Tax Saving Fixed Deposits in India

by Manshu on November 4, 2010

in Fixed Deposits

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.

{ 27 comments… read them below or add one }

abdul January 8, 2011 at 12:07 am

sub: Tax Saving Fixed Deposits in India

Kindly mention about the post office FD(tax saving)..

Reply

Manshu January 9, 2011 at 7:11 am

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.

Reply

Sunil April 15, 2011 at 1:02 am

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

Reply

Manshu April 16, 2011 at 12:56 pm

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.

Reply

dhiraj November 12, 2011 at 3:43 pm

please give the me the deatails on deposit above 1 lakh ? how many

Reply

Manshu November 12, 2011 at 8:21 pm

What do you mean how many?

Reply

PRABIRENDRA NATH BHATTACHARYA November 23, 2011 at 2:57 pm

3 year POST OFFICE TIME DEPOSIT falls U/S 80c or not

Reply

Madhusuden.V December 4, 2011 at 9:57 pm

Hi, add YES Bank, 5years Fixed FD

Reply

Vibhor January 5, 2012 at 3:11 pm

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

Reply

Manshu January 5, 2012 at 9:04 pm

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?

Reply

geet January 17, 2012 at 1:23 pm

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

Reply

Anonymous January 16, 2012 at 11:48 am

Why is the intrest rate of Indian bank not given ?

Reply

Manshu January 16, 2012 at 9:53 pm

Added that now.

Reply

DHANANJAYAN January 17, 2012 at 4:39 pm

hi, please sort this table by interest rate to identify which is better. thanks.

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Sunidhar January 19, 2012 at 5:01 pm

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

Reply

Manshu January 21, 2012 at 8:26 pm

You need to the bank to do that.

Reply

Kkumari January 20, 2012 at 2:39 pm

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?

Reply

Manshu January 21, 2012 at 8:24 pm

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.

Reply

Kkumari January 31, 2012 at 8:25 pm

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?

Reply

Jitendra P.S.Solanki July 21, 2012 at 6:45 am

K Kumari,

Only for 2012.For every year benefot you will have to open a new fixed deposit every year.

Reply

d dharma rao February 18, 2012 at 5:34 pm

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

Reply

Jitendra P.S.Solanki July 21, 2012 at 6:51 am

D Dharma,

If interest income of any indvidual from all sources exceeds Rs 10000 in any financial year its taxable.

Reply

Umesh August 2, 2012 at 9:51 pm

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

Reply

sheena ts July 20, 2012 at 9:56 pm

IS TDS filing is essential for SBT fixed deposit? IF yes what is the procedure?

Reply

Achu August 2, 2012 at 2:21 pm

@ 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

Reply

Umesh August 2, 2012 at 10:01 pm

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

Reply

sudhir chawla November 3, 2012 at 4:49 pm

bank of india offers 9% interest on tax saver FD.

Reply

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