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5 Year Tax Saving FD

A tax saver fixed deposit is a type of deposit that qualifies for a tax deduction under Section 80C of the Income Tax Act of 1961 in India. Any investor who invests in tax-saving FDs can claim a deduction of up to Rs 1.5 lakh on their investment. In the case of their death, investors can also nominate/authorize someone to withdraw the investment amount before or after maturity. Tax-saving FDs are similar to other bank fixed deposits in that the maturity amount (principal amount + FD Interest) is credited straight to your bank account at maturity. These deposits have a 5-year lock-in tenure, and the tax-saving FD interest rates range from 5.5 percent to 7.75 percent. 

Best Tax Saving FD Rates

Banks

General Public FD Rate Senior Citizens FD Rate
HDFC Bank 5.30%

5.80%

IDBI Bank

5.20% 5.80%
IndusInd Bank 6.75%

7.25%

Federal Bank

5.50% 6.00%
DCB Bank 6.95%

7.45%

IDFC First Bank

5.75% 6.25%
RBL Bank 6.50%

7.00%

YES Bank

6.50% 7.00%
Axis Bank 5.50%

6.00%

State Bank of India

5.40%

6.20%

Benefits of Tax Saving Fixed Deposits

The key benefits of investing in tax-saving fixed deposits are listed below.

  • Interest compounded over the fixed deposit’s term speed up the growth of your investment.
  • Investing in fixed deposits is considered safe because there are minimal risks involved.
  • A tax saver fixed deposit, unlike mutual funds, does not have market-linked returns. They have a set interest rate and guaranteed returns for the term.
  • Senior citizens receive 0.25 percent to 0.5 percent higher returns on their tax-saving fixed deposit investments than regular customers, as with other fixed deposits.
  • Tax-saver FDs are eligible for a deduction of up to Rs.1.5 lakh under Section 80C of the Income Tax Act.
  • The minimum deposit amount starts as low as Rs.1000.

Documents Required for Tax Saving FD

Identity Proof

  • Driving License
  • Senior Citizen ID Card
  • Passport
  • PAN Card
  • Government ID Card
  • Voter ID Card

 

Address Proof

  • Bank Statement
  • Passport
  • Electricity Bill
  • Telephone Bill
  • ID Card / Certificate issued by Post Office
  • Voter ID Card

Eligibility for opening Tax-Saving FD

  • Resident Indians
  • Individuals
  • Hindu Undivided Families (HUF)
  • Single and joint accounts.

 

Important points to remember while investing in Tax-Saving FDs

Before you decide to invest in tax-saving fixed deposits, keep the following points in mind.

  • Eligibility: Individuals and HUFs are the only ones who are eligible to invest in tax-saving FDs. Furthermore, a minor can invest with an adult in a joint account.
  • Minimum Deposit: The minimum amount that can be invested in a tax saver FD differs by the bank. Furthermore, there is no upper limit. The amount that can be claimed as a deduction under Section 80C, on the other hand, is capped at 1.5 lakh.
  • Lock-in Duration: Tax Saving FDs have a five-year minimum lock-in period.
  • Loan Facility: Loans are not available against tax-deferred savings accounts.
  • Premature Withdrawal: Tax-saving fixed deposits do not allow withdrawals before the maturity date.
  • Investment Mode: Except for rural and cooperative banks, you can invest in a tax-saving FD at any public or private bank. You can even invest online with some banks.
  • TDS: The interest on tax-saving fixed deposits is paid out on a monthly or quarterly basis. You can also choose to put it back into the market. The interest earned is taxable according to the income tax category in which your taxable income falls. You can avoid paying TDS by submitting Form 15G to the bank. Form 15H can be used by older folks to submit to the bank.

 

FAQs:

How can I start a tax savings FD?

Any public or private sector bank can open a tax-saving FD account for you. The funds can be moved from your account in minutes if you open your FD at the same bank branch where you are drawing the cheque. You can even invest through your bank's net banking service.

How much money is required to open a Tax Saver FD account?

Most banks need a minimum deposit of Rs.100 to enroll in this scheme.

Is it safe to invest in a tax-saving FD?

Tax savings FD is one of the safest ways to cut your taxes. The amount invested is safe, the returns are guaranteed, and the interest rate is fixed.

Is it possible to break the tax-saving FD?

No. Premature withdrawals from tax savings FD are not permitted. You cannot break these FDs before the five-year term is up, according to the Bank Term Deposit Scheme 2006.

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