What is Tax Saver FD? All You Need to Know to Save Tax on FD in India

What is Tax Saver FD? All You Need to Know to Save Tax on FD in India

If you wonder whether a tax saver FD is a good and profitable investment option, we have got you covered! Fixed deposits are a secure and feasible option that let you store your money safely to banks and several Non-Banking Financial Companies. You should always consider several taxes saving FD Interest Rates before investing in any bank of NBFCs. A lot of confusion tends to be attached to the idea of fixed deposits, their interests, and other details regarding the finances. Here is all you need to know about tax saving FD to make safe deposits in the future.

What is Tax Saver FD?

It is vital to understand exactly what a tax saver FD is, and only then you can go further for making those investments. Fixed Deposit is an investment option that banks and Non-Banking Financial Companies offer. You can use the plans offered by them to expand your wealth safely and securely.

According to section 80c of the Indian Income Tax Act, a tax saver fixed deposit is a scheme to get a tax deduction. Investors can claim a deduction of taxes on an investment made up to 1.5 Lakh INR.

Investors also have the option to nominate someone to withdraw the money before or after the maturity of the deposit amount in the event of their demise.

Best Tax Saver FD Interest Rates in India

If you are planning investments, you must go through the latest FD Interest Rates offered by the banks and NBFCs, analyse them, and compare them for a better insight into the matter. Only then, go ahead with the investments. Some of the top tax saving FD interest rates currently being offered in India are mentioned below.

Bajaj Finance Ltd, ICICI Bank, State Bank of India, Axis Bank, IDFC Bank, Punjab National Bank, Kotak Mahindra Bank, Union Bank and many other banks seem to offer a good FD rate to the customers.

• The State Bank of India gives 3% to 5% interest rates to all the general citizens and up to 6.50% for all senior citizens on their FDs.
• The SBM bank offers an FD at a 7.25% interest rate to all their regular customers.
• The ICICI bank tax saver FD remains around 4.30% for both the regular and the senior citizens.
• The Jana Bank offers an interest rate of 6.75%, and RBL Bank offers around 6.5% interest rate to the citizens.
• Axis Bank of India seems to be offering a guaranteed FD interest rate of 2.50% to 5.75% to the regular citizens and 3.50% to 6.75% interest rates to the senior citizens.
• At the same time, Kotak bank is also offering a 50% interest of 2.50% to 5.30% FD interest to regular citizens and 3.00% to 5.80% FD rates to senior citizens of India.

Axis tax saver FD rates and the SBI tax-saving FD rates seem to be some of the highest paying FD plans offered by the banks in the country.

If you are about to analyse and compare the recent tax saving FD rates, consider going through the offers made by the NBFCs as well. For instance, the SBM bank offers a fixed interest rate ranging from 6.50% to 7.50%. Utkarsh Small Finance Bank also offers a 6.75% FD interest rate to all regular citizens.

The Post Office also offers several plans, and they generally offer an interest rate of 5.5% to all the citizens for a one year tenure period. The tax saver FD remains the same even when the tenure period is of two years.

Benefits of Tax Saver FD

There are several benefits that you should take into consideration while you are planning to invest soon.

1. Tax saving fixed deposits is better than many other equity-based tax-saving avenues. The followed procedure is much safer than taking an investor on board for your business or taking a loan.
2. The smallest lock-in period remains five years. Several banks also offer a period instalment payment method in today’s scenario.
3. The tax saving FD interest rate remains the same from the time you invest and the time you withdraw the money after five or more years.
4. One can make someone else withdraw the interest amount before or after the maturation of your plan in the event of one’s demise. This nomination facility offers a tax saver FD premature withdrawal that makes the system more feasible for the country's senior citizens.
5. Senior citizens get around 50% more interest rates than the regular citizens in all the banks and other non-banking companies, irrespective of the investment amount.
6. You can easily make an investment today by visiting your nearest bank and filling out a form that requires some details regarding yourself and your profession in general.

In simple words, the procedure is feasible, simple, and easy for anyone who would like to make investments with good FD rates in the future.

Features of Tax Saver Fixed Deposit

Some of the key features to keep in mind are mentioned here for you if you are interested in making investments with the best possible FD rates in the finance market.

