If you haven’t started your tax planning, now is the time to commence the process as March 31 - the last date to make tax-saver investments for the financial year 2023-24 - is just six months away. Moreover, most employers will ask their employees to submit their investment proofs in January or February. Invest wisely, considering your financial goals. You can achieve your tax-planning goals by investing in existing commitments, which might include your Public Provident Fund (PPF), National Pension Scheme (NPS), Sukanya Samriddhi Yojana (SSY), monthly SIP in equity-linked savings schemes (ELSS), Employees’ Provident Fund (EPF) or by paying life insurance premiums.
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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 six consecutive repo rate hikes by the Reserve Bank of India (RBI) in the last financial year.
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The key parameter for identifying these banks is the interest rate of the top 20 banks (according to their total term deposit position reported with the RBI as on March 31, 2022). The data has been compiled by BankBazaar. Banks for which data was not available on their websites have not been considered. The data includes only tax saving FDs (for non-senior citizens) for 5-year tenure assuming quarterly compounding of interest for all the bank. Of these top 20 entities, Bankbazaar has taken into account banks offering the highest interest rates on tax saving FDs.
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IndusInd Bank and Yes Bank offer interest rates of up to 7.25 percent on tax-saving deposits. Among the private banks, these banks offer the best interest rates. A sum of Rs 1.5 lakh invested here will grow to Rs 2.15 lakh in five years.
Leading private banks, which include HDFC Bank, ICICI Bank and Axis Bank offer interest rates of up to 7 percent on tax-saving deposits. A sum of Rs 1.5 lakh invested here will grow to Rs 2.12 lakh in five years.
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Union Bank of India and Canara Bank offer interest rates of up to 6.7 percent on tax-saving deposits. Among the public sector banks, these banks offer the best interest rates. A sum of Rs 1.5 lakh invested here will grow to Rs 2.09 lakh in five years.
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Federal Bank offers interest rates of up to 6.6 percent on tax-saving deposits. A sum of Rs 1.5 lakh invested here will grow to Rs 2.08 lakh in five years.
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Leading public sector banks, which include the State Bank of India (SBI) and Bank of Baroda, offer interest rates of up to 6.5 percent on tax-saving deposits. Other banks offering interest rates of up to 6.5 percent on tax-saving deposits are Punjab National Bank, Indian bank, Indian overseas bank and IDBI Bank. A sum of Rs 1.5 lakh invested here will grow to Rs 2.07 lakh in five years.
The Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the RBI, guarantees investments in fixed deposits of up to Rs 5 lakh.
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.
