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Tax Saving FD (2023): Features, Benefits & Eligibility

Tax saving FD

You can save up to Rs. 46,800 using Tax Saving FD. Section 8OC of the Income Tax Act allows for an income tax deduction for Tax Saving FD investments, regarded as a special FD scheme. Depending on the term, you can get up to 8.10% interest on these Tax Saving FDs. There is a cap of Rs. 1.5 lakh on the maximum deposit amount. Let’s examine the functions, characteristics, and advantages of these Tax Saving FDs.

What is a Tax Saving FD?

A Tax Saving FD is a sort of deposit plan that lets you deduct up to Rs. 1.5 lakh from your FD investment under Section 80C of the I-T Act. The term of office is five to ten years long. Tax Saving FD, however, have a five-year lock-in period, which prohibits early withdrawals.

How Does a Tax Saving FD Work?

This is a condensed explanation of how a tax-saving FDD operates:

  • Banks and NBFCs provide a financial feature that lets you deposit a large quantity of money for a set period of time.
  • The lock-in period for a fixed deposit that saves taxes is five years.
  • Up to Rs. 1.5 lakh in tax deductions under Section 80C of the Income Tax Act of 1961 are available.
  • The term of a deposit is five to ten years.
  • The interest earned on the deposits is subject to taxes.

Tax Saving FD Interest Rates

Here Is A List Of Best Performing Tax Saving FD Interest Rates

Name Of The Bank Interest Rate (Regular Citizen) Interest Rate (Senior Citizen)
State Bank of India 6.50% 7.50%
Kotak Mahindra Bank 6.20% 6.70%
HDFC Bank 7.00% 7.50%
Punjab National Bank 6.50% 7.00%
IDFC First Bank 7.00% 7.50%
Deutsche Bank 7.50% 7.75%
Axis Bank 7.00% 7.50%
DCB Bank 7.60% 8.10%
Bank of Baroda 6.50% 7.15%
RBL Bank 7.00% 7.50%
ICICI Bank 7.00% 7.50%

Key Features of Tax-Saving Fixed Deposits

  • An easy method of avoiding taxes under Income Tax Act Section 80C
  • Advantages of both high earnings and cheap taxes
  • There is merely a 1000 rupee minimum deposit required.
  • The most amount that can be deposited in a fiscal year is Rs. 1,50,000.
  • Ten to fifteen years is the tenure (lock-in).
  • A facility for nominations is offered.

Benefits of Tax Savings Fixed Deposit

  • There is a five-year lock-in term that needs to be completed before being able to withdraw early.
  • Interest rate increases for older citizens range from 0.25% to 0.75% at many institutions.
  • A joint account is an option with a number of Tax Saving Fixed Deposit options.
  • Tax benefits are only available to the primary account holder in a joint account.

Calculate Your FD Interest Rate

You can use the compound interest approach or the simple interest method to determine your FD interest rate. Below is a description of the basic interest method:

  1. Simple Interest Method

Simple Interest = (P * R * T)/100


P = principal amount invested

R = Rate of interest (%)

T = Tenure

Alternatively, you can calculate the interest rate on your fixed deposit using the compound interest method. The following is the computation of compound interest:

  1. Compound Interest Method

A = P (1+r/n) ^ (n * t)


A = Maturity Amount

P = Principal amount invested

r = Rate of Interest (in decimals)

n = number of compounding in a year

t = number of years

Documents Required to Open Tax Saving FD

  1. Identity Proof
  • Driving License
  • Senior Citizen ID Card
  • Passport
  • PAN Card
  • Government ID Card
  • Voter ID Card
  1. Address Proof
  • Bank Statement
  • Passport
  • Electricity Bill
  • Telephone Bill
  • ID Card / Certificate issued by Post Office
  • Voter ID Card

Eligibility Criteria for Tax Savings FD

You may need to meet the following eligibility criteria to open tax-saving FD

  • Indian Resident above 18 years of age
  • Hindu Undivided Families (HUF)
  • Partnership Firms
  • Trust Accounts
  • Limited Companies

How to Avoid Tax Implications on Fixed Deposits?

Here are a few strategies you can use to keep fixed deposit taxes from applying:

  1. By Submitting Form 15G/15H

The bank will not deduct any TDS on interest earned if you file Form 15G (for individuals) or Form 15H (for senior citizens) stating that you have no taxable income.

  1. Timing the FD

If you time your FD so that the interest earned during any given financial year does not exceed ₹10,000, you can avoid tax deductions.

  1. Splitting the FD

Creating two FDs, one under your personal bank account and one under a HUF account, is another method to avoid tax deductions. Both accounts will be handled independently in this way.

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