Top 5 Public & Private Sector Banks That Offer Up To 6.75% Returns On Tax Saving FDs

Key takeaways of tax saving FDs

Depositors can reap the following benefits from tax-saving fixed deposits.

• One can reap tax exemptions under section 80C of the Income Tax Act, 1961.
• Tax deductions are subject to a maximum amount of Rs 1.50 Lakh per fiscal year.
• Defined as per comfort, a variable tenure of 5 years to 10 years.
• Subject to early withdrawal after a lock-in duration of 5 years.
• Elderly people can get an additional interest rate up to 0.50 percent.
• You can have a joint account facility; though, only the manager of the primary account is liable for tax benefits in case the account is opened jointly.
• Insurance cover of Rs 5 Lakh against a fixed bank account in the case of failure by the lender.

Eligibility criteria

The following conditions must be fulfilled in order to be considered for the opening of a tax saving fixed deposit account at any bank, non-banking financial institution or post office:

• He or she must be a resident individual, or Hindu Undivided Families (HUF).
• He or she must have all KYC documents
• He or she must have duly filed the application form

Document required to open a tax saving FD

For opening a tax-saving deposit in banks and post offices, identity and address proof is needed. The following documents are required to submit at the bank, NBFC, or post office while opening a tax saving FD account:

Identity proof: Passport, Aadhaar card, PAN card, government ID card, voter ID card

Address proof: Utility bills, bank statement of the last 6 months, passport, Aadhaar card

Income proof: Salary slip of the last 3 months, Form 16, recent IT return

Tax saving FD rates

Small private banks provide interest rates on tax-saving FDs of up to 6.75 percent. Compared to major public sector banks, these interest rates are higher on tax-saving FDs. DCB Bank and Yes Bank dominate the table with interest of 6.75 percent, led by IndusInd Bank promising interest of 6.50 percent on tax-saving FDs over five years. On tax-saving FDs, AU Small Finance Bank and Ujjivan Small Finance Bank bid 6.50 percent and 5.80 percent interest, respectively. Opposed to leading private banks, the interest rates provided by small finance banks are stronger.

On tax-saving FDs, foreign banks such as DBS Bank and Deutsche Bank bid 5.50 per cent interest. Leading private sector banks such as Axis Bank, ICICI Bank and HDFC Bank bid interest on tax-saving FDs of 5.50 percent, 5.35 percent and 5.30 percent, respectively. Union Bank of India, which provides 5.55 percent interest, is the highest rate provided by a public-sector bank on a 5-year tax-saving FD, led by Canara Bank and State Bank of India (SBI), which offer 5.50 percent and 5.40 percent interest respectively on tax savings FDs. On tax-saving FDs, Bank of Baroda is providing 5.25 percent interest as of now.

Note

Usually, small private banks with a minimal target market provide higher rates to lure customers. This is the reason why cheaper rates are provided by government-owned banks. Only because a bank is giving you higher return doesn’t always mean that you must consider it. Consider higher rates, but still go for comparatively larger banks with good finance and administration. Only tax-saving five-year FDs rates for non-senior citizens are listed on the above table.

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