Updated on Jan 2nd 2013.
I updated my tax saver fixed deposits page today, and I thought I’d create a separate page to record some of the better paying interest rates on these tax saving FDs.
With that in mind, here is a list with some of the best interest rates on fixed deposits that are covered under Section 80C that I could find.
I’m sure there are some that I have missed, so if you know of any banks that pay well, please leave a comment or drop in an email, and I will update the list.orted List
| Bank | Interest Rate |
|---|---|
| City Union Bank | 9.50% |
| State Bank of Travancore | 9.00% |
| IDBI Bank | 9.00% |
| Indian Overseas Bank | 9.00% |
| Vijaya Bank | 9.00% |
| Bank of Baroda | 9.00% |
| State Bank of Hyderabad | 8.75% |
| South Indian Bank | 8.75% |
| SBI | 8.75% |
| Karur Vysya Bank | 8.75% |
| Bank of Maharashtra | 8.75% |
| J&K Bank | 8.50% |
| Central Bank of India | 8.50% |
| Kotak Bank | 8.50% |
| Canara Bank | 8.50% |
| Punjab National Bank | 8.50% |
| ICICI Bank | 8.50% |
| Allahabad Bank | 8.50% |
| Axis Bank | 8.25% |
This is just a list of the best tax saving fixed deposits, but those are not the only instruments that offer you tax saving benefits. There are other instruments and this easy to understand graphic explains them to you.
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Manshu,
Do you think these deposit rates will go up after RBI’s policy review on Jan 25th. It is widely believed that there will be a 25 basis point hike.
Krish – My personal observation is that some of these tax saving FD rates are a bit more sticky than others, and I noticed when I was updating the list that some banks have not updated their rates from the last time (which was quite a few months ago), and RBI has made already what 6 upwards revisions since last year?
So, my thoughts are, yes, wait for the upward move, and then a few days after it, but then don’t count on it too much.
I think they should increase. RBI will hike the interest rate to help curb inflation.
Yeah, RBI’s rate hike seems to be a foregone conclusion with a lot of folks – I’m tired of hearing how many people are saying RBI is behind the curve when in fact they have been doing an awesome job, and a much better job than most other countries.
HI Manshu,
I’m really confused over investing 20k in infra bonds OR 20k in Tax FD (lacking 18k for 1L limit) for a period of 5 yr, tax bracket 30.
Can you provide any comment?
Thanks.
Kunal,
Personally, I’d opt for the fixed deposit, and here is my thinking behind it:
1. First and foremost, you get tax saving FDs that pay higher than the bonds, and there is a possibility that even these rates might get hiked in a few more days. So even though the absolute sum won’t be very high, one point in favor of the tax saving fixed deposit.
2. When you have the option available within your 80C (1 lakh) limit then use that up, and keep the option of infra bonds open in case you find that you can invest in them later on.
3. You will have to wait a little bit to get the investment proof, and then some people have faced the issue where the allotment advice has been sent to their old addresses, or the bonds are in the wrong name, or other issues to produce proof of payment.
4. There are some other issues that people have faced like a person wanted to close their Demat account, but since the infra bonds they owned were locked – in – they couldn’t do it right away.
5. The bank fixed deposits are more secure than the unsecured infrastructure bonds, although a situation where such companies will come to a point where they default on their bonds is unlikely.
So, I’d personally make a decision keeping all these points in mind.
lakshmi vilas bank
lakshmi vilas bank 500 days=9.6%,600 days=9.75%
Thanks for that info Ankit.
Hi Manshu,
What is your opinion about investing money in NSC tax saving?
can you tell me what is the rate of interst on NSC?
Dipak – The interest comes to about 8.15% and maturity period is 6 years. Here is the link to their webpage.
http://www.indiapost.gov.in/netscape/6yearsNSC.html
You can compare this with a tax saving FD and see if it makes sense or not.
It’s tax season time. Check out Karnataka bank which gives tax saving FD for 9.00% and will top the TAX SAVING LIST
Thanks for the info Dinesh.
Dear Sir,
My wife is house wife and i have taken the lic policy on her name so please guide me that should i take that amount in tax saving or not.
Ajay,
I checked this with someone and he told me that a husband can claim lic premium paid on behalf of his wife as a deduction from his income provided the wife is not claiming the same & the premium is paid by husband only.
Yes
Yes. Premium paid for spouse and children could be claimed
I want to know best mode of investment for saving under 80C, comparing tax saver FD, ELSS, NSC, MIS and others.
