Tax-Saving FDs: These banks offer up to 7.6% interest rate
Tax-saving bank fixed deposits give Section 80C tax deduction benefits up to an amount of Rs 1.5 lakh. But these FDs come with a 5-year lock-in. Smaller private banks and small finance banks top the FD interest rate charts on tax-saving deposits
Tax optimization should always be a part of your financial planning exercise and not a task to be completed towards the end of the financial year. If you haven’t started with your tax planning, then plan now. Invest wisely, considering your financial goals. Risk-averse investors and those in lower tax brackets can look at tax-saving fixed deposits (FDs). Several banks have raised interest rates on tax-saving FDs after five consecutive repo rate hikes by the Reserve Bank of India (RBI) in 2022. Small finance banks and smaller and new private sector banks now offer rates up to 7.60 percent on tax-saving FDs, data compiled by BankBazaar shows.
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Investments of up to Rs 1.5 lakh can be claimed for tax deduction under section 80C of the income tax act. Tax-saving FDs have a lock-in period of five years and premature withdrawals are not allowed.
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DCB Bank offers interest rates of up to 7.6 percent on tax-saving deposits. Among private banks, DCB Bank offers the best interest rates. A sum of Rs 1.5 lakh invested grows to Rs 2.19 lakh in five years.
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Ujjivan Small Finance Bank and AU Small Finance Bank offers interest rates of up to 7.20 percent on tax-saving deposits. Among small finance banks, both these banks offers the best interest rates. A sum of Rs 1.5 lakh invested grows to Rs 2.14 lakh in five years.
Deutsche Bank offers interest rates of up to 7 percent on tax-saving deposits. Among foreign banks, Deutsche Bank offers the best interest rates. A sum of Rs 1.5 lakh invested grows to Rs 2.12 lakh in five years.
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Several banks including Yes Bank, City Union Bank, RBL Bank, IDFC First Bank, HDFC Bank, Axis Bank and ICICI Bank offers interest rates up to 7 percent on tax-saving deposits. A sum of Rs 1.5 lakh invested grows to Rs 2.12 lakh in five years.
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IndusInd Bank and Suryoday Small Finance Bank offers interest rates of up to 6.75 percent on tax-saving deposits. A sum of Rs 1.5 lakh invested grows to Rs 2.10 lakh in five years.
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The smaller private banks and small finance banks are offering higher interest rates to garner newer deposits. The Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the RBI, guarantees investments in fixed deposits of up to Rs 5 lakh.
Data compiled as of January 17, 2023 from respective banks' website. BankBazaar has accounted for FDs belonging to only those foreign, private, small finance and public sector banks that are listed on the Bombay stock exchange. Banks, for which data is not available on their respective websites, were not considered. These rates are only of tax-saving five-year FDs for non-senior citizens.
Hiral Thanawala is a personal finance journalist with 9 years of reporting experience. Based in Mumbai, he covers financial planning, banking and fintech segments from personal finance team for Moneycontrol.
