Bank Fixed Deposits (FDs) That Save Income Tax Under Section 80C: 10 Points

Under Section 80C of Income Tax Act, a deduction of up to Rs. 1.5 lakh is allowed if an individual invests in tax-saving bank fixed deposits with maturity of five years and more. This exemption is part of the Rs. 1.5 lakh exemption currently available under Section 80C of Income Tax Act. Other investments that quality for income tax deduction under Section 80C include insurance premium, PPF and contribution to EPF etc. Many banks offer their customer online facility to open income tax-saving fixed deposits. The interest rate offered on income-tax saving deposits is typically the same as offered on normal fixed deposits. Senior citizens are offered higher interest.
Income Tax Saving Fixed Deposits: 10 Things To Know

1) Income tax-saving fixed deposits have a minimum lock-in period of five years. No premature withdrawals or loans are allowed.

2) SBI, for example, offers tax-saving deposits for a minimum tenure of five years and a maximum of 10 years, according to the bank’s website.

3) Interest rates on tax-saving fixed deposits offered by SBI, ICICI Bank and and HDFC Bank, as shared them on their websites.

Banks                 Interest Rate For General Public                    For Senior Citizens

SBI                                      6%                                                               6.50%

ICICI Bank                        6.50%                                                             7%

DFC Bank                         6%                                                                6.50%

4) The maximum investment allowed by banks in income tax saver fixed deposits is Rs. 1.5 lakh.

5) Some banks allow the minimum amount from Rs. 100. The minimum amount required to open an income tax saver FD in SBI is Rs. 1,000, according to the bank’s website.

6) Interest earned in income-tax saving FDs is taxable according to the individual’s tax bracket.

(Read: How To Save Income Tax? PPF Vs ELSS Mutual Funds Vs Tax Saver Bank FDs)

7) TDS or tax deducted at source is applicable on the interest earned. TDS is applicable when interest payable or reinvested on fixed deposits across all branches, per customer, exceed Rs. 10,000 in a financial year.

8) Investors can choose monthly/quarterly option for earning interest. The interest amount earned can also be reinvested, if the investor wants so.

9) In case of joint deposit, the tax benefit under Section 80C will be available only to the first holder of the deposit.

10) Nomination facilities are available in case of income tax-saving fixed deposits.

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