People in India save a lot of money. We prefer our investment amount to safety and security, even if it comes at a risk of low profits. This is why Fixed Deposits have been the best choice for Indians for hundreds of years. Even though mutual funds and other stock investments are good for long-term goals, we still prefer FDs.
The same logic stretches to tax saving too. There are ELSS Mutual Funds, but many buyers prefer Section 80C tax-saving FDs instead. So, if you want to know more about tax-saving FDs, such as how they can help you save money and what the best tax-saving fixed deposit rates are, keep reading.
1. What Is a Tax Saving Fd?
Under Section 80C of the Income Tax Act, you can claim up to 1.5 lacks from your taxes if you have a tax saving deposit. They have a 5-year commitment time. The returns on a tax-saving FD are set for the length of the FD, just like the returns on other fixed deposits. No matter what happens, they don’t change. You can’t take money out of your tax savings bank early or in pieces, though. There is also no way to borrow money against these tax-saving fixed savings.
2. Best Fd Rates for Tax Savings
Let’s look at the top banks’ tax-saving FD interest rates for 2023.
| Banks | General Public FD Rate | Senior Citizens FD Rate |
|---|---|---|
| HDFC Bank | 5.50% | 6.25% |
| IDBI Bank | 6.10% | 6.85% |
| IndusInd Bank | 7.00% | 7.75% |
| Federal Bank | 6.00% | 6.50% |
| DCB Bank | 7.25% | 7.75% |
| IDFC First Bank | 6.50% | 7.00% |
| RBL Bank | 6.55% | 7.05% |
| YES Bank | 6.75% | 7.05% |
| Axis Bank | 6.10% | 6.85% |
| State Bank of India | 6.10% | 6.60% |
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3. Fixed Deposits Can Help You Save Money on Taxes.
Here are the main reasons why investing in tax-saving fixed savings is a good idea.
- When interest is added together over the length of the fixed deposit, your money grows faster.
- Putting money in a fixed deposit is safe because there aren’t many risks involved.
- The returns on a tax saver fixed deposit are not tied to the market like the returns on mutual funds are. They come with a set rate of interest, and the returns are guaranteed for the entire term. Using an online FD tool, you can easily figure out how much money you will have at the end of the term of a tax-saver FD.
- Seniors get 0.25% to 0.5% more on their tax-saving fixed deposits than other customers do. This is the same as with other fixed deposits.
- Under Section 80C of the Income Tax Act, you can deduct up to Rs.1.5 lakh from your tax bill if you use the Tax-Saver FD plan.
- The lowest amount you can put down is Rs.1000.
4. What Should You Keep in Mind When Putting Money in A Tax-Saving FD?
Here are some important things to think about before you decide to put in fixed deposits that help you save on taxes.
Eligibility Criteria: Tax saver FD plans can only be invested in by individuals and HUFs. A minor can also buy with the help of an adult.
Minimum Deposit: The least you can put into a tax-saver FD changes from bank to bank. There is also no maximum amount. But under Section 80C, you can only claim 1.5 lakh as tax relief.
Lock-in term: The lock-in term for Tax Saving FDs is at least 5 years.
Loan Facility: You can’t use tax-saving FDs as collateral for a loan.
Early Withdrawal: You can’t get your money out of a tax-saving fixed deposit before the maturity date.
Mode of Investment: You can put money into a tax-saving FD at any public or private bank, except rural and community banks. You can even invest online with some banks.
Time Deposit at the Post Office:.artical-inner-subtitle
You can open these FDs either as a “single” or a “joint” account. When two or more people invest together, only the main account holder gets the tax gain. You can take your post office time payment to another post office. Section 80C of the Income Tax Act lets you get a tax break if you put money into these FDs for five years.
Most banks give senior citizens who put in tax-saving FDs a higher interest rate (usually by 0.25% to 0.5%). But Post Office Time Deposits don’t offer the much higher interest rates that can be used to save on taxes.
Tax Deducted at Source (TDS): Interest on tax-saving fixed savings is paid out every month or quarter. You can also put it back into the business. The interest you get is taxed based on the tax rate for your taxable income. By giving the bank Form 15G, you can avoid having to pay the TDS. Form 15H can be given to the bank by people over the age of 65.
If a person earns more than 10,000 in interest over the course of a financial year, TDS applies. Section 80TTB of the Income Tax Act gives seniors a tax break of up to 50,000.
6. What Documents Are Needed and Who Can Open a Tax-Saving Fd Account?
To invest in FDs that help you save on taxes, you need to show proof of your home and who you are at the bank or post office. Here is a list of papers you can use to open an FD account that helps you save on taxes:
Proof of identity
- Driving License
- ID Card for Senior Citizens
- Passport
- PAN Card
- ID from the government
- Voter ID Card
Proof of Address
- Bank Statement
- Passport
- Bill for Electricity
- Bill for the phone
- The Post Office gives out ID cards and certificates.
- Voter ID Card