PLEASE SUGGEST
Hmmm, I’ve not done that comparison yet, and don’t know an answer to that – sorry. a little busy these days, so probably won’t get time to get to it.
Amongst the Options provided by you, Tax Saver FD with Bank is a good one.
If you can afford to take some risk, go for ELSS. However I would give first priority to PPF since 8 % interest earned is tax free.
State Bank of Bikaner and Jaipur gives 9.00% in tax saving deposit, so does Karur Vysya Bank.
Thanks Pran – I’ll update the post with this info a little later in the week.
9.80 % is rate of interest offered by Corporation Bank on Tax Saver FD for Senior Citizens
It is desirable to review and update the rates of Interest atleast once in a fortnight to make the information more useful
Thanks for that info – I’ll update the post this weekend.
Hi
what is the difference between Tax saving FDs and normal FDs and how they are different. can you please illustrate with an example.
regards
Varma
Tax saving FDs are fixed deposits that allow a deduction of the amount you put in the FD from your taxable income. They are covered under 80C. You can look at this post to get an idea of other options under 80C and how the calculation is done.
http://www.onemint.com/2011/01/05/section-80c-tax-saving-schemes/
The 5 year Tax saving FD rate in Karnataka Bank is same as Kotak Bank
I’ll update the post this coming weekend.
rate of interest in tmb tsd- (mullai) for tax saver scheme is 9.75%. this is for ur kind information. any way thanks for ur data
Hey Thanks Ramesh. I’m not familiar with this bank – can you please send the link to their website so I can update info from that.
http://www.tmb.in/d_taxsaving.htm ( Tamilnad Mercantile Bank Ltd )
Thanks Kiran.
^ http://www.tmb.in/d_taxsaving.htm ( Tamilnad Mercantile Bank Ltd )
Hi Kiran,
Do we need a savings account with TMB before investing in a tax saving term deposit?
Hi,
Is it safe to invest in tamilnad mercantile bank ltd fixed deposit?
Ajay – up to Rs. 1 lakh is insured by RBI, and the bank has been okay, so it seems to be okay.
Thank you Manshu
is it true that returns on the term deposits offered by private sector banks is higher as compared to public sector banks?
No, not necessarily, it’s imp to do a little bit of research at that point in time and see who is offering the best rate.
OBC Bank gives 9.5 %
please help me and tell me the Interest rates on 21/01/2011 on Tax saving Fixed deposit in Panjab and Sind Bank
Don’t have it sorry.
sir, please tell me from where i can get it. actually i got an FD made from above bank. they made it at 7.0% i doubt that rate was higher on that day. now bank peoples are not cooperating. please help me
deepak
Sorry to hear your trouble, the bank will have info on that. I don’t know where else you can find it.
Hi Deepak
I hope your problem must have been solved by now. Generally banks do not make mistakes, but when they are not listening to your complaint may mean something wrong.
If not then you should try to get the right information from other branches of P&SBank in your city and make a complaint to regional and head office of P&SBank, if needed. You can do some homework yourself to get the right information.
Secondly check the Tax saver FD Receipt you got. It should be mentioned clearly that it is a tax saver FD and the normal one.
Hope the following piece of information that I gathered from various sources may be useful for you.
From BSE website
Subject: Change in Interest Rates of Domestic Term Deposits w.e.f. Feb 25, 2011
Announcement: Punjab & Sind Bank has informed BSE that Bank has announced an increase in interest rates of various tenors of Retail Domestic Term Deposits by 0.05% to 1.00% with effect from February 25, 2011. Rate of interest for 46-90 days term deposit of up to Rs. 1 crore has been raised by 1.00% i.e., to 6.50% p.a. Rate of interest for 222 days, 500 days and 1000 days deposit schemes has been raised to 8.75% p.a., 9.55% p.a. and 9.60% p.a., respectively. Further, rate of interest on PSB Fixed Deposit Tax Saver Scheme has also been increased from existing 8.50% p.a. to 9.05% p.a.
Note (from me): {(From this announcement from BSE, one can conclude that the rates prevailing should be 8.50% for Tax saver FD). (if there is no change of rates in between.)}
Excerpts (edited) from a website dealing in financial topics
Punjab and Sind Bank raises base rate, BPLR
Dec 23, 2010
Public sector lender, Punjab & Sind Bank has revised its lending rates. The bank has raised its base rate by as much as 55 basis points. The base rate of the bank now stands at 9% from 8.45% earlier.
(a few lines omitted)
BPLR was replaced by base rate from July 1, 2010.
