Rate of Interest of Tax Saving FD: HDFC, SBI, Axis, and ICICI Bank

Tax saving fixed deposits are one of the best ways of getting tax deduction u/s 80C of the IT Act, 1961. When you invest in one such FD scheme, you get a tax deduction of up to Rs. 1.5 lakhs. The term for which you invest in it ranges from five years to ten years and there is no option of partial or premature withdrawal.

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In addition to this, if an investor dies between the term of tax saving fixed deposit, his/her nominee can withdraw the amount post maturity or before. However, the tax-saving FD scheme is the same as other fixed deposit schemes offered by a bank because the maturity amount (FD interest + Principal) comes to the bank account directly.

Most of the banks offer tax-saving fixed deposit scheme, but the rate of interest offered by them differ. In such a situation, you may think about which bank is the best for fixed deposits and may get confused. However, to vanish your confusions we are here providing the interest rates of some of the banks like HDFC, SBI, AXI, and ICICI Bank:

Interest Rates of Tax Saving FDs of Some of the Banks:

  • State Bank of India: The lock-in period for tax-saving fixed deposits offered by the State Bank of India is 10 years. Being an investor, you can get a tax benefit of up to Rs. 1,50,000 every year and claim the tax benefits under section 80C of the IT Act, 1961. The current SBI FD interest rates for tax saving deposits for the general public is 5.40% and for senior citizens, it is 6.20%. For opening this FD scheme online, log on to the net banking of SBI, and make a minimum deposit of Rs. 1000 or Rs. 1, 50,000.
  • HDFC Bank: The lock-in period of tax-saving fixed deposits offered by HDFC Bank is five years and the interest that is paid out can be quarterly or monthly basis. The current HDFC Bank rate of interest for its tax-saving fixed deposits for the general public is 5.50% and 6.25% for senior citizens. The minimum amount needed to open this account with HDFC Bank is Rs. 100 and maximum are Rs. 1, 50,000.
  • ICICI Bank: Two types of tax-saving fixed deposits are offered by ICICI Bank, which are reinvestment plans and traditional plans. The interest that is paid in the traditional plan can be on a monthly or quarterly basis. On the other hand, in the reinvestment plan, the interest on ICICI Bank FD is compounded quarterly and then it is reinvested with the initial or principal amount. The minimum investment amount needed to open this type of account is Rs. 10,000 and a maximum of Rs. 1, 50,000. The lock-in period of tax-saving FD with ICICI Bank is five years and the rate of interest offered for the general public is 5.50% and for senior citizens is 6.30%.
  • Axis Bank: With AXIS Bank one can open three types of tax-saver fixed deposits, which are monthly interest pay-out, quarterly interest pay-out, and reinvestment deposits. The lock-in period for these fixed deposits is five years. The current Axis Bank rate of interest for the general public is 5.50% and senior citizens are 6.05%.

Advantages of a Tax-Saving Fixed Deposit:

As an investor of a tax-saving fixed deposit scheme, you can enjoy the following benefits:

  • One can avail the tax exemption u/s 80C of the Income Tax Act, 1961.
  • Flexible lock-in period that ranges from five years to 10 years.
  • The maximum amount for which you can avail of the tax deduction is Rs. 1,50,000 / financial year.
  • The investors get fixed returns.
  • The senior citizens get an additional 0.50% rate of interest.
  • An investor can open a joint tax-saving fixed deposit account.

Eligibility to Open a Tax-Saving Fixed Deposit:

The following people are eligible to open a tax-saving fixed deposit account:

  • Individuals
  • Indian Residents
  • Hindu Undivided Families

Documents Needed to Open a Tax-Saving Fixed Deposit:

The following list of documents is needed to open a tax-saving fixed deposit account:

  • Aadhar card
  • PAN card
  • Ration card
  • Passport
  • Proof of address
  • Proof of age
  • Passport-size photograph

Tax-Saving Fixed Deposits Vs. Other Tax Saving:

Even though the fixed deposits of banks provide the option of saving the tax to the investors, but there are some other options as well wherein benefits can be extended. Their options are – Public Provident Fund (PPF), ELSS Funds, National Pension Scheme (NPS), and National Savings Scheme (NSS).

Tax-Saving Investment Option

Rate of Interest

Deductions Under Section 80C

Taxation

Lock-In Period

Public Provident Fund

7.10%

Up to Rs. 1.5 lakhs

PPF falls under the taxation regime of EEE. The interest earned, the amount invested, and the maturity amount are exempted from tax.

15 years

Equity Linked Savings Scheme

13.38%

Up to Rs. 1.5 lakhs

Returns are tax-free as long as returns in a fiscal year are a maximum of Rs. 1 Lakhs

3 years

National Pension Scheme

6.92% to 14.29%**

Up to Rs. 1.5lakhs and additional Rs. 50,000 under section 80CCD (1B)

Income through a mandatory purchased annuity is taxed according to the rate of the slab.

Till Retirement

National Savings Certificate

6.80%

Up to Rs. 1.5 lakhs

The interest is tax-free for the initial four years

5 years

 ** The aforementioned values are historic values and the return of NPS may slightly vary.

Summing It Up!

Despite the recent fall down in the rate of interest of fixed deposits, they continue to top in the chart when we talk about tax-saving investment schemes. When you invest in a secure and flexible fixed deposit scheme, you save tax over your yearly income. The banks provide a different rate of interest for normal fixed deposits including for senior citizens, individuals, bank staff, and NRIs. The rate of interest may vary as per the various categories of the applicants. So, if you are thinking to invest in a fixed deposit scheme, then tax-saver FDs are the best-suited investment option. However, if the lock-in period is a constraint for you, then you can select FD without a tax-saving option.

Written By: PolicyBazaar - Updated: 02 July 2021
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