Highest Tax Saving Bank Fixed Deposit Rates U/S 80C – February 2019

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?

1. Convenient to invest. ICICI Bank, SBI, HDFC Bank, etc offers online facility for Tax Saving FD
2. Redemption on maturity comes directly to your bank account
3. High Safety – FD up to Rs 1 Lakh is insured

Why you Should Not Invest?

1. There are lot of competing products like EPF, PPF, ELSS to exaust the investment of Rs 1.5 Lakh u/s 80C
2. The interest earned is taxable
3. Cannot be withdrawn prematurely
4. 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 February 3, 2019 banks are offering 6.00% – 8.25% for general public and 6.50% – 8.75% for Senior Citizens.

1. The best Tax Saving Fixed Deposit Interest offered is 8.25% for General Public by IDFC Bank
2. The best Senior citizens Tax Saving Fixed Deposit Interest offered is 8.75% by IDFC Bank
3. 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.

Click for Best Interest Rate on FDs for General public

The highest Interest Rates have been highlighted:

 Source: Bank Websites                              Last Updated: February 3, 2019

Download: Free ebook for Income Tax Planning for FY 2018-19

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 would be deducted at the rate of 10% of the interest paid, if the interest paid exceeds Rs 10,000 in a financial year. 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:

1. 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)
2. Most of the banks accept deposit of 5 Years only. However there are banks with deposit tenures of more than 5 Years
3. You can deposit on either Single or Joint name. However benefit of tax deduction is available for first holder only.
4. 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
5. Most banks give Senior citizens and their staff members additional interest of 0.25% to 0.5%
6. Depositor can opt for either cumulative or non-cumulative way of crediting periodical interest
7. Don’t be mislead by banks advertisements about their yield on Tax Saving FDs. Those are manipulative calculations
8. Be cautious of small co-operative banks as they have higher risk than bigger private and public sector banks
9. Depositor gets benefit U/s.80C of the Income Tax Act. 1961
10. Minimum deposit is Rs.100 and in multiples thereof
11. Maximum deposit in a Financial Year Rs.1,50,000/- [i.e., 1st April to 31st March of the following calendar year]
12. Deposits cannot be withdrawn prematurely
13. Deposits cannot be pledged to secure loan or as security

Highest Tax Saving Bank Fixed Deposit Rates – 80C – February 2019

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!