A Tax Saving Fixed Deposit (FD) is a financial instrument designed to provide individuals with a dual benefit of fixed returns and tax savings. Unlike regular fixed deposits, Tax Saving FDs come with a mandated lock-in period of 5 years, during which premature withdrawals are not allowed.
The primary advantage of investing in a Tax Saving FD is the deductions under Section 80C of the Income Tax Act. This allows investors to reduce their taxable income by the invested amount, up to a maximum limit of Rs 1.5 lakh. This not only encourages disciplined savings, but also serves as a strategic tool for tax planning.
Tax Saving FDs offer a dependable solution to save money and cut down on income tax and helps in simple and efficient financial management.
Tax Saving FDs are one of the most popular and safe long-term investment plans. Here are some key highlights of Tax-Saving FDs:
|Up to 7.75% p.a.
|Deduction of up to ₹1.50 lakh under Section 80C
|KYC documents, including identity proof, address proof, and photograph.
Different public and private sector banks and small finance banks offer different interest rates for tax savings FD. Check out the FD rates of top financial institutions below.
Several public and private sector banks facilitates tax saving Fixed Deposits at lucrative interest rates. Refer to the table below to know the current tax saving FD interest rates of the top 10 banks in India.
|Name of Bank
|FD Interest Rate (General)
|FD Interest Rate (Senior Citizens)
|Punjab National Bank
|Bank of Baroda
|16.00% - 22.00%
|Kotak Mahindra Bank
Read Less*The bank reserves the right to modify the interest rates on Tax Saver Fixed Deposits. Check the bank’s official website for the latest information.
There are several small finance banks that offers tax saving FDs. Here are the top 10 small finance banks you may consider:
|Interest Rate (General)
|Interest Rate (Senior Citizen)
|AU Small Finance Bank
|North East Small Finance Bank
|Utkarsha Small Finance Bank
|Capital Small Finance Bank
|Ujjivan Small Finance
|Suryoday Small Finance Bank
|Fincare Small Finance Bank
|Jana Small Finance Bank
|ESAF Small Finance Bank
|Euitas Small Finance Bank
Read Less*The bank reserves the right to modify the interest rates on Tax Saver Fixed Deposits. Check the bank’s official website for the latest information.small
Tax savings FDs have several unique features that help to optimise your investments. Know all about the significant features of tax saving FD below, including eligibility criteria, minimum and maximum deposit, tenure, premature closure, renewals, etc.
Tax Saving Fixed Deposits (FDs) are specifically designed for resident Indian citizens and Hindu Undivided Families (HUFs) seeking to save taxes and accumulate wealth over the long term. To be eligible to invest in a Tax Saving FD, you must meet the following criteria:
The minimum and maximum deposit amounts for a Tax-Saving Fixed Deposit (FD) varies depending on the bank you choose. The minimum deposit is ₹100, and the maximum deposit is capped at ₹1.5 lakh per financial year to qualify for tax deductions under Section 80C of the Income Tax Act.
Here's a quick breakdown of the deposit limits for Tax-Saving FDs:
Minimum Deposit: Most banks have a minimum deposit limit of ₹100. Although, some banks may have a higher minimum, such as ₹500 or ₹1000.
Maximum Deposit: ₹1.5 lakh per financial year per individual. This limit is inclusive of investments in other eligible tax-saving schemes under Section 80C.
It's always recommended to check with your chosen bank for their specific terms and conditions regarding minimum and maximum deposit amounts for Tax-Saving FDs.
The tenure, or duration, of a Tax-Saving Fixed Deposit (FD) is typically five years. This means that once you invest in a Tax-Saving FD, your money is locked in for a period of five years, and you cannot withdraw the principal amount during this time.
After the completion of the five-year lock-in period, you have the option to either withdraw the funds or renew the FD for another term, as per the terms and conditions of the bank or financial institution where you hold the FD.
The tax-saving FD comes with a mandatory five-year lock-in period, barring any premature withdrawals during this duration.
However, exceptions apply in the case of the investor's death, allowing legal heirs or nominees to access premature payments.
If there is no designated nominee, the bank disburses the funds to the legal heir following the investor's passing.
In some cases, you may withdraw money before completing the lock-in period, but you have to pay penalties and get a smaller sum than the expected maturity value.
As per Government notification, the option for auto-renewal is not applicable to the Tax-Saver FD schemes.
Although tax saving fixed deposits (FDs) are a popular investment option for individuals looking to save tax, there are several other tax saving investment options available, each with its own unique advantages and disadvantages.
Here is a comparison of tax saving FDs with some of the other popular tax saving investment options:
|Bank Tax Saving FD
|National Savings Certificate (NSC)
|National Pension System (NPS)
|Up to 12%
Before investing in a Tax Saving Fixed Deposit (FD), it's crucial to consider various factors to ensure the investment aligns with your financial goals and risk tolerance. Here are some key points to remember before investing in a Tax Saving FD:
Tax Saving Fixed Deposits (FDs) offer a plethora of benefits to investors, making them a popular choice for tax-saving and wealth accumulation. Here are some of the key advantages of investing in Tax Saving FDs:
In India, Under Section 80C of the Income Tax Act, individuals can deduct up to ₹1.5 lakh per financial year from their taxable income for investments in certain specified instruments, including tax saving FDs.
To claim tax deductions on fixed deposits, you must meet the following eligibility criteria:
There are a few ways to avoid TDS on FD (fixed deposit) interest in India. These include:
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A Tax Saving Fixed Deposit (FD) is a type of fixed deposit that offers tax benefits to the investor. Under Section 80C of the Income Tax Act, 1961, investors can claim a deduction of up to Rs 1.5 lakh per annum on the amount invested in a Tax Saving FD.
The major difference between a Tax Saving FD and a regular fixed deposit is the tax benefit. Regular fixed deposits do not offer any tax benefits, while Tax Saving FDs offer a deduction of up to Rs 1.5 lakh per annum under Section 80C of the Income Tax Act, 1961.
Key features include a fixed tenure of 5 years, non-extendable lock-in period, and eligibility for tax benefits up to a specified investment limit.
Investing in a Tax Saving FD helps in saving taxes by providing deductions up to a maximum limit of Rs 1.5 lakh under Section 80C.
The minimum investment limit for a Tax Saving FD is Rs 100. The maximum investment limit is Rs 1.5 lakh per annum.
The lock-in period for Tax Saving FDs is five years. This means that you cannot withdraw your money from the FD before the end of the five-year period.
The interest rates on Tax Saving FDs are fixed for the entire tenure of the FD. However, interest rates may vary from bank to bank.
Yes, you can prematurely withdraw funds from a Tax Saving FD before the lock-in period ends. However, you will have to pay a penalty for premature withdrawal. The penalty for premature withdrawal is typically 1% of the amount withdrawn.
The major tax benefit associated with investing in Tax Saving FDs is the deduction of up to Rs 1.5 lakh per annum under Section 80C of the Income Tax Act, 1961. This deduction will reduce your taxable income, which will reduce your tax liability.
Yes, you can take a loan against a Tax Saving FD. However, the interest rate on the loan will be higher than the interest rate on the FD.
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