The bank has also raised fixed deposit rates across selected maturities. The 222 days, 500 days and 1,000 days deposits will now fetch interest of 7.5%, 8.75% and 9% respectively.
Unedited excerpts from an article from a financial newspaper
Punjab & Sind Bank raises deposit rates by up to 0.75 pc
PTI Aug 11, 2010, 07.08pm IST
NEW DELHI: State-owned lender Punjab & Sind Bank on Wednesday announced an increase in interest rates on fixed deposits (FDs) of different maturities by up to 0.75 per cent per annum.
The new rates will be effective from August 4, the bank said in a release.
The new deposit rates range from 2.50 per cent to 7.50 per cent on FDs of 7 days to 10 years’ tenor, said a bank official.
Punjab and Sind Bank’s decision to hike deposit rates follows similar steps taken by leading banks like ICICI Bank, Punjab National Bank, Union Bank of India, Oriental Bank and HDFC Bank.
Note (from me): Many banks pay less interest on the Tax Saver FD in comparison to normal FD of 5 year duration
Now on the basis of above you can make your own conclusion.
Thank you sir, i m very thankful to you for the time you have spent searching the answer for my query. Thank you again.
I had contacted bank 3-4 times by personally visiting the bank also but due to their fault they are very uncooperative to talk about it. Ultimately at that time, finding no other alternative, i left this matter.
Manshu,
If I deposited 10 lakhs in a back that offers 9.00% in a tax saving fixed deposit for 5 years. How much would be taxed from the interest that’s earned each year?
Shankar – the tax benefit is only to the extent that money you invest in this will be reduced from your taxable income. So, once that’s done – the FD is treated as ordinary FD and the interest will be taxable like others.
Whether TDS is applicable on interest earned on Taxable FD?
Yes, interest earned is taxable.
Hi Manshu,
I want to invest Rs. 150,000 either in Fixed deposit for five years or in NSC? Which option will give me better return ? I have been told that 10% tax is deducted from the interest accumulated in the FD. What about tax deduction in NSC?
Hi Rohit,
NCS falls under 80C investments, so you will get tax rebate by investing in NSC upto Rs. 1 lakh, and if you don’t have any other plans to use 80C, then this can be a good way. Interest income is taxable in both instruments now. NSC may not have TDS but the interest is still taxable.
NSC falls under 80C, so you will get deduction by investing in NSC (subject to 1 lakh limit), the interest accrued is also exempted from tax and the interest amount is eligible for 80C deductions (being reinvested ?) (subject to 80C limit) but the main drawback in NSC is (I have learnt ?), the whole amount that you will get on maturity (maturity value), is included in your income and SUBJECT TO TAX. You save on tax @ say 10% and end up paying @ say 10-20% after 6 years.
In tax saver fixed deposit, the lock in period is 5 years and not 6 years (as in case of NSC) though the interest in taxable but currently it will be almost at par with NSC interest (after tax) and the maturity value is is not subject to tax like other FDs (as far as I know).
One more thing I do not understand why so much importance in given to PPF as a tax saving instrument, except the tax earned is tax free. Any comment.
Hi Umesh,
Interest being tax free is a pretty sweet deal for people who fall under the 30% tax bracket and that’s why it’s popular I think.
NSC is now 5 years.
Hello,
My age is 25 years…
I want to know one thing..
What is the maximum limit I can put my money in Bank FDs?
Ex –
If I invest 1,00,000 in Indian overseas Bank FD in 2012 for one year.. I’ll get matured amount @ 9.25 = 1,09,250..
I keep investing 1,00,000 every year.. and I also put my earned money from FD in another FD @ every maturity…
Is that possible?? and if so, what is the maximum period I can invest??
And Is that a good option considering the childeren education and marriage??
Well, what you can do is to get a fixed deposit for a longer date from whichever bank you prefer – when you go for slightly longer dated terms then you get a higher rate of interest, and then you can use the money from that maturity to reinvest at a later time.
It’s possible to do what you want, but the only thing is when you create a new FD you will get the rates at that time, not today.
Thanks for suggestion…
The thing is I want to invest money for short spans of time…
And other thing… tax(Tax) only deducted from the interest income (if it is bigger than 10,000 Rs)..
Is there any other deductions liable?? (especially on the amount i invest??)
How many years a sum of Rs 10000/- will be double in State Bank of India Fixed Deposit Scheme
would be a good idea to update this post given interest rates at peak.
Yeah, I need to update this post regardless of whether interest rates have peaked or not. This data has become quite dated.
