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4 Best Tax Saving Fixed Deposits To Invest In 2021

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Starting an investment in the debt category has always been a secure and wise move to welcome a decent and risk-free return in your portfolio. All debt investments have their own set of returns and tax benefits as well based on your chosen scheme and period of deposit. And when it comes to claiming tax benefits on investments, investing in a fixed deposit scheme under the debt category is always widely favored by all types of investors not only to generate secure and guaranteed returns but also to enjoy tax benefits under section 80C.

 

To claim tax benefits up to Rs 1.5 lakh on fixed deposits, one needs to stay invested for 5 years of the lock-in period. This clearly states you can not make a premature withdrawal before the 5-year expiry which may sound unworthy for the investors having short-term needs or at the time of unwanted emergencies. By keeping all these factors in mind, we have compiled the 4 best and secure tax-saving fixed deposits in 2021 to invest in.

5-Year Tax Saving Fixed Deposits of Small Finance Banks

5-Year Tax Saving Fixed Deposits of Small Finance Banks

Amid the current low-interest-rate regime of banks, small finance banks are promising the best interest rates than leading private and public sector banks on both short-term and long-term deposits. By investing in a fixed deposit scheme of small finance banks one would not only get good returns, tax benefits but also his or her deposits will enjoy an insurance cover up to Rs 5 lakhs by DICGC. Here are the top 5 small finance banks which are currently promising the best interest rates on 5-year fixed deposits or tax-saving deposits of less than Rs 2 Cr.

BanksRegular FD RatesSenior Citizen FD Rates
Ujjivan Small Finance Bank 6.75% 7.25%
Jana Small Finance Bank 6.50% 7.00%
Equitas Small Finance Bank 6.25% 6.75%
Suryoday Small Finance Bank 6.25% 6.50%
Utkarsh Small Finance Bank 6.00% 6.50%
Source: Bank Websites

5 Year Tax Saving Fixed Deposits of Private Sector Banks
 

5 Year Tax Saving Fixed Deposits of Private Sector Banks

Here are the top 5 private sector banks promising better interest rates on tax-saving fixed deposits of less than Rs 2 Cr.

BanksRegular FD RatesSenior Citizen FD Rates
RBL Bank 6.50% 7.00%
DCB Bank 6.50% 7.00%
Yes Bank 6.25% 7.00%
IndusInd Bank 6.00% 6.50%
Karur Vysya Bank 6.00% 6.00%
Source: Bank Websites

5 Year Tax Saving Fixed Deposits of Public Sector Banks

5 Year Tax Saving Fixed Deposits of Public Sector Banks

For a deposit amount of less than Rs 2 Cr, here are the top 5 commercial banks promising good returns on tax-saving fixed deposits.

BanksRegular FD RatesSenior Citizen FD Rates
Union Bank 5.50% 6.00%
Canara Bank 5.50% 6.00%
State Bank of India 5.30% 5.80%
Punjab & Sind Bank 5.30% 5.80%
Bank of India 5.15% 5.65%
Source: Bank Websites

Post Office Time Deposit

Post Office Time Deposit

After fixed deposits of banks, small savings schemes are the most secure investment under the debt category. Among all the small savings schemes, the post office time deposit account functions exactly like a fixed deposit of a bank where you can invest for a term of 1 year to 5 years. You can open a post office time deposit account at any post office by making an initial deposit of Rs 1000/- and in multiple of 100 with no upper limit. Section 80C of the Income Tax Act of 1961 refers to investments made under a 5-year TD.

The deposit amount along with the accumulated interest rate in this term deposit account is payable after 1 year, 2 years, 3 years, and 5 years from the date of account opening. The government has recently announced that interest rates on small savings accounts would remain unchanged for the quarter ending September 30, 2021. According to the circular, post office time deposit accounts would continue to pay 5.5 percent interest on deposits of one to three years, and 6.7 percent on deposits of five years.

Read more about: fd fixed deposit investment
Story first published: Saturday, July 17, 2021, 12:51 [IST]
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