Tax Saving Fixed Deposit (FD) is best for those who want to make safe investments without any risk.
Tax Saving FD: The month of March is in its last phase and taxpayers are busy assessing their financial situation and managing their tax liabilities. Those who plan their tax savings throughout the year have no worries at this time, but those who plan at the last minute are now looking for the best options to save money. There are only a few days left for the financial year to end, so this is the right time to make the most suitable investment to save tax.
There are many options available in the market to save tax, but Tax Saving Fixed Deposit (FD) is the best for those who want to make safe investments without risk. However, this facility is available only in the old tax regime and cannot be availed in the new tax regime.
What is Tax Saving FD?
Tax Saving Fixed Deposit (FD) is a special type of savings scheme, which provides the benefit of tax deduction under Section 80C of the Income Tax Act, 1961. In this scheme, investors can claim a deduction of up to Rs 1,50,000 per financial year, which reduces their taxable income and reduces the total tax liability.
The lock-in period of this FD is 5 years, that is, investors cannot withdraw their deposits during this period. However, its biggest feature is that the interest rate remains stable, which gives safe and fixed returns.
Important things related to Tax Saving FD
Lock-in Period
Tax saving FD has a mandatory lock-in period of 5 years, i.e. premature withdrawal is not allowed during this period. This provides stable returns on investment and it remains a risk-free investment.
Interest Taxation
Investors can claim a deduction of up to Rs 1.50 lakh only on the principal, not on interest. The interest earned is added to the taxable income and is taxed as per the investor’s tax slab.
If the interest exceeds Rs 40,000 (Rs 50,000 for senior citizens) in a financial year, the bank deducts TDS (Tax Deducted at Source). If an investor’s total tax liability is less than TDS, he can claim a tax refund by filing an income tax return.
No loan and auto-renewal facility
Unlike normal FDs, tax saving FDs do not offer loan or overdraft facility. Apart from this, there is no option of auto-renewal in it, that is, after maturity the investor has to reinvest it manually.
Bank-wise tax saving FD interest rates (as of March 2025)
DCB Bank: 7.40%
Axis Bank: 7.00%
IndusInd Bank: 7.25%
Yes Bank: 7.25%
Federal Bank: 7.10%
HDFC Bank: 7.00%
Bank of Baroda: 6.80%
Canara Bank: 6.70%
SBI (State Bank of India): 6.50%
IDFC First Bank: 6.75%
Kotak Mahindra Bank: 6.20%
(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times Hindi)
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