Best Tax Saving FDs in India with Interest Rate upto 7%

Best Tax Saving Bank Fixed Deposits

Best Tax Saving FDs in India

According to a research conducted by the RBI in March 2020, 52% of Indians preferred investing in bank deposits, which is not surprising considering the value of bank deposits had increased by 10.1% in 2019. 

Majority of Indians are still risk-averse and would prefer investment options which would guarantee the safety of capital alongside interest income like a bank deposit. 

But since TDS was applicable on bank deposits, they had started losing their charm for the Indian investors. This is when banks introduced Tax Saving Fixed Deposits. 

Tax saving fixed deposit is one of the best tax saving options for salaried individuals as these provide dual benefits: 

  • Safety of capital and interest income
  • Investment in tax saving bank fixed deposits can be claimed as deduction upto Rs 1.5 Lakhs under section 80C of Income Tax Act,1961.

Before we reveal the list of the best tax saving fixed deposits with high interest rate, let us understand the following: 

  • Key features of tax saving fixed deposit.
  • Who can invest in tax saving fixed deposits?
  • Top 5 banks that provide tax saving fixed deposits.
  • Best tax saving Fixed Deposit rates for you.
  • Conclusion 
  • FAQs

Key Features of Tax Saving Fixed Deposit

  • Tax exemption upto Rs. 1.5 lac under section 80C of Income Tax Act, 1961.
  • Long-term tenure of 5 years to 10 years.
  • Premature withdrawal allowed after a 5 year lock-in period.
  • Interest rates to Senior citizens – additional 0.50% interest .

Who can invest in Tax Saving Fixed Deposit?

Only Indian resident individuals and Hindu Undivided Families (HUFs) can invest in Tax saving FDs. It can be held either in individual names or joint names. 

Note:  Tax saving exemption will only be available for the primary account holder.  

Let us now look at some of the top banks which provide tax saving Fixed deposits with high interest rates.

Top 5 Banks Providing Best Tax Saving Fixed Deposits

State Bank of India – SBI Tax Saving Fixed Deposits

SBI tax saving FD offers an interest rate of 5.40% for regular accounts and 6.20% for senior citizen accounts. It has a lock-in period of 5 years post which you can withdraw your money i.e. principal amount + interest. 

The minimum deposit for tax saving FD offered by SBI is Rs. 1000 and maximum amount for deposit is Rs. 1.5 Lakh. 

HDFC Bank – HDFC Tax Saving Fixed Deposits

HDFC tax saving fixed deposit offers an interest rate of 5.50% for regular accounts and 6.25% for senior citizen accounts. It has a lock-in period of 5 years and you can avail tax benefits as per section 80C of Income Tax Act.The minimum deposit for tax saving FD is Rs. 100 and maximum amount for deposit is Rs. 1.5 Lakh under your tax slab.

ICICI Bank – ICICI Tax Saving Fixed Deposits

ICICI bank offers two types of tax saving FDs. Either you can opt for a traditional plan or a reinvestment plan. 

  • The traditional plan offers monthly or quarterly payout options.
  • Reinvestment plan pays quarterly compounded interest that is reinvested with the principal amount.

The FD interest rates for regular investors is 5.50% and 6.30% for senior citizens. It has a tenure of 5 years with a minimum deposit of Rs. 10,000 and a maximum deposit of Rs. 1.5 Lakh.

Kotak Mahindra Bank – Kotak Mahindra Bank Tax Saving Fixed Deposits

Kotak Bank offers an interest rate of 4.90% for regular accounts and 5.40% for senior citizens accounts. The lock-in period is of 5 years with a minimum deposit of Rs. 100 and a maximum of Rs. 1.5 Lakh.

Axis Bank – Axis Bank Tax Saving Fixed Deposits

The tax saving fixed deposits of Axis Bank comes with a tenure of 5 years. It offers an interest rate of 5.50% for general accounts and 6.05% for senior citizen accounts. The interest is paid every month or every quarter as per the selected option. 

Best Tax Saving Fixed Deposits with High Interest Rates in India

Banks  Interest rates for

regular account 

Interest rates for 

Senior citizen account

SBI Tax Saving Scheme 5.40% 6.20%
HDFC Bank 5 Year Tax Saving Fixed Deposit 5.50% 6.25%
Axis Bank Tax Saver Fixed Deposit 5.50% 6.05%
Kotak Bank Tax Saving Fixed Deposit 4.90% 5.40%
ICICI Bank Tax Saving Fixed Deposit 5.50% 6.30%
Bank of Baroda Tax Savings Term Deposit 5.30% 5.80%
IDBI Bank Suvidha Tax Saving Fixed Deposit 5.10% 5.60%
Citibank Tax Saver Deposits 3.75% 4.25%
Bajaj Finance Tax Saving Fixed Deposit 6.60% 6.85%
Ujjivan Small Finance Bank Tax Saver Fixed Deposits 6.50% 7%
AU Small Finance Bank 5 Years Tax Saving Fixed Deposit 6.75% 7.25%

Conclusion 

Tax saving fixed deposits is one of the best tax saving options for salaried individuals, senior citizens and low-risk investors. However, the rate of return provided by these tax saving fixed deposits is substantially lower than other investment options.

While there is nothing wrong in protecting your capital, you should also invest in other investment options like stocks, mutual funds, gold, ETFs etc to create a diversified investment portfolio. 

To create a diversified portfolio, you will need a Demat account, which is a virtual locker that holds all your financial assets like stocks, mutual funds, gold, ETFs etc and allows for easy transfer, monitoring and tracking. 

Open a 3-in-1 Demat, trading and mutual fund account with India’s best equity stock broker Samco today and get access to the best investment options in India.  

Basic FAQs

What is the minimum amount required to open a tax saving fixed deposit?

The minimum amount needed to open a tax saving fixed deposit varies between private sector banks to public sector banks. The minimum amount for ICICI bank tax saving FD is Rs. 10,000 whereas SBI allows opening a tax saver FD account with a minimum deposit of Rs. 1,000. You can also start a tax saving FD with HDFC bank with a minimum deposit of Rs 100 only. 

Is premature withdrawal and loan allowed in tax saving fixed deposits?

Tax saving fixed deposits come with a 5 year lock-in period wherein premature withdrawal is not allowed. However, once the 5 year lock-in period is complete, you can withdraw from the FD. 

Is tax saving FD a good investment?

Tax saving FD is one of the best investment options for salaried individuals with a low risk profile. 

Tax saving FDs or PPF or Post office fixed deposits – Which is better? 

While PPF offers higher interest rates compared to FDs, it does have a super long term i.e. 15 year lock-in period. Also while PPF is completely tax-free, TDS is applicable on tax saving FDs. So, while tax saving FDs have more liquidity, PPF provides better tax benefits than tax-saving FDs.

Post office time deposits have a long lock-in period and provide low interest rates.

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