The Ultimate Guide to Tax-Saving Bank Fixed Deposits

Looking for a safe and reliable way to save on taxes while earning good returns? Tax-saving fixed deposits (FDs) are an excellent option. Not only do they offer a deduction of up to Rs 1.5 lakh under Section 80C of the Income-tax Act, but they also provide a secure investment avenue for your hard-earned money.

When it comes to tax-saving FDs, there are a few key points to keep in mind. The maximum investment allowed per year is Rs 1.5 lakh, and the deposit comes with a mandatory lock-in period of five years. This means that once you invest in a tax-saving FD, your money will be locked in for the specified period.

It is important to note that the interest earned on tax-saving FDs is subject to tax deducted at source (TDS) based on the investor’s tax bracket. For individuals, TDS applies if the total interest earned exceeds Rs 40,000 in a financial year. However, senior citizens can claim an annual interest deduction of up to Rs 50,000 under Section 80TTB.

Top 5 Tax-Saving Bank Fixed Deposits

When choosing a bank for a tax-saving FD, it is crucial to compare interest rates offered by different banks to maximize your returns. A higher interest rate can translate to better earnings over the long term. Here are the top 5 tax-saving bank FDs, as per data compiled by ET Intelligence Group:

Experts suggest that interest rates on fixed deposits may have peaked in the current cycle. As the Reserve Bank of India (RBI) considers reducing the repo rate, banks are likely to lower the interest rates on fixed deposits. This makes it a good time to lock in higher yields before the reversal cycle kicks in, according to Nirav Karkera, Head of Research at Fisdom.

So, if you’re looking to save on taxes and earn decent returns, tax-saving bank FDs could be the ideal choice for you. Make sure to compare different banks and choose the one that offers the best interest rates to maximize your benefits.