5 year tax saving fixed deposit: Consider these 80C eligible FDs if looking for investments before Mar 31

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Published: March 15, 2018 1:12:37 PM

Looking to invest in 5 year fixed deposits to save tax for FY17-18? Check the latest interest rates on tax saving FDs from SBI, HDFC, ICICI and other banks.

Tax saving investments, fixed deposit interest rates, tax saving for FY17-18, tax saving fixed deposits, tax saving FDs, save tax, five year FDs, SBI, HDFC Bank, ICICI Bank. Boi, kotak bankThe amount invested in tax-saving fixed deposits can be claimed as a deduction under Section 80C.

Have you saved and invested enough in a bid to save the maximum tax possible for the financial year 2017-18? If not, you need to hurry up as the last day of this month – March 31st – is round the corner, after which the FY2018-19 will start from April 1 and then you won’t be able to do anything for the current financial year. If you are a risk-averse investor and are looking for fixed returns over the medium to long term, then tax-saving fixed deposits (FDs), offered by India’s leading banks, ranging from SBI to HDFC to ICICI Bank, may be one of the good investment options for you. The deposits made in these FDs come with a mandatory lock-in period of 5 years and may have a maturity period ranging from 5 to 10 years.

Unlike other fixed deposits, you can save a good amount of tax from such FDs. The only hitch is that you have to be sure that you will not need the money for the next five years, as unlike other FDs these FDs cannot be broken pre-maturely. Premature loans against these FDs are also not allowed.

However, the amount invested in tax-saving fixed deposits can be claimed as a deduction under Section 80C. “No tax would be levied on the principal amount invested, but the interest earned on these FDs would be taxable as per the income tax slab rates of the individual,” says Karan Batra, Founder & CEO of CharteredClub.com.

Thus, as interest earned is taxable as per the investor’s tax bracket, therefore, TDS is applicable. “The interest on deposits is payable on either monthly/quarterly basis or can be reinvested. A person can, however, avoid the TDS deduction on the interest earned by submitting Form 15G (or Form 15H for senior citizens) to the bank,” says Adhil Shetty, CEO, Bankbazaar.com.

Fixed deposit (FD) interest rates being offered by India’s leading banks:

Fixed Deposit Interest Rates (up to Rs 1 crore)
BANKS5 Years & above only
Andhra Bank6.25%
Allahabad Bank6.50%
Axis Bank6.90%
Bank of Baroda6.25%-6.5%
Bank of India6.25%
Bank of Maharashtra6.00%
Canara Bank6.00%
Central Bank of India6.50%
Corporation Bank6.50%
Dena Bank6.30%
DCB Bank Limited7.2%- 7.25%
Dhanlaxmi Bank6.50%
HDFC Bank6.00%
ICICI Bank6.50%
IDBI Bank6.00%
Indian Overseas Bank6.00%
Indian Bank6.00%
Indusind Bank6.50%
Kotak Mahindra Bank6.25%
Oriental Bank of Commerce6.40%
RBL Bank7.10%
State Bank of India6.50%
Syndicate Bank6.50%
Yes Bank7.00%
UCO Bank6.25%
Union Bank of India6.50%
United Bank of India6.00%
Vijaya Bank6.25%
*Data taken from respective bank’s website, as on 8 March 18

Source: Bankbazaar.com

Investing in 5-year fixed deposits can be considered by people who are looking for fixed returns every year and not variable returns which are market-linked. People looking for fixed returns can also explore options like the National Savings Certificate which are same like 5-year FDs, but the interest offered by them is usually higher than the 5- year FDs.

In case you are looking for something more flexible for saving tax, you can try ELSS funds. That may be a little more riskier than an FD, but are more liquid with a three-year lock-in period and having potential for higher returns. “In case tax-saving is not your main agenda, but you just want to park funds, go for liquid funds as they provide better returns than FDs, and you can redeem them when you want. Tax will, however, be levied on both ELSS and liquid funds while redeeming them,” says Shetty.

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