Best Tax Saving FD Schemes of 2024

If you are searching for a tax-saving investment option, then nothing is better than a tax-saver fixed deposit scheme. It is one of the popular financial plans that provide tax benefits under Section 80C of the Income Tax Act, 1961. Tax saving FD schemes are considered less risky as compared to other investment instruments like mutual funds.

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  • Save upto ₹46,800 in tax under Sec 80C

  • Inbuilt Life Cover

  • Tax Free Returns Unlike FD+

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Best Tax Saving Fixed Deposit Schemes in 2024

Tax–Saving FD Interest Rates for Regular Citizens (in % p.a.) Interest Rates for Senior Citizens (in % p.a.)
Public Sector Banks
State Bank of India (SBI Bank) 6.50% 7.50%
Punjab National Bank (PNB Bank) 6.50% 7.00%
Bank of Baroda 6.50% 7.15%
Canara Bank 6.70% 7.20%
Indian Bank 6.25% 6.75%
Private Sector Banks
Kotak Mahindra Bank 6.20% 6.70%
HDFC Bank 7.00% 7.50%
IDFC Bank 7.00% 7.50%
Axis Bank 7.00% 7.75%
Bank of Baroda 6.50% 7.15%
Small Finance Banks (SFBs)
Suryoday Small Finance Bank 8.25% 8.75%
Unity Small Finance Bank 7.65% 8.15%
Fincare Small Finance Bank 8.00% 8.60%
Utkarsh Small Finance Bank 7.50% 8.10%
Ujjivan Small Finance Bank 7.20% 7.70%

Note: The rate of interest offered on tax-saver fixed deposits is subject to change and is valid as of January 2024.

Comparison Between
Fixed Deposits, Guaranteed Return Plans & Debt Mutual Fund
Guaranteed Return Plans, Fixed Deposits &
Debt Mutual Fund
Guaranteed Return Plans
Returns Before Tax
7.5% (TAX-FREE)
Returns After Tax
7.5%
Guaranteed Returns
Yes
Life Cover
Yes
Tax on Profit
Tax Free*
Risk
No Risk
awards
Still Better than FD’s and Debt Mutual Fund
Fixed Deposits
Returns Before Tax
7% (TAXABLE)
Returns After Tax
4.8%
Guaranteed Returns
Yes
Life Cover
No
Tax on Profit
Taxable
Risk
Low Risk
Debt Mutual Fund
Returns Before Tax
8% (TAXABLE)
Returns After Tax
5.5%
Guaranteed Returns
No
Life Cover
No
Tax on Profit
Taxable
Risk
High Risk
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*For annual premium upto ₹5 Lacs

Overview of a Tax Saving FD Scheme

A tax-saving FD scheme is an investment option that allows you to save on income tax while earning fixed returns. It involves investing a specific amount for a lock-in period, typically five years. The invested amount qualifies for a deduction of up to Rs. 1.5 lakhs under Section 80C of the Income Tax Act, 1961. 

The interest earned from tax-saving FD interest rates is taxable, but the invested principal amount is exempt from tax. This scheme provides a dual benefit of tax savings and a fixed return on investment. These benefits make it a popular and best investment plan for risk-averse investors.

Key Features of Best Tax Saving FD Interest Rates

The top features of the best tax-saving Fixed Deposit (FD) interest rates are listed below:

  • Competitive Rates: Enjoy attractive interest rates that make your investment grow.

  • Tax Benefits: Benefit from tax savings under Section 80C of the Income Tax Act.

  • Fixed Investment Period: Lock in your funds for a specific duration, ensuring stable returns.

  • Easy Application: Simple and hassle-free application process for convenient investing.

  • Flexible Interest Payouts: Choose between monthly, quarterly, or annual interest payouts based on your preference.

  • Minimum Documentation: Streamlined paperwork to make the investment process quick and efficient.

  • Renewal Options: Options to renew your FD at maturity for continued benefits.

  • Online Management: Conveniently manage your FD online, keeping track of your investment.

  • No Market Fluctuations: Shield your investment from market volatility with fixed returns.

  • Loan Against FD: Access funds in times of need by availing a loan against your FD.

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Key Benefits of Investing in Best Tax-Saving FD Interest Rates

The key advantages of investing in the best tax-saving Fixed Deposit (FD) interest rates are as follows:

  • Tax Savings: High fixed deposit rates provide an opportunity to earn attractive returns while enjoying tax benefits under Section 80C of the Income Tax Act.

  • Stability and Security: FDs are known for their stability and security. This makes them a reliable investment option. Your principal amount is safeguarded, and the interest earned adds to your overall returns.

  • Fixed Returns: With fixed interest rates, you know exactly how much you will earn. This provides you with predictability and helps in financial planning.

  • Flexible Tenure: Most tax-saving FDs offer flexibility in choosing the tenure. Hence, it allows you to align your investments with your financial goals and liquidity needs.

  • Ease of Investment: Opening a tax-saving FD is a simple and hassle-free process, making it accessible for both seasoned investors and those new to financial planning.

