Tax Saver Fixed Deposits in India

We remember the term fixed deposit being used by our fathers who always seemed to have FDs maturing, don’t we? That may be a thing of the past but it is surely not forgotten. Especially not after the government made amendments to the Income Tax laws which brought FDs back in vogue.

Let us take you on a crash course on Fixed Deposits and some of its tax saving elements. And if you thought that wasn’t enough, we also discuss tax saving FDs from some of the top banks in India.

Why are they called Fixed Deposits?

No, it is not rocket science. As the name suggests, a fixed deposit is a deposit in a bank or a government recognised institution for a ‘fixed’ period.

Why were fixed deposits a rage?

Decades back when investment instruments were limited, the masses preferred FDs as they traditionally offered rates higher than the regular savings accounts. Because your money is locked up for a certain period of time, the banks would offer a higher rate of interest.

What are Tax Saving Fixed Deposits?

U/s 80C of the Income Tax Act 1961, certain deposits by an individual/HUF shall be deducted from total income of the assessee. The maximum deduction available is Rs. 1 lakh in the relevant AY. This benefit is available under the Term Deposit Scheme 2006, by the Central Government of India. To qualify as a tax benefit u/s 80C of the Income Tax Act 1961, the term deposit must have the following features:

  • The deposit must be for a fixed period, not less than 5 years.
  • The term deposit must be regulated and framed by the Central Government.

Tax Saving Fixed Deposits: Points to be noted

  • None of the Fixed Deposits under this scheme will allow premature withdrawal facility.
  • You will not be able to avail a loan against these tax saving FDs.
  • There will be a TDS of 10%. If you fail to provide your PAN information to the bank/financial institution, TDS will be at 20%.
  • If you jointly invest in a tax saving fixed deposit with someone, only the primary holder of the FD will be able to avail the tax benefit u/s 80C of the Income Tax Act 1961.

Let’s take a quick look at the highlights of tax saving fixed deposits that are offered by some of India’s leading banks.

State Bank of India

SBI Savings Scheme, 2006

  • Minimum deposit amount Rs. 1,000 and maximum is Rs. 1,00,000 per year
  • Minimum FD tenure is 5 years (which is also the lock-in period), maximum is 10 years
  • An extra 0.50% interest rate over and above the base rate for Senior Citizens.


ICICI Bank Tax-Saver Fixed Deposit

  • Minimum investment is Rs. 10,000 and maximum is Rs. 1,00,000.
  • FD term is 5 years.
  • You can choose to receive monthly or quarterly interest payments. If you wish to re-invest, the interest is compounded quarterly and is added to the principle amount.

Axis Bank

Axis Bank Tax Saver Fixed Deposit

  • Minimum investment amount is Rs. 100 and maximum is Rs. 1,00,000.
  • FD will have tenure of 5 years.
  • You can choose to either receive interest quarterly, or re-invest interest with quarterly interest payments.


HDFC Five Year Tax Saving Fixed Deposit

  • Minimum deposit amount is Rs. 100, with multiples of 100 thereon. Maximum deposit limit is Rs. 1,00,000.
  • FD will have a tenure and lock-in period of 5 years.
  • Senior Citizens can avail 0.50% extra interest rate.

Bank of Baroda

Baroda Tax Savings Term Deposit

  • Minimum deposit amount is Rs. 100 and maximum is Rs. 1,00,000.
  • FD Term is 5 years.
  • Quarterly interest is calculated.

Punjab National Bank

PNB Tax Saver Fixed Deposit Scheme

  • Minimum deposit amount is Rs. 100 and maximum is Rs. 1,00,000.
  • FD tenure can be 5 or 10 years. Lock-in period is 5 years.

In today’s world of mutual funds, hedging instruments and much more, a rate of 11-12% after taking into account may not be the best you get. But a tax saving fixed deposit is surely a stable and a very easy form of investment.

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