Tax Saver FD (Fixed Deposit)

With respect to the old tax regime, no changes were proposed in the Union Budget 2024. The new tax regime offers new benefits, including a higher standard deduction of ₹75,000. However, tax benefits on regular FDs are still not available. Now jumping to a specific type of fixed deposit account, a tax saver FD enables you to expand your capital and reduce tax liabilities as per Section 80C of the Income Tax Act, 1961. 

Best Tax-Saving FD Interest Rates

Here's a quick look at the various FD interest rates offered by prominent banks for tax saver FD accounts:

Note: The above rates are subject to change, depending upon the bank’s discretion. For latest updates, it is highly recommended to refer to the official websites of the mentioned banks. 

Key 5-Year Tax-Saving FD Benefits 

When you open a tax saver FD, you can witness the following benefits:

Comparatively Higher Interest Than Savings Accounts

Regular savings accounts offer much lower interest rates compared to tax saver fixed deposits. Therefore, these are great instruments to grow your money over a period of 5 years without taking any risk. 

Tax Saving Under Section 80C of the Income Tax Act

In contrast to regular fixed deposit accounts, tax-saver FDs allow you to reduce your overall taxable income for a particular financial year. Under Section 80C of the IT Act, you may claim benefits on investments of up to ₹1.5 lakh per annum.

Secured Growth

Deposit Insurance and Credit Guarantee Corporation (DICGC) insures tax-saver fixed deposits, guaranteeing up to ₹5 lakh of the total investment per depositor. Unlike ELSS funds, here you can receive predicted returns as the returns are not subject to market fluctuations. Once you invest in a tax saver FD, the initially agreed-upon interest rate remains unchanged till the maturity date. 

Multiple Payout Options

Tax saving fixed deposits are widely renowned for their flexible payment schemes. Therefore, if you are searching for a regular passive income source, you may opt for a monthly or quarterly interest payout option. Otherwise, beneficiaries receive the whole sum when their FD matures. 

Disciplined Saving

There is no premature withdrawal clause in a tax-saver fixed deposit account which is entirely different from a regular FD. Therefore, financial advisors recommend these plans as they make investors park their money for long-term benefits. Over time, it teaches discipline by stopping you from impulsive spending.

Points to Remember While Investing in Tax Saver FD 

Before you start investing in tax-efficient fixed deposit schemes, keep these points in mind:

• Eligibility: You need to be at least 18 years old to open this type of fixed deposit. Other than individuals, HUFs are also considered eligible by banks and other FD providers. For minor applicants, a primary guardian has to be jointly registered at the time of issuing the FD.
• Minimum Deposit Amount: This factor depends on a specific fixed deposit provider. However, the maximum investable amount is capped at ₹1.5 lakh per financial year. This limit is the same as what has been fixed for other tax saving instruments as per Section 80C of the Income Tax Act, 1961. 
• Lock-in Period: The lock-in period for any tax-saving FD is set at 5 years. Before this, you cannot make claims for full or partial withdrawal. Moreover, you cannot avail a loan against your fixed deposit principal. 
• Where to Invest: Except for rural and cooperative banks, tax saving FDs can be easily accessed via any private or public sector bank. Additionally, several NBFCs these days provide tax saving fixed deposits at highly competitive rates. 
• Nomination: For tax saver FDs, you can declare nominee(s) either online or offline. Nonetheless, it is essential to remember that these accounts, if held by minors, lack the nomination feature.
• TDS: Although the government allows tax benefits on your contributions towards a tax saver FD scheme, the interest earned from these accounts is subject to taxation. If your annual income does not exceed the minimum threshold limit, you may request tax exemption by submitting 15G to the issuing bank. 

If you are confused where to find the best deals regarding tax saving FDs, try using the Stable Money platform once! All our partner banks’ FD schemes are regulated by DICGC, a fully owned subsidiary of the Reserve Bank of India.