Tax Saving FD – Know About Tax Saving Fixed Deposit

Every salaried individual as well as a business person is required to pay taxes as per the income tax laws. While paying taxes, we all aim to legally save it in some way or the other. But how do we do that? It is the most confusing question for most of the taxpayers. One of the excellent ways of saving taxes is by investing in tax-saving investment schemes. They not only help you save taxes but are also instrumental in effectively achieving your financial goals.

There are many investment avenues available in the market that either offer tax exemption or tax deduction. Having said that, selecting the most suitable and right tax-saving investments may not come easy for everyone. While choosing the right scheme, one needs to access several factors such as safety, returns and liquidity, among other things.

A very popular tax-saving investment option among taxpayers is investments under section 80C. As per section 80C of the Income Tax Act, 1961, investments of up to Rs. 1.5 lakhs can be claimed as a deduction. Tax saving fixed deposit is a type of fixed deposit where you can get a deduction of maximum Rs. 1.5 lakhs under section 80C. To arrive at the net taxable income, the amount invested in tax saving FD is to be deducted from gross total income.

Let us learn about some of the important points that you must consider before investing in tax saving FD.

Things to Know About Tax Saving Fixed Deposit

Investment in tax saving FD can be done by individuals and Hindu Undivided Family (HUF) only.

The minimum amount for fixed deposits varies from bank to bank.

Income tax saving FD has a lock-in period of 5 years.

You cannot make premature withdrawals and loans against these FDs.

Investment in these FDs can be made only through private or public sector banks. Rural and co-operative banks are not eligible for these FDs.

Tax-saving fixed deposits can be held in ‘singly' or 'jointly'. When the holding is in joint mode, the tax benefit is available to the first holder.

Tax saving FD interest rates vary from bank to bank. The interest rate ranges from 5.5% – 7.75%. However, note that some banks offer higher rates on FDs to the senior citizens.

These fixed deposits have nomination facilities.

The interest earned on the income tax saving FD is taxable according to the investor’s tax bracket. The interest on tax saving FD is payable on a monthly or quarterly basis.

The main advantage of investing in tax saving fixed deposits is that they are less risky in comparison to equities. Since many banks offer this type of FD, let us learn about its details.

• Banks and Income Tax Saving FDs
• SBI Tax Saving FD

Tax saving FD interest rates of SBI is 6.25% for general customers and 6.75% for senior citizens. The maximum deposit in a year is Rs. 1 lakh and the minimum deposit is Rs. 1,000. By using a tax saving FD calculator you can know the amount receivable after the lock-in period of 5 years depending on the maturity period of your FD.

HDFC Bank Tax Saving FD

Tax saving FD in the HDFC Bank can be opened with a minimum amount of Rs. 100. The maturity period of this FD is 10 years. Tax saving FD interest rates is 6.30%. Senior citizens get an added benefit of 50 basis points over general customers.

ICICI Bank Tax Saving FD

The interest rate on tax saving fixed deposits at the ICICI Bank to the general customers is 6.6% and for senior citizens, the interest rate is 7.10%. These rates are applicable to FDs having a maturity period of 5 to 10 years. The maximum amount that can be deposited is Rs. 1.5 lakhs and the minimum amount for opening tax saving FD at the ICICI Bank is Rs. 10,000.

PNB Tax Saving FD

Punjab National Bank offers an interest rate of 6.30% on a five-year tax saving FD. The minimum amount for opening tax saving FD at the PNB Bank is Rs. 5,000.

Bank of Baroda Tax Saving FD

Bank of Baroda offers an interest rate of 6.30% on a five-year tax saving FD.

The Bottom Line

The above mentioned are the basic details about the major banks that offer income tax saving FDs. You may access each individual option carefully and select the suitable one after doing good research. You can find all the basic information on the bank’s website. If you want to find out the returns that you will be earning from the fixed deposit, you can access the tax saving FD calculator and find out the returns by entering your fixed deposit details.

If you want to learn more about income tax saving FD or want to learn about other investment options, you can contact IndiaNivesh. We are among one of the most trusted and value-enhancing financial groups in India.Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."