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    What is a Tax Saver FD?

    Tax saver fixed deposit is a type of fixed deposit by investing in which you can get tax deduction under section 80C of the Indian Income Tax Act, 1961. Normally, tax saver deposits are of two types - “Single holder Type Deposits" and “Joint holder Type Deposits”. Such deposits are offered for a lock-in period of 5 years. Any investor can claim a deduction of maximum Rs.1, 50,000 by investing in tax saver fixed deposits.

    Key highlights of Tax Saver FDs:

    • Maturity period of a tax saver FD is 5 years.
    • Get tax deduction up to Rs.1, 50,000.
    • Deduction is available to individuals, members of Hindu undivided family (HUF), senior citizens and NRIs.
    • The interest earned from tax saver fixed deposits is taxable. Tax will deducted at source.
    • Premature withdrawal is not available.
    • You cannot get loan against tax saver fixed deposits.
    • Tax saver deposits can be opened both singly and jointly. In case of a joint account, tax benefit will be availed by first holder of the deposit as per the section 80C of the Income Tax Act, 1961.

    Tax Deductible Fixed Deposits

    As per current tax laws an individual can claim a tax deduction for investments in tax saving fixed deposits of up to Rs.1.5 lakh. The amount will be deducted from the total gross income of the individual to arrive at the taxable income. Section 80C of the Income Tax Act permits this deduction. Listed below are some criteria to be fulfilled to claim for this deduction:

    • Hindu United Families (HUF) and individuals only are eligible to invest in tax saving fixed deposit schemes.
    • The Fixed Deposit can be of the minimum amount as stipulated by the bank.
    • The tax saving fixed deposits have a 5-year lock-in period. Premature withdrawals and and loans against the Fixed Deposit is not permitted.
    • Individuals may invest in these Fixed Deposits through any private or public sector banks, except co-operative and rural banks.
    • The Post Office Time Deposit of 5 years also qualifies for deductions under Section 80C of the Income Tax Act of 1961.
    • Post Office Fixed Deposits are transferrable between post offices.
    • Fixed Deposits can be held either individually or jointly. In case of a joint fixed deposit the tax benefit will be given to the first holder of the Fixed Deposit.
    • Interest earned on these Fixed Deposits is taxable under the investor’s tax bracket, therefore, Tax Deductible at Source (TDS) is applicable. The interest payable on the investment is either on a monthly basis or quarterly basis, this interest may be reinvested.
    • Tax Deductible Fixed Deposits have a nomination facility.
    • Banks offer slightly higher interest rates to senior citizens on these Fixed Deposits. This increased interest rate exists for Tax Saving Fixed Deposits.

    Benefits of investing in Tax Saver FDs

    Tax saver fixed deposits come with a number of benefits which include:

    • The major benefit of investing in tax saver fixed deposit is that it helps you save income tax.
    • You can start investing with as little as Rs.100 and add to your savings.
    • Since premature withdrawal is not available in case of tax saver fixed deposits, you can be sure of receiving assured returns, apart from saving tax.
    • Nomination facility is available. You can nominate/authorize someone to withdraw your deposit before or post maturity in the event of your death.

    Who is eligible to open a Tax Saver FD?

    • All resident individuals with a pan card.
    • Non–resident Indians (NRIs).
    • Senior citizens above the age of 60 years are eligible to open a tax saver fixed deposit account.

    Things To Know About Tax Saving Fixed Deposits

    As per current tax laws, if one invests in a tax saving FD, he/she can claim the invested amount up to a maximum of Rs 1.5 lakh as a deduction from his/her income. The amount invested this way is meant to cut from gross total income to arrive at taxable income. This kind of deduction is permitted under Section 80C of the Income Tax Act. Section 80C further determines the upper-limit of investment – which is currently fixed at Rs 1.5 lakh. The Tax-saving fixed deposit is one of the few gateways presently permitted for investment for one to claim a tax break according to Section 80C of the Income Tax Act.

    Only Individuals and HUFs can make investments in the tax saving fixed deposit (FD) scheme. This FD can be put together with a certain minimum amount - and this amount varies from one bank to another. Fixed deposits have a lock-in time of 5 years, and withdrawals before maturity are not permitted, as are not loans against these FD's.

    One can invest in these FD's via any of the public or private sector banks, but not cooperative and rural banks. An investment made in the Post Office Time Deposit for a period of 5 years also qualifies one for deduction under the same section 80(C) of the Income Tax Act, 1961. This Post Office Fixed deposit comes with the provision of being transferable from one Post office to another.

    Top 5 banks offering Tax Saver FDs in India:

    There are many banks in India which offer tax saver fixed deposits for 5 years. Mentioned below is a number of top five Indian banks offering tax saver fixed deposits:

    • Axis Bank
    • ICICI Bank
    • HDFC Bank
    • SBI Bank
    • IDBI Bank

    Tax Saver Fixed Deposits Interest rate comparison

    Given below is a clear comparison of interest rates of the top 5 Tax Saver Fixed Deposit schemes in India:

    Bank Name of the Tax Saver FD scheme General rate of interest Rate of interest for senior citizens
    Axis Bank Axis Bank Tax Saver Fixed Deposit 7.25% per annum 7.75% per annum
    ICICI Bank ICICI Bank Tax Saver Fixed Deposit 7.50% per annum 8.00% per annum
    HDFC Bank HDFC Bank Tax Saver Fixed Deposit 7.50% per annum 8.00% per annum
    SBI Bank SBI Tax Saving Scheme 2006 7.00% per annum 7.25% per annum
    IDBI Bank Suvidha Tax Saving Fixed Deposit Scheme 7.50% per annum 8.00% per annum

    *The rates are subject to change without prior notice. The customers are requested to contact the respective bank for the revised rates.

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