Hello Manshu,
I am planning on investing 5L in a FD for a period of 1-2 years. I have a ICICI savings account but I am unsure whether I should invest 4L in FD’s and 1L in Tax Saver FD, because as you mentioned if my interest amount(from 4L(Taxable FD)+1L(Tax free) FD) is more than 1L then the interest will bear tax.Did I understand your logic correctly?
Thanks
Hi Ganesh
Any amount earned as interest is taxable and subject to TDS as per rules, whether earned from a normal FD or from a TAX SAVER FD.
The difference in two types of FD is, the amount invested in Tax saver FD which is of 5 year duration (lock in) is subject to 80C deduction in the year of investment unlike normal FDs and not that it is TAX FREE.
Tax saver FDs has some condition like you can not pledge, can not get loan on it, can not encashed prematurely (being 5 years lock in) unlike normal FDs. One more thing, check the rates of interest for 5 year normal FD and tax saver FD as some pay lower rate of interest for tax saver FD.
Umesh
Hi Manshu
How can I post or send a compilation in a tabular form particularly for, interest on fixed deposit (FD) for various durations and tax saver FD, of various banks. Also can I post links of other websites in comments?
Thanks
Umesh
The table will not get pasted correctly in the comment box, so if you want something like that to be posted then please email me – onemint at gmail and I will take a look at it. Yeah, please feel free to post any links that you feel are useful to forward the discussion.
Thanks – much appreciated!
Thanks Umesh.
Hi Manshu
I hope that the readers of onemint will find following links useful
A. Get the Highest FD Interest Rates
1. For Fixed Deposits
2. Tax Savings Fixed Deposits
3. NRI Fixed Deposits
http://www.ratekhoj.com/fixed-deposits/index.php
A (a) Fixed Deposit Rates
You can get FD rates based on institution types like banks (Public Sector / Nationalized Banks, Indian Private Sector Banks, Foreign Banks, Cooperative Banks, Post Office Savings Schemes, Companies etc.). You can get interest rates selecting as per deposit period range or you can select specific deposit period for your fixed deposit. You can also search for senior citizen and non senior rates as well. Many banks pay different rates of interest for large deposits, you can select this criteria as well.
The search is broadly categorized in 4 types:
1. FD rates based on institution type/deposit period range
2. FD rates based on institution type/specific deposit period
3. FD rates in selected institutions/deposit period range
4. FD rates in selected institutions/deposit period range
You then fill your search criteria and the resulting table can runs into hundreds of pages. In many cases you have to narrow your search or you have to be specific in your search so that the table may not run in many pages.
You can sort this table as per you choice as per alphabetical list of institutions, period of deposit and rate of interest (highest to lowest) by clicking on the first row of the table.
http://www.ratekhoj.com/fixed-deposits/fixed-deposit-rates/index.php
A (b) Tax Savings Fixed Deposits and other schemes
This web page gives you a selection for schemes that are eligible for tax savings under Sec 80C.
You can choose from the following:
Tax Savings Fixed Deposits in Banks (including rate of interest)
Tax Savings Fixed Deposits in Post Office
Equity Linked Savings Schemes (ELSS)
http://www.ratekhoj.com/fixed-deposits/tax-savings-fixed-deposits/index.php
B. Calculators
Fixed Deposit Interest Calculator – Calculate how much interest payments you can get based on your fixed deposit amount, interest rate and interest payment period.
FD Maturity Calculator – Calculate the maturity amount and effective yield (compound interest rate) of your fixed deposit based on your deposit amount, interest rate and duration
http://www.ratekhoj.com/calculators.php
C. Find Bank IFSC Codes, MICR Codes, Postal Addresses
http://www.ratekhoj.com/banks/index.php
D. Gold Coin Prices Offered by different banks
http://www.ratekhoj.com/goldprice/index.php
Umesh
Hi,
Please tell me if the interest earned on the tax free FD will be taxable when the tax free FD will mature?
Hi
You perhaps have some misconception. This is a tax saver FD and not tax free FD.
This 5 year Tax Saver FD saves you tax like other 80C investments in the year of investment but not saves tax on interest earned. Interest is taxable on yearly basis.
Umesh
Hi Umesh,
I meant Tax saver FD only, it was just a typo error.
Thanks for the info.. ur web page has helped me a lot..
Hi,
I have a doubt is the amount put in FD wil have tax excemption or the interest occured alone will have tax excemption ? I jus started an RD acc in citi bank. Can i show it as savings in my Tax ?
