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Banks Offering Tax Saving FDs - Checkout Interest Rates for Various Banks
If you want to grow your money at a fixed interest rate and save tax at the same time, tax-saver FDs can be one of the best options for you. However, the interest rate on FD varies across financial institutions. So, to ensure a higher earning on investment, it is necessary that you compare this rate before putting in your money.
What is a Tax Saver FD?
Tax-saver FD is a financial instrument in which you get all the benefits of the regular FD along with the added advantage of saving tax. It lets you reduce your tax liabilities in a financial year by up to Rs. 1.5 Lakhs. However, unlike the regular FDs, you do not get the flexibility to choose the tenure for your deposit. It comes with an obligatory 5 year lock-in period.
List of Top Tax Saver FDs and Their Interest Rates
Financial Institutions |
Interest Rate on FD for General Citizens (Per Annum) |
Interest Rate on FD for Senior Citizens (Per Annum) |
Union Bank of India |
6.70% onwards |
6.70% onwards |
ICICI Bank |
6.20% onwards |
6.70% onwards |
HDFC Bank |
6.10% onwards |
6.60% onwards |
Axis Bank |
6.10% onwards |
6.85% onwards |
State Bank of India |
5.85% onwards |
6.65% onwards |
Bank of Baroda |
5.65% onwards |
6.30% onwards |
You can notice that the FDs for senior citizens come with an average of around 0.25% to 0.5% lesser interest rate compared to the regular FDs.
Besides the benefits of higher interest rates, senior citizens also get more relaxation on tax deducted at source (TDS). Typically, when the interest earning on the FD is Rs. 40,000 or more in a financial year, the financial institutions apply 10% of TDS on the earned interest. However, for senior citizens, the TDS deductions come into effect when interest earnings are more than or equal to Rs. 50,000.
You should also be aware of other important features of tax-saver FDs before making your deposit.
Features and Benefits of Tax Saver FD
You can leverage the following benefits by investing your money in tax-saving deposits:
- Fixed Interest Rate
The interest rate remains the same throughout your tenure, disregarding the market fluctuations. You get a pre-determined value on your deposit after it matures. As a result of this guaranteed maturity amount, you can plan your upcoming expenses properly.
- Tax Benefit
You can reduce your taxable income on your deposits under Section 80C of the Income Tax Act of India. The maximum amount you can decrease from your gross annual income is Rs. 1.5 Lakhs.
- Lock-In Period
Typically, the tax-saver FDs come with a pre-determined lock-in period of 5 years. You cannot withdraw your money before the tenure is complete.
- Flexible Pay-Out of Interest
You get the option to choose your interest payouts. It can be monthly, quarterly or at the end of your chosen tenure. If you want regular earnings, you can choose either monthly or quarterly payouts, whichever benefits you the most.
- Single/Joint Account
You can open your fixed deposit account singly or jointly. However, only the primary account holder can get the benefit of a tax deduction on the deposit.
Things to Consider While Choosing a Tax-Saver FD
Here are some of the aspects you need to carefully check while choosing a tax-saver FD for growing your money:
- Financial Goal: You should ideally deposit in a tax saving FD if you have no problem with the fact that your money will remain locked for a period of 5 years. In case you think that your upcoming expenses are larger, you can go with regular FDs, in which the tenure is flexible.
- Interest Rate: The interest rate on FD varies from one financial institution to another. You need to choose a bank or NBFC that lets you secure a higher interest rate.
- Existing Tax Benefits: You get the tax benefit for only up to Rs. 1.5 Lakhs per year under Section 80C of the Income Tax Act of India. Tax benefits in this section are considered on various instruments, including home loan EMIs, life insurance premiums, investment in NPS, PPF, FD, etc. So, if you already have reached the limit, it will not be too beneficial for you to invest in tax-saver FDs.
How to Invest Money in Tax-Saver FDs
You need to follow the steps mentioned below to apply for your creating your FD account:
Step 1: Visit the e-commerce platform for investment instruments
Step 2: Go to the page for fixed deposits
Step 3: Click on ‘Invest Now’
Step 4: Provide your basic details, including your name, mobile number, birth date
Step 5: Generate OTP and enter it for the verification
Step 6: Mention your investment details like your deposit amount, preferred tenure, FD type, pay-out option and details of your bank account
Step 7: Complete your online KYC using your PAN card or Aadhar card and enter your nominee details
Step 8: Choose your mode of payment
You can pay either via UPI or net banking. In case, your investment amount is more than Rs. 1 Lakh, you may have to pay only through net banking.
With your payment, you will have successfully booked your deposits and get the acknowledgement message via SMS and email.
Although one of the main objectives of investing in tax-saver FD is to reduce tax obligations, you should not disregard the aspect of prospective earning on your deposits. It is crucial that you choose a financial institution that gives an interest higher than competitors. You can either do so by performing a thorough market research or select any of the financial institutions listed above.