  • No Market Fluctuations: Unlike investments in the stock market, FDs are not affected by market fluctuations. This makes them a safer option for you if you prefer a more conservative approach to investing.

  • Liquidity Options: While tax-saving FDs have a lock-in period, some banks offer partial withdrawal options in case of emergencies. This adds a layer of liquidity to your investment.

  • Diversification: Including tax-saving FDs in your investment portfolio provides diversification, reducing overall risk by balancing your investments across different asset classes.

Tax-Saving FD vs. Other Tax-Saving Investments

Investment Option Tax-Saving FD ULIP (Unit Linked Insurance Plan) PPF (Public Provident Fund) SSY (Sukanya Samriddhi Yojana) NSC (National Savings Certificate) ELSS (Equity Linked Savings Scheme)
Tax Benefit On invested amount under Section 80C Tax-free maturity proceeds under Section 10(10D) On invested amount under Section 80C Tax-free maturity and withdrawal under Section 10(14) On invested amount under Section 80C On invested amount under Section 80C
Lock-in Period 5 years 5 years 15 years 21 years or until the child gets married after the age of 18, whichever is earlier 5 years 3 years
Returns 5% - 8% p.a. 10 – 24% p.a. 7.10% p.a. 8.0% p.a. 7.7% p.a. 8% - 20% p.a.
Risk Level Low, as it's a fixed deposit Moderate to high due to market fluctuations Low, as it's a government-backed scheme Low to moderate, influenced by market conditions Low, government-backed High, as it depends on equity market performance
Liquidity Limited access during the lock-in period Partial withdrawals allowed after the lock-in period Limited access with partial withdrawals after the 7th year Limited, withdrawals allowed after the 5th year Limited access during the lock-in period Generally liquid after the lock-in period
Suitability Conservative investors seeking fixed returns Investors comfortable with market risks Long-term investors looking for fixed returns Parents saving for a child's education/marriage Risk-averse investors seeking fixed returns Investors with a higher risk tolerance seeking the potential for higher returns

People Also Read: FD Calculator

Who Should Invest in Tax-Saving FD?

Tax Saving Fixed Deposits (FDs) are ideal for individuals looking to save on taxes while earning a fixed return on their investment. These FDs come with a lock-in period of 5 years, making them suitable for those with a long-term investment horizon. Investors in lower tax brackets can benefit the most from Tax Saving FDs, as they offer a guaranteed interest rate and the added advantage of tax exemptions under Section 80C of the Income Tax Act. If you are seeking a secure and tax-efficient investment option, Tax Saving FDs might be the right choice for you.

FD interest rates India have fallen consistently over the last 12 years.
Invest in Plans that offer Guaranteed Returns for over 25 Years

Documents Required to Invest in Tax-Saving FD Schemes

It is essential to provide the following documents while opening a Tax-Saving FD Account:

  • PAN Card: Essential for all financial transactions, including tax-saving FD investments.

  • Identity Proof: Valid government-issued IDs such as Aadhar card, passport, or driver's license.

  • Address Proof: Documents like utility bills, Aadhar card, or passport to verify your residential address.

  • Passport Size Photographs: Usually, a couple of recent passport-sized photos are required.

  • Filled Application Form: Complete the application form provided by the bank or financial institution.

  • KYC Compliance: Ensure that your Know Your Customer (KYC) details are up to date.

  • Form 15G/15H (if applicable): For individuals seeking tax exemption on interest income.

  • Cheque or Demand Draft: The initial investment amount needs to be provided through a cheque or demand draft.

The Final Words!

FDs are the best investment options as they offer certain returns without any element of financial risk. However, it is always recommended to do the tax planning and manage your investment instead of paying hefty income tax.

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FAQs

  • Which FD is best for tax saving?

    Here are 5 highly-rated tax-saving investment options to consider:
    • HDFC Bank Tax Saver FD

    • ICICI Bank Tax Saver FD

    • Axis Bank Tax Saver FD

    • SBI Tax Saver FD

    • Kotak Mahindra Bank Tax Saver FD

  • Is 5-year FD interest tax-free?

    The interest earned on regular 5-year FDs is taxable as per your income tax bracket. However, the principal amount invested in these FDs is eligible for a tax deduction of up to Rs. 1.5 lakhs per year under Section 80C of the Income Tax Act.
  • Which FD is eligible for 80C?

    FDs eligible for tax deduction under Section 80C of the Income Tax Act, 1961 are specifically called Tax-Saving FDs. These are offered by various banks and post offices in India.
  • Is SBI FD tax-free?

    Whether an SBI FD is tax-free depends on the type of FD:
    • Regular SBI FDs: The interest earned on regular SBI FDs is NOT tax-free. It is taxable as per your income tax bracket.

    • SBI Tax Saving FD: SBI offers a specific type of FD called the SBI Tax Saving FD, which comes under Section 80C of the Income Tax Act.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
^Trad plans with a premium above 5 lakhs would be taxed as per applicable tax slabs post 31st march 2023
+Returns Since Inception of LIC Growth Fund
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ

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