India Tax Saver Fixed Deposits

Overall Rating: star ratingstar ratingstar ratingstar ratingstar rating[0/5]Total Votes [  ]  
Rate this page:
Tax saver fixed deposits in India have become a wonderful tool for the investors to save income tax through section 80C. It's only in 2006 when the trend started changing, as the government, under Section 80C of Income Tax Act 1961, exempted bank fixed deposits booked for 5 years and up to 1 lac by HUF or individuals. So, if you are a tax payer and looking forward to some investment options that can save some tax for your, you can opt for India tax saver fixed deposits. Fixed Deposits are the safest investment area, where you get the interest on present opportunity foregone.

About Tax Saving FDs in India

In Union Budget 2006, the tax benefits were extended to 5-year tax saver fixed deposits, where investments up to 1 lac were exempted from the tax. One cannot withdrawal the deposits prematurely. Besides, you cannot use the deposit as collateral to get a loan. Banks do not provide overdraft facility on India tax saver fixed deposits.

The Indian tax saver fixed deposits, unlike vanilla fixed deposit products, don't have sweep-in facilities. As a result, you can't link fixed deposits to your savings account.

Interest Rates on Tax Saving FDs

There can be varied rate of interests on the tax saver fixed deposits in India, which may range from 8% to 9%. Senior citizens get special interest rates. The interest rates are usually calculated on quarterly basis. The interest is reinvested again into the FD. As a result, at the end of each quarter, the principal goes up.

The returns on India tax saver fixed deposits are taxable.

Who Can Have Tax Saver Fixed Deposits?

Any individual as well as Hindu Undivided Family (HUF) can go for tax saver fixed deposits. One can also jointly hold this FDs. Even a minor can be a joint holder.

Salient Features of Tax Saving Fixed Deposits

Following are the salient features of tax saver fixed deposits in India:
  • The fixed deposit is locked for 5 years. You cannot withdraw your investment prematurely.
  • The minimum amount of purchase is 100 and then in multiples of that.
  • The maximum amount of purchase is 100,000.
  • The maximum amount of claim is 1 lac.
  • The rate of interest varies, which can further change in future.
  • It doesn't have sweep-in facility. It can't be linked to a savings account. Surplus fund of savings account can't be automatically invested in tax saver fixed deposits either.
  • Relationship benefits are not offered on the India tax saver fixed deposits.

Banks Offering Tax Saver Fixed Deposits

There are a number of banks that offer tax saver fixed deposits in India. Following are some of those:
  • Allahabad Bank
  • Canara Bank
  • HDFC Bank
  • ICICI Bank
  • IDBI Ltd.
  • State Bank of India
  • Syndicate Bank
  • Union Bank of India

Bank NameInterest Rate(%)What Rs. 10,000 will grow to
Tenure 5 Years and +
Tamilnad Mercantile Bank10.0016,386
City Union Bank9.7516,187
IDBI Bank9.5015,991
State Bank of Tranvancore9.5015,991
Punjab & Sind Bank9.5015,991

Last Updated on 2/8/2012

>> More About India Tax