Top 5 Private Sector Banks Offering Highest Return On 5-Year Tax Saving FDs

Investing in tax-saving fixed deposits is the most preferred and safe debt instrument to have in your portfolio when it comes to saving tax under Section 80C of the Income Tax Act. By investing in tax-saving fixed deposits for a 5-year lock-in term, one can save up to Rs. 1.5 lakh per year in taxation. When compared to Equity Linked Savings Schemes, deposits made through tax saving FDs not only provide good returns but are also guaranteed by DICGC up to Rs 5 lakhs, making them safer than Equity Linked Savings Schemes (ELSS).

The interest generated on these fixed deposits is taxed according to the tax bracket of the first or primary holder only in the case of a joint account, and only individuals and Hindu Undivided Families (HUFs) can invest in tax-saving FDs under existing income tax regulations. If interest payments on FDs with a single bank surpass Rs 40,000 (Rs 50,000 for senior citizens) in a financial year, the bank would deduct 10% TDS and by submitting Form 15G or Form 15H TDS can be avoided.

Tax saving fixed deposits can be booked with monthly and quarterly interest payout, and interest rates vary from bank to bank. As a consequence, we've compiled a list of the top 5 private sector banks currently providing the highest interest rates on tax saving fixed deposits. Keep in mind that the top 5 banks are ranked only on the basis of interest rates, not market capitalization.

IndusInd Bank

The 'Indus Tax Saver Scheme (5 years)' is a tax saving scheme offered by IndusInd Bank to both the general public and elderly persons. When compared to other top private banks in India, IndusInd Bank gives the highest rate of interest on fixed deposits, with 6.50 percent for the general public and 7% for senior citizens on 5-year tax-saving fixed deposits. The bank's fixed deposit interest rates were last modified on February 16th, 2022.

Yes Bank

Yes Bank offers a variety of benefits to investors including better interest rates, tax exemption, and the opportunity to earn YES Rewardz Points when booking a Tax Saver FD. You can book FDs from digital channels of the bank such as YES Online and YES Mobile, with a minimum deposit of INR10,000 and a maximum deposit of INR1,50,000 per fiscal year. The contribution should be made for 5 years with a lock-in for the entire term, and in return, you will have the option of receiving quarterly payouts of interest or re-investing. The bank's fixed deposit interest rates were last amended on January 4, 2022, after which the general public will get an interest rate of 6.25 percent and senior citizens would receive an interest rate of 7 percent on tax saving deposits.

RBL Bank

RBL Bank offers a tax-saving fixed deposit that provides tax exemption under Section 80C as well as excellent returns. You can make deposits for amounts ranging from Rs. 100 to Rs. 1,50,000 in multiples of Rs. 100 in order to benefit from attractive interest rates and tax breaks. The tax saving deposit should be booked for 5 years, with the general public receiving an interest rate of 6.30 percent and senior citizens receiving an interest rate of 6.80 percent. These rates are in effect as of February 3rd, 2022.

IDFC First Bank

IDFC First Bank provides a Tax Saver Deposit plan, in which customers can deposit up to Rs. 1.5 lakh and receive tax deductions as well as competitive interest rates. Tax-saving deposits can be deposited for a period of five years, with the general public receiving an interest rate of 6.25 percent and senior citizens receiving an interest rate of 6.75 percent. These rates are in effect from January 21, 2022.

DCB Bank

DCB Bank also offers a tax-saving fixed deposit scheme, with a minimum deposit of Rs.10,000 required to establish an account. The maximum amount that can be invested in a Tax-Saver FD under existing legislation is Rs.150,000. You can deposit money in the Tax-Saver FD for a period of 5 years or longer, and the general public will receive an interest rate of 5.95 percent, while senior citizens will receive a rate of 6.45 percent. These interest rates are in effect from 22nd November 2021.

Best Tax Saver FDs

Banks	Tenure	Regular interest rates per annum	Interest rates for senior citizens	W.e.f.
IndusInd Bank	5 years	6.50%	7.00%	16th February 2022
Yes Bank	3 years to less than or equal to 10 years	6.25%	7.00%	4th January 2022
RBL Bank	60 months	6.30%	6.80%	February 03, 2022
IDFC First Bank	5 years	6.25%	6.75%	January 21, 2022
DCB Bank	5 years or more	5.95%	6.45%	22nd November, 2021
Source: Bank Websites