Tax-saving FDs : Benefits, investment limit and other details

Tax-saving fixed deposits can be started online. (Photo credit: Pixabay)

New Delhi: There are several options for taxpayers to save tax on their income.

However, every individual has their own preferences. This may depend on various factors like the amount of money one can spend, the time period for which it can be invested, the purpose of saving, and many more. Despite all this, the tax-saving fixed deposit remains one of the most popular investment options. Tax-saving FDs are fixed-term deposits which get an exemption of tax under section 80C of the Income-Tax Act. They have a minimum lock-in period of five years.

Difference between normal FD and tax-saving FDs

According to Neha Nagar – Finfluencer Founder & CEO of TaxationHelp.in, normal FDs are more flexible as the amount can be withdrawn at any time. However, tax-saving FDs have a lock-in period of 5 years so we can’t withdraw our money before 5 years.

Is there any limit to investment? How they are taxed?

The minimum investment limit is Rs 100 while the maximum limit is Rs 1.5 lakh. Note that the interest we get from both FDs is taxable at the same rates. “The only difference is that we get a tax exemption if we deposit less than Rs 1.5 lakhs in FD which is not in the case of normal FD,” she added.

Interest rates on tax-saving FDs offered by banks:

S. No.	Bank	Interest Rates (Regular public)	Interest Rates (Senior Citizens)
1.	State Bank of India	5.40%	5.90%
2.	Kotak Mahindra Bank	5.30%	5.80%
3.	HDFC Bank	5.30%	5.80%
4.	Punjab National Bank	5.25%	5.95%
5.	IDFC Bank	5.25%	5.75%
6.	Deutsche Bank	6.25%	6.25%
7.	Axis Bank	5.75%	6.25%
8.	DCB Bank	5.95%	6.45%
9.	Bank of Baroda	5.25%	5.75%
10.	Lakshmi Vilas Bank	5.75%	6.25%

Who can invest in them?

Only HUFs (Hindu Undivided Family) and Individuals (Indian Citizens) can invest in tax-saving fixed deposits.

How to Start a tax-saving Fixed deposit?

These documents are needed to start a tax-saving FD account.

PAN (Permanent Account Number) card
The government recognized ID proof – Aadhaar Card, Driving License, Passport, Ration Card, Voter ID card.
2 recent passport-size photographs.

We can also start a tax-saving fixed deposit online with our Bank’s net-banking Facility.