Key Features Of A Tax-Saving FD

Tax-saving FDs are a type of fixed deposit that allows investors to get a tax deduction of up to ₹1,50,000 when investing in them

Tax-Saving FD: Eligibility

All Indian citizens and HUFs (Hindu United Family) are eligible to invest in a tax-saving FD. Moreover, minors can also invest in these FDs jointly with a guardian.

Minimum And Maximum Deposit

The minimum deposit amount for tax-saving FDs varies as per different banks, but the lowest minimum deposit limit you will find would be at least ₹1,000. The maximum deposit you can make in a single year on tax-saving FDs is ₹1.5 lakh.

Lock-In Period

The minimum lock-in period for tax-saving FDs is 5 years, meaning investors cannot withdraw their invested funds from the FD for at least 5 years from the date of starting. Moreover, a loan facility is also not allowed for tax-saving FDs.

How To Invest In Tax-Saving FDs

Prominent private and public sector banks offer various tax-saving FD schemes with many attractive features that potential investors can choose from.

Tax Deducted At Source (TDS)

TDS is applicable on the interest earned as per the applicable tax bracket. However, this tax can be avoided by submitting Form 15G (or 15H for senior citizens) to your bank where you have the FD.

Nomination Facility

Individuals have the option to nominate another person/family member to take over/benefit from the tax-saver FD if an unfortunate event befalls them. However, this facility is not allowed for minors.

Documents Required

The following documents are required to start a tax-saving FD: 

  1. Identity Proof (Passport, PAN, DL, etc.) 

  2. Address Proof (Passport, Light bill, Bank statement, etc.)

Interest Rates On Tax-Saving FDs

Most banks offer an interest rate in the range of 5.5% to 7.5% for tax-saving FDs depending upon the tenure and amount of money invested. Senior citizens are generally offered slightly higher interest rates than regular citizens.

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