Tax Saving Fixed Deposits one of the most popular way to save taxes u/s 80C of income tax. These are like normal Fixed Deposit with banks but is labeled as “Tax Saving FD” while making the deposit.
Why you Should Invest?
- Convenient to invest. ICICI Bank, SBI, HDFC Bank, etc offers online facility for Tax Saving FD
- Redemption on maturity comes directly to your bank account
- High Safety – FD up to Rs 1 Lakh is insured
Why you Should Not Invest?
- There are lot of competing products like EPF, PPF, ELSS to exaust the investment of Rs 1.5 Lakh u/s 80C
- The interest earned is taxable
- Cannot be withdrawn prematurely
- Cannot be pledged to secure loan or as security
Also Read: Best Tax Saving Investments u/s 80C
Tax Saving Fixed Deposit Interest Rate
As of April 1, 2019 banks are offering 6.00% – 7.85% for general public and 6.50% – 8.45% for Senior Citizens.
- The best Tax Saving Fixed Deposit Interest offered is 7.85% for General Public by Lakshmi Vilas Bank
- The best Senior citizens Tax Saving Fixed Deposit Interest offered is 8.45% by Lakshmi Vilas Bank
- 5 Year NSC at Post Office gives 8.0% interest for both Senior Citizens and general public
The table below lists the banks in alphabetical order with their respective interest rate offer on Tax Saving FDs for General and Senior Citizens.
The highest Interest Rates have been highlighted:
|Bank||General||Senior Citizen||Scheme Name|
|Allahabad Bank||6.50%||6.50%||Allahabad Bank Tax Benefit Term Deposit Scheme|
|Andhra Bank||6.50%||7.00%||AB Tax Saver Deposits|
|Axis Bank||7.25%||7.75%||Axis Bank Tax Saver Deposits|
|Bandhan Bank||7.50%||8.00%||Bandhan Bank Tax Saver FD|
|Bank of Baroda||6.70%||7.20%||Baroda Tax Savings Term Deposit|
|Bank of India||6.35%||6.85%||Star Sunidhi Tax-Saving Deposit Scheme|
|Bank of Maharashtra||6.50%||7.00%||Bank of Maharashtra Tax Saver FD|
|Canara Bank||6.20%||6.70%||Canara Tax Saver Scheme|
|Catholic Syrian Bank||6.50%||7.00%||CSB Tax Savings Support|
|Central Bank of India||6.55%||7.05%||CENT Tax Saving Deposit|
|Citibank||6.00%||6.50%||Citibank Tax Saver FD|
|City Union Bank||7.50%||7.50%||CUB Tax Saver Gold Deposit|
|Corporation Bank||6.50%||7.00%||Corp Tax Saver|
|DCB Bank||7.75%||8.25%||DCB Bank Tax Saver FD|
|Dhanalakshmi Bank||6.50%||6.50%||Dhanam Tax Advantage Deposit|
|Federal Bank||7.40%||7.90%||Federal Tax Savings Deposit|
|HDFC Bank||7.25%||7.75%||HDFC Bank Tax Saver FD|
|ICICI Bank||7.25%||7.75%||ICICI Bank Tax Saver FD|
|IDBI Bank||6.85%||7.35%||Suvidha Tax Saving Fixed Deposits|
|IDFC First Bank||7.75%||8.25%||IDFC Tax Saving Fixed Deposits|
|Indian Bank||6.90%||7.40%||IB Tax Saver schemes|
|Indian Overseas Bank||6.80%||7.30%||IOB Tax Saver Deposit Scheme|
|Indus Ind Bank||7.50%||8.00%||Indus Tax Saver Scheme|
|J&K Bank||6.50%||7.00%||Tax Saver Term Deposit Scheme|
|Karnataka Bank||7.00%||7.50%||KBL – Tax Planner|
|Karur Vysya Bank||7.00%||7.00%||KVB – Tax Shield Deposits|
|Kotak Mahindra Bank||6.50%||7.00%||Tax Saving Deposits|
|Lakshmi Vilas Bank||7.85%||8.45%||Lakshmi Tax Saver Deposits|
|Oriental Bank of Commerce||6.75%||7.25%||Oriental Bank Tax Saving Term Deposit|
|Post Office NSC (5 Years)||8.00%||8.00%||National Saving Certificate|
|Punjab and Sind Bank||6.55%||7.00%||PSB Fixed Deposit Tax-Saver Scheme|
|Punjab National Bank||6.25%||6.75%||PNB Tax Saver Fixed Deposit Scheme|
|Ratnakar Bank||7.60%||8.10%||Ratna Tax Saving Scheme|
|South Indian Bank||7.00%||7.50%||SIB Tax Gain 2006|
|State Bank of India||6.85%||7.35%||SBI Tax Savings Scheme 2006 (SBITSS)|
|Syndicate Bank||6.50%||7.00%||SyndTaxShield Deposit Scheme|
|Tamilnad Mercantile Bank||6.90%||7.40%||TMB TSD (Mullai)|
|UCO Bank||6.50%||7.00%||UCO Tax Saver Deposit Scheme – 2006|
|Union Bank of India||6.70%||7.20%||Union Tax Saver|
|United Bank of India||6.00%||6.50%||United Bank of India Tax Saver FD|
|Yes Bank||7.25%||7.75%||Yes Bank Tax Saver FD|
Source: Bank Websites Last Updated: April 1, 2019
Taxation & TDS – Tax Saving Fixed Deposits:
The interest received on tax Saving Fixed Deposit is fully taxable. The interest income is considered as “income from other sources” for Tax filing and taxed at marginal tax rates applicable.
TDS (Tax deduction at source) at the rate of 10% is deducted, if the interest income is more than Rs 40,000 in financial year per bank (changed from Rs 10,000 limit in Budget 2019)
In case of Senior citizens TDS would be deducted at the rate fo 10%, if the interest income exceeds Rs 50,000. You can see the same in Form 26AS.
In case your income does not exceed taxable slab and so want to avoid TDS, you can submit Form 15G or 15H when making the deposit. You would also need to submit the form at the start of every financial year to the concerned bank branch.
Also Read: How to Fill Form 15G and 15H?
Key Points – Tax Saving FD:
Below are some of points to keep in mind while investing in Tax Saving Deposits:
- As the Tax Saving FD scheme was introduced in Budget of 2006, it’s also known as Tax Saving Deposit scheme 2006 (Notification Number 203/2006 and SO1220 (E) dated 28/07/2006)
- Most of the banks accept deposit of 5 Years only. However there are banks with deposit tenures of more than 5 Years
- You can deposit on either Single or Joint name. However benefit of tax deduction is available for first holder only.
- Most banks offer interest rate which is similar to their 5 years term deposits. Only a few banks give slightly higher interest rate for their Tax Saving Fixed Deposits
- Most banks give Senior citizens and their staff members additional interest of 0.25% to 0.5%
- Depositor can opt for either cumulative or non-cumulative way of crediting periodical interest
- Don’t be mislead by banks advertisements about their yield on Tax Saving FDs. Those are manipulative calculations
- Be cautious of small co-operative banks as they have higher risk than bigger private and public sector banks
- Depositor gets benefit U/s.80C of the Income Tax Act. 1961
- Minimum deposit is Rs.100 and in multiples thereof
- Maximum deposit in a Financial Year Rs.1,50,000/- [i.e., 1st April to 31st March of the following calendar year]
- Deposits cannot be withdrawn prematurely
- Deposits cannot be pledged to secure loan or as security
Disclaimer: We have tried to keep interest rates up to date, but as these change frequently you are advised to check with the bank before investing. Also it would be great if you can point out any errors through comments or email!