When it comes to tax-saving investments, fixed deposits still continue to top the chart despite the cut in interest rates. Investors rely on FDs because they are a bank-based investment product, and also because of their low-risk and safe nature.
Tax-saving fixed deposits are a good way to get tax deduction under section 80C of the Income Tax Act, 1961. Depositors can claim a deduction of up to a maximum of Rs 1.5 lakh by investing in tax-saving fixed deposits. Note that, no partial or pre-mature withdrawal is allowed in tax-saving bank FDs. These deposits come with a booking period ranging from 5 years to 10 years.
Tax-saving fixed deposit schemes are offered by various banks such as SBI Bank, ICICI Bank, HDFC Bank, and Axis Bank. The interest rate varies from bank to bank and range from 6.00 per cent to 6.50 per cent for the general public and 6.50 per cent to 7.00 per cent for senior citizens.
Here is what some of the few big banks offer under their tax-saving fixed deposit scheme;
State Bank of India (SBI) – SBI offers a lock-in period of 5 years on its tax-saving fixed deposits. Investors invest up to Rs 1,50,000 lakh every year and can claim benefits under Section 80C. SBI currently is offering an interest rate of 6.00 per cent per annum and 6.50 per cent interest rate for senior citizens.
Investors can log in to SBIs net banking account, to open SBI fixed deposits online, and can make a minimum deposit of Rs 1,000 and the maximum limit is Rs 1,50,000 lakh.
ICICI Bank – ICICI Bank offers 2 types of tax-saving fixed deposit plans – traditional plan and reinvestment plan. With the traditional plan, the interest payout is on a monthly or quarterly basis. While with the reinvestment plan the interest is compounded quarterly and reinvested with the principal amount. Investors can make a minimum investment of Rs 10,000 and a maximum of Rs 1,50,000 lakh.
This scheme by ICICI bank is for a duration of 5 years and offers 6.40 per cent interest per annum on a tax saver fixed deposit for the general public and 6.90 per cent for senior citizens.
HDFC Bank – The HDFC Bank’s tax saver fixed deposits come with a lock-in period of 5 years. The interest payout on this scheme is on a monthly or quarterly basis, and the bank currently offers regular investors an interest rate of 6.30 per cent interest per annum and 6.80 per cent to senior citizens. Investors can start with a minimum of Rs 100 and invest up to a maximum of Rs 1,50,000 lakh.
Axis Bank – Axis Bank offers 3 types of tax saver fixed deposits: quarterly interest payout, monthly interest payout, and reinvestment deposit. The fixed deposit option comes with a lock-in period of 5 years starting from the date of receipt. Axis Bank is currently offering an interest rate of 6.50 per cent per annum for regular depositors and 7.00 per cent for senior citizens.