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Tax Saving FD – Opt for 5 Year Tax Saving Fixed Deposit

Tax Saving FD – Opt for 5 Year Tax Saving Fixed Deposit

One of the factors considered by diligent investors is the existence of tax benefits associated with any investment scheme that put their money into.By investing in tax saving FDs, you can get tax deduction under Section 80C of the Indian Income Tax Act, 1961. For individuals earning above Rs. 2.5 lakhs in a fiscal year, it’s mandatory to file IT returns and pay the required taxes. As per the Act, FD account holder can claim a tax deduction for investments up to Rs. 1.5 lakhs in a tax-saving fixed deposit account.

Features & Benefits of Tax saving Fixed Deposit

Since it is a bank-based investment plan and closely monitored by RBI, tax saving fixed deposits offer investors a safe and low risk plan. There are several features and benefits it promises that make the investors to choose this plan. The lucrative features and benefits of tax saving fixed deposits are as follows:

  • Tax-saving FD schemes comes with a lock-in period of 5 years.
  • Interest rate range from 6. 80% to 8.25% per annum.
  • Deposit range varies from Rs. 100 to Rs. 1.50 lakhs per financial year.
  • Loan against fixed deposits and pre-mature withdrawals are strictly restricted.
  • Tax-saving FD offers higher rate of interest than savings account.
  • Tax Deducted at Source (TDS) is applicable on the interest of FD.
  • One can seek an exemption for TDS only if the net interest income is below Rs. 10,000.
  • The tax-saving FD account holders have to submit Form 15G/15H to the lender to avail the exemption.
  • Premature withdrawal is available after 5 years lock-in period.
  • Most tax-saving FD schemes come with a joint account option.
  • In case of joint account, only the primary account holder would be eligible for the tax benefits.  
  • A fixed deposit offers nomination facilities. 

Eligibility Criteria

  • Indian Citizen
  • Members of Hindu Undivided Family

Documents Required

  • Permanent account number (PAN) card
  • Government recognized ID proof- Aadhaar Card/Driving Licence/Passport/Voter ID
  • Government recognized address proof
  • Proof of age (for senior citizens)
  • 2 recent colour passport sized photograph 

Interest Rate of Tax Saving Fixed Deposit

Tax saving fixed deposits is a variant of term deposits scheme which provides tax benefits. The 5-year locked-in scheme provides variants of interest rate ranging from 6.00% to that of 8.75%, depending on the respective financers. Hereby, some of the banks’ tax saving fixed deposit interest rate are as follows:

Banks Tax Saving FD Interest rate (General) Tax Saving FD Interest rate (Senior Citizen)
IDFC Bank 7.75% 8.25%
ICICI Bank 7.25% 7.75%
Axis Bank 7.00% 7.50%
HDFC Bank 7.25% 7.75%
Kotak Mahindra Bank 6.50% 7.00%
State Bank of India 6.85% 7.35%

You should also consider the fact that NBFCs like Bajaj Finance offer a higher interest rate on Fixed Deposits as compared to banks.  For instance, Bajaj Finance offers interest rates up to 9.10%, higher than most banks in India.  Along with that, you also get the convenience of managing your FD account online with the help of a hassle-free process.

Comparison with other Tax Saving Investments

Apart from Fixed Deposit, there are many other tax savings investment options that can help investors to build up wealth. Public Provident Fund (PPF), National Savings Certificates (NSC), National Pension System (NPS) etc. are such other kinds of tax saving investments plan. The basic differences of these investment schemes are as follows:

Investment Plans Return Rate Lock-in Period Tax on Returns
5-year Bank Fixed Deposits 6% to 7% 5 years Yes
Public Provident Fund (PPF) 7% to 8% 15 years No
National Savings Certificate (NSC) 7% to 8% 5 years Yes
National Pension System (NPS) 8% to 10% Till retirement Partially Taxable
ELSS Funds 15% to 18% 3 years Partially Taxable

When compared with investment schemes, Fixed Deposits emerge to be one of the more reliable options for investments due to the higher interest rates offered and higher and guaranteed returns that you can get from them. Moreover, when you choose to open a Fixed Deposit with a reputed company such as Bajaj Finance, you also get to manage your Fixed Deposit in a hassle-free way with the help of the online account management facilities and flexible tenors.

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