The post Tax-saving FDs: These are the best tax saving FD which can reduce your income tax liability first appeared on Rightsofemployees.com.

Your options include Public Provident Fund (PPF), National Pension System (NPS), Sukanya Samriddhi Yojana (SSY), Monthly SIP in Equity Linked Scheme (ELSS), Employees Provident Fund (EPF), Tax Saving Fixed Deposits (FDs) and payment through life insurance premium.

Investors with low risk appetite and investors in lower tax brackets can try tax saving FDs. However, you need to remember that your money will be locked for five years. You can compare term deposit rates of different banks to find the best option. This is calculated on the basis of quarterly compounded interest rate. BankBazaar.com has collected data related to this. This data is of 26 June 2014.

Also Read: Budget 2024: Will senior citizens get 50% discount on train tickets again? know details here

Axis Bank, HDFC Bank and ICICI Bank are offering 7 percent interest on tax-saving FDs. If you have invested Rs 1.5 lakh in a tax-saving FD for 5 years at this rate, it will grow to Rs 2.12 lakh in the respective period. Similarly, Canara Bank is offering 6.70 percent interest on tax saving FDs. If you can invest Rs 1.5 lakh for 5 years at this rate, the tax-saving FD will grow to Rs 2.09 lakh.

Bank of Baroda, Punjab National Bank, State Bank of India and Union Bank of India are offering 6.5 percent interest rate on tax saving FD. At this rate, if Rs 1.5 lakh is invested in tax saving FD for five years, it will grow to Rs 2.07 lakh. Indian Bank’s rate on tax saving FD is 6.25 percent. According to this, if Rs 1.5 lakh is invested in 5 years, this FD will grow to Rs 2.05 lakh.

The tax FD rate of Bank of India is 6%, that is, if you deposit Rs 1.5 lakh in it, you will get Rs 2.02 lakh in 5 years. Reserve Bank (RBI) subsidiary Deposit Insurance and Credit Guarantee Corporation (DICGC) also gives fixed returns on FD of Rs 5 lakh.

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As the new year 2023 begins, it is the right time for senior citizens to plan their investments and choose tax saving FDs to make the most of the rising interest rates on deposits. Lending may become more expensive in the coming times and banks may want to entice investors to keep their money with them to increase their cash flows.

Starting a tax-saving FD teaches a very important lesson, that is to save more. Saving a penny is earning money. This is a general rule, and it works well for senior citizens as well. Here are some of the key features of the tax saving senior citizen FD.

1. Fixed Returns: Many financial instruments show volatility when it comes to returns. Moreover, investors have to wait for an average of three to five years for their investments to grow. On the other hand, FD gives you fixed returns risk free. There is no risk to your money, and you get assured returns.
2. Flexibility in tenure: FD comes with flexibility of tenure and amount. You can choose any tenure and amount you want to invest. However, for tax saving FDs, you must have a lock-in period of at least five years. Longer tenure helps you deposit more amount with interest. Many people opt for longer tenure and higher maturity amount for tax saving.
3. Zero Maintenance Cost: Unlike mutual funds and stocks, when you invest your money in FDs you don’t really need to track the market and ups and downs. This is a one time activity, and you can get your maturity once your FD tenure is over. There is no cost to anything. You put a fixed amount in the FD account, and you get a lump sum when your FD matures.
4. Liquidity: Despite the lock-in period in case of tax saving senior citizens FD, you can still liquidate your investment if you need funds due to an emergency. The lock-in terms and conditions are not very stringent as compared to other financial instruments. However, you must check with the bank for deductions and penalties when you opt for early withdrawal.
5. Safety: Your money remains completely safe in the FD account until your bank defaults. Despite this, you are eligible to claim a maximum of Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC) with effect from 4 February 2020. This makes FD a very safe investment option for senior citizens.
6. Tax Saving: Tax deduction of up to Rs 1.5 lakh is allowed under Section 80C, when you invest in a tax-saver FD with a minimum lock-in period of five years.

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According to a media report , Aditya Shetty, CEO, BankBazaar.com, says that the tax savings from funds invested in tax saving FDs will vary depending on the tax bracket. A person in the 30% income tax net can claim a tax deduction of Rs 46,800. Similarly, if a person paying 20% ​​income tax invests Rs 150,000 in a tax saving FD, then he can save Rs 31,200 in tax annually. Good interest is also available in tax saving FD. Let us know how much interest the major banks are paying.

Which bank is paying how much interest

IndusInd Bank: IndusInd Bank is currently paying interest at the rate of 6.75 per cent per annum on tax saving FDs. Yes Bank is also paying only 6.75 percent interest on tax saving FD.

DCB Bank: Private sector bank DCB is also giving good returns on tax saving FDs. At present, the bank is giving interest at the rate of 6.60 percent on this FD.

RBL Bank: RBL Bank is offering 6.55 percent interest to customers on Tax Saving FD. Similarly, if you make a tax saving FD in IDFC First Bank, then you will get 6.50 percent interest.

Indian Overseas Bank: Indian Overseas Bank of the public sector is paying an annual interest rate of 5.85 percent to the customers on tax saving FD.

Canara Bank: Canara Bank is giving interest at the rate of 5.75 percent to its customers on Tax Saving FD. Punjab National Bank is also offering 5.75 percent interest on tax saving FDs.

Union Bank: If you make a tax saving fixed deposit in Union Bank, a leading public sector bank, then you will get interest at the rate of 5.75 percent only. Similarly, State Bank of India is offering 5.65 percent interest on tax saving FDs to its customers.

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