• The lock-in/ tenure period remains to be five years to 10 years for all investors irrespective of their age, profession and other details.
• The investors can enjoy the benefits of both high returns and tax savings.
• The minimum deposit amount starts from 1000 INR. Anyone can make an investment following the procedure, for the basic rate is comparatively low in the market.
• The maximum deposit that you can do in one year has to be around Rs. 1,50,000.

These are some of the basic features that you should know about the entire fixed deposit rates and procedure in India.

Eligibility Criteria to Apply for Tax Saver FD

If you are planning to make an investment, go through the eligibility criteria to understand whether or not you are eligible for the same.

• You have to be an Indian resident in order to be eligible to apply for the tax-saving FD procedure in any bank/ other organisation.
• You must belong to a Hindu Undivided Family (HUF) in order to be eligible.
• You can open a tax-saving FD single or joint account.

Documents Required

The major documents that you will require in order to apply for a tax saver FD interest plan in any bank or other organisation are listed below.

1. Permanent Account Number (PAN) Card;

2. Passport;

3. Ration Card;

4. Aadhar Card;

5. Voter ID Card;

6. Age proof (mainly for senior citizens);

7. Address proof (for all citizens) including electricity bill, bank statement with cheque, certificate/ID issued by the Post office, Telephone bill.

8. Passport size photographs.

How to Apply Tax Saver Fixed Deposit?

The first and foremost step that you need to do before applying for any tax saver FD investment program is to understand, analyse, and compare all the existing contemporary FD rates that are offered by banks and other organisations and post offices. The best interest rate as per your demands, choices, and age is the one you should go for.

Collect and organise the necessary documents and visit your nearest bank at the earliest. You will then be required to fill out a form and give the proof of your residence, age, profession, and so on to the bank officials. They will take you through the process as per your plans and its perks.

Top Banks for Tax Saver FDs in India

Here are the top banks that offer the best FD rates in India in today’s scenario.

• The State Bank of India offers an interest rate of 5.40% to the general citizens and around 6.20% to all senior citizens.
• HDFC banks offer a 5.50% interest rate to the general citizens and a 6.25% to senior citizens for a tenure of a minimum of five years.
• Axis bank offers 5.75% and 6.25% interest rates to the general and senior citizens of the country.
• Kotak Mahindra Bank offers around 5.30% interest rate to the general citizens and 5.80% to the senior citizens.
• ICICI Bank and Bank of Baroda offer around 5.50% and 6% interest rates to the general and senior citizens.

Apart from these top banks, other banks like RBL Bank, Corporation Bank, Bajaj Finance, Jana Small Finance Bank, and PNB Bank also offer well interest rates in the market.

Points to Remember Before Investing in Tax Saver Fixed Deposit

Here are the major points to remember if you are going to make an investment in the future:

• Only people belonging to the HUFs are eligible to apply for the tax-saving FD plans.
• The minimum deposit amount is 1.5 Lakh. Premature withdrawal is not possible in most cases.
• The minimum lock-in period is five years.
• No cooperative or rural banks offer the FD interest rate plans. You can only apply in public or private sector banks.
• You should be prepared with all the necessary documents at the time of verification in the bank you are planning to invest in. Lacking an important document will lead to a failed application.

FAQs about Tax Saver FD Interest Rates

✅Is it safe to invest in tax saving FD plans?

Ans: Yes, it is a completely safe option when you are applying to any bank. Banks are even more reliable than Non-Banking Financial Companies when it comes to investments.

✅What is the minimum amount I require to open a tax saver FD account?

Ans: The minimum amount required varies from one bank to the other. For instance, the HDFC bank accepts a minimum amount as low as RS. 100, while the ICICI bank requires at least 10,000/- at the beginning. The State Bank of India, on the other hand, set their minimum requirement bar at RS. 1000.

✅Which bank is the safest to open a tax-saving FD account in India?

Ans: The most secure banks that offer good FD interest rates are the State Bank of India, ICICI Bank, HDFC Bank, Axis Bank, and Kotak Mahindra Bank.

✅Is tax saver FD better than PPF?

Ans: PPF tends to generate a higher interest rate on your investments. However, the lock-in period for PPFs is longer than the tax saving FD plans. Also, PPF is a completely tax-free program. Whereas tax saving FD plans require taxes.

✅Are tax FD options risk-free?

Ans: Tax FD options are completely risk-free. All the returns are guaranteed, and the invested transactions are entirely protected.

✅What happens after the maturation of a tax FD program?

Ans: After the prescribed lock-in period, the entire amount with the interest rate is transferred to your bank account.