A tax-saver fixed deposit is specifically designed to help individuals save on income tax. You can deposit a lump sum amount for a fixed tenor, with a lock-in period of 5 years. The investment in such FDs qualifies for deductions up to ₹1.50 Lakhs under Section 80C of the Income Tax Act, 1961.
Here are the rates for tax-saving fixed deposits from some FD issuers:
Bank |
Non-senior Citizen (p.a.) |
Senior Citizen (p.a.) |
YES Bank |
7.25% |
8.00% |
7.25% |
7.75% |
|
7.20% |
7.70% |
|
SBI |
6.50% |
7.50% |
ICICI Bank |
7.00% |
7.50% |
HDFC Bank |
7.00% |
7.50% |
PNB |
6.50% |
7.00% |
Axis Bank |
7.00% |
7.75% |
Bank of Baroda |
6.50% |
7.15% |
Note: The above tax-saver FD interest rates are subject to change at the issuer’s discretion.
Here are the features and advantages you can enjoy investing in a tax-saving FD:
Enjoy deductions of up to ₹1.5 Lakhs on investment amount u/s 80C of the Income Tax Act
Fixed and assured interest rates throughout the FD tenor, providing predictable returns.
Mandatory lock-in period encourages disciplined savings for at least 5 years.
Ideal for risk-averse investors seeking a secure investment option with tax benefits
Simple application process and accessibility through various banks
You cannot prematurely withdraw the sum in your deposit either partially or completely until the lock-in period is over
The tax benefits can only be claimed by the primary account holder
The eligibility criteria and documents required for a tax saving FD may vary slightly between banks, but generally, they adhere to certain common parameters.
Residential status: Resident Indians, including salaried and self-employed individuals
Age: At least 18 years old
Investor Type: Individuals and Hindu Undivided Families (HUFs)
Identity proof: Aadhaar card, passport, Voter ID, PAN card, and senior citizen identification (if necessary)
Address proof: Utility bills, driving license, Voter ID, Aadhaar card, and passport
Avoiding TDS on fixed deposits involves strategic financial planning. Here are some strategies:
You can submit Form 15G (if below 60 years) or Form 15H (if above 60 years) to the bank to declare that your total income is below the taxable limit. This exempts you from TDS.
Distribute your investments across multiple banks or tenors to keep the interest earned from each FD below the threshold. The TDS limit has been fixed at ₹40,000 for the general public and ₹50,000 for senior citizens.
Before you invest in a tax-saver FD, compare it with these top tax-saving options:
Investment |
Lock-in period |
Expected Returns |
Unit-linked insurance plans (ULIPs) |
5 years |
Market-linked |
National Pension Scheme (NPS) |
Until retirement |
Market-linked |
National Savings Certificate (NSC) |
5 years |
7.70% |
Sukanya Samriddhi Yojana (SSY) |
21 years |
8.20% |
Public Provident Fund (PPF) |
15 years |
7.10% |
Equity Linked Savings Scheme (ELSS) |
3 years |
Market-linked |
Note: The above interest rates are subject to change. Kindly check the latest rates on official government or bank websites.
In conclusion, tax-saver fixed deposits serve as a prudent financial tool, combining the dual benefits of tax savings and capital protection. With a mandatory lock-in period of 5 years, these deposits provide a disciplined approach to wealth accumulation.
Once your tax-saving FD matures, the maturity amount, which includes the principal and the interest earned, is directly transferred to your linked bank account.
While there's little to no risk involved with tax-saver FDs, there are certain factors you must consider before investing. For instance, the lock-in period of 5 years means that you will not be allowed to access the invested funds, even during an emergency.
The minimum deposit amount in a tax-saving FD varies according to the terms and conditions of the financial institution. However, you can deposit a maximum of ₹1.5 Lakhs in a financial year.
No, tax-saver fixed deposits have a mandatory lock-in period of 5 years, and premature withdrawals are not allowed during this period.
Individuals and HUFs (Hindu Undivided Families) can invest in tax-saver FDs.
The minimum tenor of a tax-saver FD is 5 years.