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Want to invest in tax saving FDs? Here’s a guide


Want to invest in tax saving FDs? Here’s a guide

There are many people who wish to save taxes by investing in suitable Fixed Deposit schemes before the current financial year comes to a close. You should always keep an eye on the current rates of interest on FDs that are offered by leading banks and financial institutions. Investing in tax saving FDs is a good bet for those who do not have a high appetite for risk and are looking for secure and decent returns on their investments.

These types of FDs are offered by many banks in India right from HDFC and SBI to ICICI Bank and others. These deposits come with a compulsory lock-in period. This is usually 5 years and the maturity period can range between 5-10 years based on your preferences.  The tax savings are quite decent from tax saving FDs but you will have to stay invested and not withdraw the money for a period of 5 years. These FDs cannot be prematurely withdrawn so that is one factor that you will have to keep in mind.

However, the tax benefit is claimed as a deduction under Section 80C on the amount that you have invested. Tax will not be imposed on the principal amount that has been invested although FD interest will be taxed based on the person’s tax slab. TDS also applies since interest is taxable in this case as well. The deposit interest is paid out on a quarterly/monthly basis and this can be reinvested by you if you wish. However, TDS deduction can be bypassed by the submission of Form 15G or 15H for senior citizens.

As per reports, for deposits up to Rs. 1 crore and in the 5 years and above category, SBI is offering 6.50% while Axis Bank is offering 6.90%. Bank of India and Bank of Baroda are offering 6.25% and 6.25-6.50% respectively. HDFC Bank is offering 6% while ICICI Bank is offering 6.50%. Canara Bank is also offering 6% while DCB Bank Limited is offering between 7.2-7.25%. Kotak Mahindra Bank is offering interest rates of 6.25% while RBL Bank is offering 7.10%. Yes Bank is offering 7% while 6.50% is being offered by Union Bank of India. Vijaya Bank and United Bank of India are offering 6.25% and 6% respectively. UCO Bank is offering 6.25% while Syndicate Bank is offering 6.50%.

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