Tax Saving Fixed Deposits in India

Updated on Feb 27 2011.

Since we’ve had so many posts on bonds and tax saving instruments in the past few days I thought I’d keep the momentum going and write about tax saving fixed deposits in India today.

A tax saving term deposit has a tenure of 5 years, and a lot of banks offer these. They save tax because they reduce your taxable income when you invest in them up to a cap of Rs. 1 lakh, and come under Section 80C.

The interest earned from these fixed deposits is taxable, and tax will deducted at source as applicable.

These term deposits can’t be encashed before the expiry of 5 years, and you can’t pledge them to get any loans also.

Here is a list of some banks which offer these deposits along with the prevailing interest rates applicable as at November 3rd 2010.  If you see any mistakes, want to add any other bank or have anything else to say – please leave a comment.

S.No. Bank Interest Rate
1 Axis Bank 8.25%
2 Allahabad Bank 8.00%
3 Bank of Baroda 8.50%
4 Bank of Maharashtra 8.30%
5 Canara Bank 8.75%
6 Central Bank of India 8.85%
7 HDFC Bank 8.25%
8 ICICI Bank 8.75%
9 IDBI Bank 8.75%
10 Indian Bank ?
11 Indian Overseas Bank 8.10%
12 J&K Bank 8.50%
13 Karur Vysya Bank 9.00%
14 Kotak Bank 9.25%
15 Punjab National Bank 8.50%
16 Punjab and Sind Bank 8.50%
17 South Indian Bank 8.75%
18 State Bank of Hyderabad 8.75%
19 SBI 8.50%
20 State Bank of Travancore 9.00%
21 Syndicate Bank ?
22 UCO Bank 8.00%
23 Union Bank of India 8.50%
24 Vijaya Bank 8.25%
25 City Union Bank 9.50%
26 Indian Bank 9.00%

Click here to see the interest rates comparison on regular fixed deposits.

36 thoughts on “Tax Saving Fixed Deposits in India”

  1. Hi Sir,
    Request you to assist me in following tax saving FDR:-
    I made a tax saving FDR on 20th May’15 in advance for the financial year 2015-2016 in a pvt. Bank. Now it’s more than 3 months that bank didn’t provide me any tax saving FDR certificate. I have visited bank branch many times but every time they have one or the other excused. I am feeling harrased and want to end my relationship with the bank by breaking all my FDR including tax saving FDR and close the account but as you have mentioned that Tax saving FDR can not be break before 5 years.. Plz suggest is there a way out and if not then request you to guide me that how I can file a complaint against bank in consumer court as I am feeling very harrased and helpless..
    Shelly Juneja

  2. Do all the FD’s whose tenture is equal or more then 5 years comes under 80 C or only the Tax saver FD comes under 80 C?

    1. No Rupesh, only certain FDs that are explicitly called Tax Saver FDs are eligible for 80C exemptions, and all of those FDs are of 5 years duration, never more than that.

    1. @ sheena ts
      TDS – Tax Deducted at Source.
      You dont have to file it.
      It is the tax deducted by the SBT/or any bank before paying you interest. If you have interest above 10,000 and you have given your PAN number to the bank they will deduct 10% as TDS unless you have given form 15 H to the bank. Remember if you haven’t given your PAN number they will deduct 20 % as TDS.

      ** If you are not in “taxable limit” and have no pan number only option is to deposit in different bank such that no bank will have interest above 10,000.
      ** If you are not in taxable limit and have PAN you can use 15 H and ask bank not to deduct TDS

    2. Hi sheene ts

      If your total income is above the taxable limit, then you will adjust this TDS as tax paid by you while computing total tax paid, while filing ITR.
      However if your TOTAL income is below the taxable limit and you want to claim a refund of this TDS, you will have to file the relevant ITR to claim a refund

  3. Sir,
    I have deposited Rs.2.5 Lakhs in IDBI FD for five years @ 9.5 % interest.Whether the interest is taxable or not?

    1. Hi Dharma Rao

      In my opinion even a single rupee earned as interest from fixed deposit or savings account is taxable as per your tax slab. There is no exemption, whatsoever, till assessment year 2012-13. From next year, AY 2013-14 only interest from saving account is exempted upto 10 K but still no exemption for interest from FD

  4. Hi,

    I have opened a Tax saver FD in canara bank. Interest rate is 9% PA. Let the interest I receive on maturity be Rs.X. How and when Income tax is calculated and deducted from the Interest earned? Would you be able to give some more clarity on this part?

    1. They will deduct a part of the TDS about 10% and then the rest of the interest needs to be added to your income and taxed at your marginal rate.

      1. Manshu,

        I have started this Tax saver FD on 2012, May I use the same for 4 more years for exemption or just for 2011-12?

  5. Dear Sir/Madam,

    I have a taxsaver Fd for Rs. 100,000/- made inthe year 2008. I havent claimed for the same till date and neither do i intend to.
    Please let me know know the procedure to break this Fixed Deposit. – 9769964227

  6. Hi,
    What is the meaning of “The interest earned from these fixed deposits is taxable, and tax will deducted at source as applicable.”

    If TDS is deducted, whats is the meaning of tax-saver?
    I was thinking there is No TDS if we have this kind of FD

    1. No, that’s not right there is a big difference between tax saver and tax free. In these type of fixed deposits – you pay tax on interest income just like other fixed deposits.

      The way you save tax is that when you invest money in this FD, say you open a FD for Rs. 50,000 – then at that time you can reduce this Rs 50,000 from your income. So, you will have to pay taxes on reduced salary and that’s the way you save taxes and that’s why these are called tax saver fixed deposits.

      Does this make sense – do you get this?

      1. Sir,

        What is tax free FD ? does investing in tax free FD mean that the interest income received from them is tax fee please advice and which banks provide them and are they allowed as deduction u/s 80C

  7. pls add City Union bank ‘s one of the scheduled banks and its interest rates are high.. It’s 9.5% currently..

    1. Thank you Sunil – I’ve added them. I think I need to update the other interest rates as well, and will do that over the next week or so.

    1. Abdul – I’m not familiar with any tax saving fixed deposit that the Post Office runs. They might have one, but I’m only familiar with the ones run by banks.

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