT department has the power to deduct TDS on the interest earned on the tax savings scheme investment. With no premature withdrawal allowed for the initial locked-in period, customers do not have the provision of claiming any loans or overdraft facilities.

Furthermore, there are several ways to avoid Tax deductions on the tax saver FDs by following specific guidelines and procedures.

How to Avoid TDS on FDs

As per the Income Tax Act of 1961, Tax is liable to be deducted from the source on fixed deposit investments. However, in the odd instance, if your liability to pay tax falls to a minimum or nil, you can claim your deducted TDS by submitting Form 15G and 15H. Usually, TDS gets deducted from investment revenue that falls under the taxable category. Investors have the provision to claim TDS with the following forms.

  • Form 15G and Form 15H - Submit these forms in case your TDS deductions are invalid. If your investment revenue is below the taxable income threshold, proceed to fill out forms 15G and 15H.
  • Select the apt frequency for the deposits such that the taxes amount to less than INR 10,000 each year.
  • You can also try opening a joint account by splitting the deposits.

Things To Know About Tax Saving Fixed Deposits

As the name entails, Tax savings fixed deposits are majorly opted for their tax benefits. This means customers opening a tax saver investment account will be eligible for tax deductions under Section 80C of the Income Tax Act 1961. These tax saver bonds come with an array of features. Here are a few things about the Tax Saving Fixed Deposits.

  • Tax Saver Bonds are one of the best options for investors that guarantees a return with low to medium capital gains.
  • The interest rates are locked in, making them immune from market fluctuations.
  • Senior citizens get specialised interest rates
  • Just like regular fixed deposits, tax saver options offer the customers the provision to make lumpsum investments.
  • The locked-in period of a minimum of 5 years entails that users will not be able to make early withdrawals.
  • Customers get a nomination facility which allows them to assign a relative in case of a sudden mishap.

Frequently Asked Questions

What are the best tax-saving mutual funds in India?

There are specific tax-saving mutual funds that are invested in providing the contributor with the opportunity to apply for tax returns. One highly performing tax-saving mutual fund is the IDFC equity-linked savings scheme.

What is the Public Provident Fund (PPF) Scheme?

Provident Funds are an investment scheme where an individual is allowed to set aside a part of their income that they are eligible to receive at the end of their employment. Public Provident Fund or PPF is a government savings scheme ideal for creating retirement wealth.

What is the Senior Citizen Saving Scheme?

A Senior Citizen Savings Scheme is similar to an annuity or a Provident fund where monetary capital is saved for the post-retirement period. The savings are paid out quarterly to the recipient.

What will be the best tax saver FD plan?

Various banks offer their customers the tax saver FD scheme with attractive and competitive interest rates. Top banks such as SBI and HDFC offer about 5% to 6% interest rates, while other banks such as AU Small Finance Bank and Deutsche Bank offer about 6% to 7% interest rates.

What are the different tax saving schemes under section 80C?

Some of the various tax saving schemes mentioned under Section 80C include Equity Linked Savings Scheme or ELSS, National Pension Scheme or NPS, Unit Linked Insurance Plan or ULIP, Public Provident Fund or PPF, Sukanya Samridhi Yojana, and so on.

What are some of the best income tax saving schemes in India?

Various tax savings schemes in India can provide good returns. These include Unit Linked Insurance Plan (ULIP), ELSS Mutual Funds, Public Provident Fund (PPF), Sukanya Samridhi Yojana (SSY), National Savings Certificate, Tax-savings fixed deposit, Senior Citizen Savings Scheme, and School Tuition Fees.

What are ELSS mutual funds?

ELSS mutual funds or Equity Linked Savings Scheme is a mutual fund savings scheme where the cash pool is allocated in equities. With an added advantage of tax saving options, ELSS has a locked-in period of 3 years minimum.

What is a 'National Savings Certificate?

National Savings Certificate is a government-issued investment scheme with the provision for receiving a fixed income. This scheme can be opened from any public bank or post office. This scheme mainly aims at low to middle-income earners with the added benefit of tax saver options.

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