Investment Plans

High Return Tax Saving Fixed Deposit

By Admin
Mar 04, 2021
high return tax saving fixed deposit

Fixed deposit investment is considered to be one of the most secure and safest modes of investment. There is no risk of losing the principal amount in the case of FD investment.

But there are certain types of fixed deposits that are known as tax-saving fixed deposits. 

This variety of fixed deposits is eligible for a tax deduction of up to INR 1.5 lakh under Section 80C of the Income Tax Act. The minimum lock-in period is 5 years while the maximum is that of 10 years. But, one thing must be considered that premature withdrawal is not possible in this type of investment. The investor is eligible to authorise someone to withdraw the maturity amount before or post-maturity in case of the death of the investor. 

There are various banks like HDFC Bank, IDBI Bank, SBI, IDFC Bank, etc. that offer a high rate of interest in case of tax-saving fixed deposit plans.

Benefits

  • Under Section 80C of the Income Tax Act, the schemes are eligible for tax deduction benefits
  • In a single financial year, the maximum deduction limit under the scheme is INR 1.5 lakh
  • These investment schemes possess a lock-in period of 5 years while the maximum tenure can be extended up to not more than 10 years
  • There is no doubt regarding an assured positive return on maturity. Moreover, there is also an insurance of INR 5 lakhs against fixed deposits of banks, so that there is no risk for the investor despite the failure of the bank
  • Premature withdrawals or loan facilities are not provided in this sort of investment scheme
  • The interest earned through this is taxable depending on the investor’s tax slab. This means that TDS is applicable. Submitting a 15G form in the case of the general investors or a 15H form in the case of the senior citizens is mandatory to avoid the obligations of TDS. If the total interest exceeds the INR 40,000 mark in a single financial year. Under Section 80TTB, senior citizens can claim a deduction up to INR 50,000.

Who can invest?

Hindu Undivided Families (HUFs) and individuals are eligible to invest in tax-saving bank fixed deposit schemes. The minimum and the maximum investment amount differ from one bank to another.

Features of tax-saving fixed deposit schemes of certain banks

1. Axis Bank Tax-Saving FD

Maintaining a lock-in period of 5 years, this sort of fixed deposit option offers payout on a monthly or quarterly basis. Reinvestment option is also available here. The interest rate is 5.50% for general investors and 6% for senior citizens. The minimum investment amount is INR 100 while the maximum is INR 1.5 lakh. The highlighting factor for this sort of investment here is that the investment amount should be in multiples of 100.

2. SBI Tax-Saving FD

The lock-in period for this scheme is 5 years and the investor is eligible to invest not more than INR 1.5 lakhs in a single financial year. It offers tax-saving options under Section 80C of the Income Tax Act. The minimum investment amount here is INR 1,000 while the maximum is INR 1.5 lakh. The interest rates offered are 5.40% and 6.20% for the general investors and the senior citizens respectively.

3. IDBI Bank Tax Saver FD

The Suvidha Tax Saving Fixed Deposit Scheme of this particular bank, allows the investor to invest a maximum of INR 1.5 lakh for 5 years. On maturity, the investor receives a lump sum value. The interest rate offered by the bank is 5.20% p.a. for the general investors while for the senior citizens, it is 5.80% p.a.

4. HDFC Bank Tax Saver FD

Here the investor is eligible to invest any amount ranging between INR 100 and INR 1.5 lakh for 5 years. The lock-in period is 5 years. The interest rate for the general investors is 5.30% p.a. while for the senior citizens, it is 5.80% p.a.

Summary

As the tax-saving fixed deposit is a type of debt investment, therefore, it is a safe investment option when compared to ELSS. Moreover, the return is also assured with minimal risk of loss. Among all the other debt investment options, this sort of fixed deposit investment scheme only offers a minimum lock-in period of 5 years. Moreover, although 5-year NSC schemes also qualify for tax-saving benefits, they do not offer periodic interest payout options. 

The tax-free high return has always been the target of the investors. This essay throws some light on one of the easiest methods of investment. Fixed deposit investment is always considered to be one of the safest investment options. But tax-saver fixed deposits are even more unique with their own highlighting features. 

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