Interest is taxable – you have to pay tax on interest. RD can’t be shown as a tax saving instrument.
if possible update the rates from major banks. better if standalone fresh post, dear manshu
Dear Sahil – I updated this list recently so they should still be applicable – did you see a rate that was outdated – if so I will spend some time reviewing the whole list else I think they are current. Thanks!
Dear Manshu,
Oriental Bank of commerce is offering 9.75% (+0.5% for senior citizens) for 5 years and Tamilnad mercantile bank is offering 10%(+0.25% for senior citizens) for 5 to 10 years with 5 year lock-in on tax-saving deposits.
Hello,
Please forgive if my question seems lame, i would like to deposit a sum of 10L in fixed deposit for 5 years under monthly returns of intrests(HDFC 8.87%pa).Could you tell me how is that money(interest) taxed and what is the amount i will be getting monthly.
hi Every one is there any FD which gives completely tax free on intrest earned ?
No, but there are tax free bonds that are coming out these days like the NHAI bond which can give you tax free interest.
hi every one i want to invest for 30000 and i need to choose tax saving plans
Question 1: which one would be better if iam looking to invest for short period
Question2: which one would be better if iam looking to invest for long period
Note: Iam not intrested in Insurance plans.
given the highest returns iam ready to invest in higher amounts and variable period of time .
and the intrest earned should be tax free
Thanks for your suggestions.
Only the income from PPF is tax free, rest of them are all taxable, so that’s your only option (given your conditions).
Add this to the list :
Axis Bank – 8.25%
(Link : http://www.axisbank.com/personal/interestrates/domesticdepositrates/Domestic-Deposit-Rates.asp?ucode=Personal )
Thanks Rohit – added it now.
I think u r missing the bank name which is giving best return at present of 9.50% with 5year lock-in in tax saver gold & tax-saver silver scheme for both senior citizen & general public, it’s ” City Union Bank Ltd” from kumbakonam, Tamilnadu.
Thanks – I’ve added City Union Bank in the table now.
this table is last updated on feb 2011. is there any change in this list or it is still applicable as of Jan 2012?
some more rates updates…
Tamilnad Mercantile Bank – 10.00 – Indian Private Sector Bank.
IDBI Bank – 9.50 – Public Sector Bank.
State Bank Of Travancore – 9.50 – Public Sector Bank.
hi,
I want to invest 70k to save tax. Which one is better NSC or PPF or fixed deposit. What is the duration of each one and which is a better option please let me know as i am doing it for the first time.
For persons having more than 15 years of left over service, I opine PPF is suitable. For comparative features of various tax savings schemes, you may search with aid of google.
hi, karnataka bank offers 9.5% as KBL tax planner
check out this link –
http://www.ratekhoj.com/fixed-deposits/tax-savings-fixed-deposits/tssresults.php?citizentype=non-senior&sorttype=rate&sortorder=DESC
None of the banks are benefitting Indian customers with hi interest rates that they pay to NRE deposits…. Most of them pay 10-10.5% to NREs but not for resident indians. Dont understand this at all… I heard some of NRIs are taking loans in their country and placing NRE deposits to earn better returns and pay back the loan as well
I contacted LVB lakshmi vilas bank and found they are encouraging FDs > 10 lakhs at 10.5% interest rate
Pl let me know whether interest accrued on Tax saver bank FDs are deemed as reinvested in subsequent years
in bank tax saver FD or no
No. Such provision is available for NSC only
Kotak bank is not paying 9.25 % on tax saver fixed deposits.
I have opened a FD on 3rd, Feb, 2012, they are paying only 9.00 %.
Hi all,
LVB Lakshmi vilas bank offers good tax saver fixed depostit.
For more information check the below link.
http://www.lvbank.com/ltsd.aspx
LVB is allowing is allowing 9.75 % on Tax Saver Deposit for Sr Citizens whereas IDBI Bank is allowing 10 %
Hi ,,
AXIS Bank website shows 80C Tax Saver FD rate as 8.25% only.
‘Today you deposit Rs 10,000 in a 5 year fixed deposit with the State Bank of India. You shall earn compond interest rate of 6 per annum on your deposit. How much amount will you receive after 5 years?
Rs 10000 plus Rs 3469 Interest. See the Calculator in http://allbankingsolutions.com/fdcal.htm
hi,
i want to invest 1cr in fd. should i invest in one bank or few more banks to redeuce the tax and for some other IT problems?
whther tamilnad mercantile bank tax saving fd rate is high or any other bank
which bank offer high rate for tax saving fds
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