Investing in 5-year tax-saving fixed deposits is highly favoured under the debt investment category by investors who desire not only stable returns with a promise of deposit safety but also tax benefits under section 80C. You can invest up to Rs 1.5 lakh in a tax-saving FD to save tax under section 80C of the Income Tax Act. The minimum term deposit under the Tax Saving Scheme is five years, which means you can't take money out prematurely. Following the popularity of equity-linked savings plans (ELSS), which have a three-year term, five-year fixed deposits, or tax-saving investments with a bank or post office are quite popular among those who do not desire market-based returns.
The DICGC scheme guarantees returns and capital protection up to Rs 5 lakhs, but one must keep in mind that interest income from the tax saver account is completely taxed. Varied banks provide variable rates on tax-saving FDs, so it's advisable to browse around before you invest. As a consequence, we've analysed the interest rates of India's largest banks as well as the Post Office Time Deposit Account (TD).
Customers, both non-senior and senior citizens, can take advantage of a Tax Saving Scheme offered by the country's largest lender State Bank of India (SBI). A term deposit under the tax-saving scheme has a minimum term of 5 years and a maximum term of 10 years. Investors should be aware that term deposits under the tax-saving scheme have a 5-year lock-in period. A term deposit can be opened with as little as Rs.1000/-, and the maximum amount that can be deposited under the plan in a financial year is Rs.1.5 lac. On term deposits maturing in 5 years and up to 10 years, the bank is offering an interest rate of 5.50% to the general public and 6.30% to senior citizens. These interest rates on tax-saving fixed deposits are effective as of 15.02.2022.
ICICI Bank's Tax Saver FD (Fixed Deposit) offers both excellent interest rates and tax savings. To claim tax deductions under section 80C, one must invest a minimum of Rs 10,000 and a maximum of Rs 1.5 lakhs in a financial year. ICICI Bank additionally offers monthly, quarterly, or reinvestment in principal interest payments, as well as a 5-year lock-in term with no premature withdrawal and auto-renewal facility. The bank is presently giving a 5.45 percent interest rate to the general public and 5.95 percent to senior citizens through its tax savings plan. According to the bank's official website, these interest rates are in force from January 20, 2022.
HDFC Bank provides a Tax Saver FD, a five-year tax-saving fixed deposit, with a minimum investment of Rs. 100 and multiples of Rs. 100 and a maximum investment of Rs. 1.5 lakhs every financial year. The program has a 5-year lock-in period and may be booked with monthly or quarterly interest payments. According to the bank, the tax benefit under 80C will be accessible exclusively to the deposit's first holder in the case of joint deposits. The bank is giving 5.60 percent interest on 5-year tax-saving FDs to the general public and 6.35 percent to elderly people. These rates are effective as of February 14, 2022.
Investors have the opportunity to create long-term wealth with Axis Bank's Tax Saver Fixed Deposit, as they may earn excellent returns on their lump sum deposit while also saving money on taxation. To qualify for the dual advantages, one must invest a minimum of Rs. 100 and a maximum of Rs. 1,50,000 every year.
There are three types of Tax Saving Fixed Deposits: reinvestment, quarterly interest payout, and monthly interest payout. To claim a tax deduction under section 80C, the plan requires a 5-year lock-in period. Individuals and companies eligible for Axis Bank's Tax Saver Fixed Deposit include residents and Hindu undivided families. On tax-saving FDs, Axis Bank is currently offering an interest rate of 5.75% to the general public and 6.50% to senior citizens. These rates are in force from 17th March 2022.
Post Office Time Deposit
Under its post office savings schemes, the Department of Posts, which is supervised by the Ministry of Communications of the Government of India, provides a Post Office Time Deposit Account (TD). A single adult or a joint holder (up to 3 adults) can open a National Savings Time Deposit Account (TD) or a Post Office Time Deposit Account (TD).
Individuals can open as many accounts as they like with a minimum deposit of INR 1000/- and in multiples of 100 with no maximum restriction. The scheme has tenors of one year, two years, three years, and five years, with interest payable annually. Currently, the Post Office Time Deposit Account (TD) pays 5.5 percent on deposits maturing in one to three years and 6.7 percent on deposits maturing in five years, and the deposit under the five-year TD qualifies for the tax benefit of section 80C of the Income Tax Act of 1961.
The 6.7 percent interest rate on 5-year deposits is not only safe but also much higher than the rates offered by the leading banks discussed above. However, there are a few things to keep in mind here: Based on certain terms and conditions, Post Office Time Deposit Accounts (TD) can be closed prematurely by submitting a prescribed application form along with a passbook to the concerned Post Office, but no deposit can be withdrawn before the six-month period has passed from the date of account opening. Additionally, post office time deposits do not qualify for the additional interest rate benefit for senior citizens.