Best Tax Saving Bank Fixed Deposit Rates in February 2020

Tax Saving Fixed Deposits one of the most popular ways to save taxes u/s 80C of income tax. These are like normal fixed deposits with banks but are labeled as “Tax Saving FD” while making the deposit.

Why you should invest?

  1. Convenient to invest. ICICI Bank, SBI, HDFC Bank, etc offers online facility for Tax Saving FD
  2. Redemption on maturity comes directly to your bank account
  3. High Safety – FD up to Rs 1 Lakh is insured

Why you should Not Invest?

  1. There are a lot of competing products like EPF, PPF, ELSS to exhaust the investment of Rs 1.5 Lakh u/s 80C
  2. The interest earned is taxable
  3. Cannot be withdrawn prematurely
  4. Cannot be pledged to secure a loan or as security

Tax Saving Fixed Deposit Interest Rate

As of February 8, 2020 banks are offering 5.25% – 7.50% for the general public and 5.750% – 8.00% for Senior Citizens.

  1. The best Tax Saving Fixed Deposit Interest offered is 7.50% for    General Public by DCB Bank
  2. The best Senior citizens Tax Saving Fixed Deposit Interest offered is 8.00% by DCB Bank
  3. 5 Year NSC at Post Office gives 7.9% interest for both Senior Citizens and general public

The table below lists the banks in alphabetical order with their respective interest rate offer on Tax Saving FDs for General and Senior Citizens.

The highest Interest Rates have been highlighted:

Bank General  Senior Citizen Scheme Name
Allahabad Bank 6.50% 6.50% Allahabad Bank Tax Benefit Term Deposit Scheme
Andhra Bank 6.10% 6.60% AB Tax Saver Deposits
Axis Bank 6.50% 7.00% Axis Bank Tax Saver Deposits
Bandhan Bank 6.75% 7.25% Bandhan Bank Tax Saver FD
Bank of Baroda 6.10% 6.60% Baroda Tax Savings Term Deposit
Bank of India 6.25% 6.75% Star Sunidhi Tax-Saving Deposit Scheme
Bank of Maharashtra 5.50% 6.00% Bank of Maharashtra Tax Saver FD
Canara Bank 6.25% 6.75% Canara Tax Saver Scheme
Catholic Syrian Bank 6.25% 6.75% CSB Tax Savings Support
Central Bank of India 6.20% 6.70% CENT Tax Saving Deposit
Citibank 5.25% 5.75% Citibank Tax Saver Deposit
City Union Bank 6.60% 6.60% CUB Tax Saver Gold Deposit
Corporation Bank 6.35% 6.85% Corp Tax Saver
DCB Bank 7.50% 8.00% DCB Bank Tax Saver FD
Dhanalakshmi Bank 6.50% 6.50% Dhanam Tax Advantage Deposit
Federal Bank 6.50% 7.00% Federal Tax Savings Deposit
HDFC Bank 6.30% 6.80% HDFC Bank Tax Saver FD
ICICI Bank 6.40% 6.90% ICICI Bank Tax Saver FD
IDBI Bank 6.25% 6.75% ICICI Bank Tax Saver FD
IDFC First Bank 7.25% 7.75% Suvidha Tax Saving Fixed Deposits
Indian Bank 6.25% 6.75% IB Tax Saver schemes
Indian Overseas Bank 6.25% 6.75% IOB Tax Saver Deposit Scheme
Indus Ind Bank 6.75% 7.25% Indus Tax Saver Scheme
J&K Bank 6.00% 6.50% Tax Saver Term Deposit Scheme
Karnataka Bank 6.50% 6.90% KBL – Tax Planner
Karur Vysya Bank 6.75% 6.75% KVB – Tax Shield Deposits
Kotak Mahindra Bank 5.90% 6.40% Tax Saving Deposits
Lakshmi Vilas Bank 7.25% 7.85% Lakshmi Tax Saver Deposits
Oriental Bank of Commerce 6.25% 6.75% Oriental Bank Tax Saving Term Deposit
Post Office FD (5 Years) 7.70% 7.70% 5-Year Post Office Time Deposit 
Post Office NSC (5 Years) 7.90% 7.90% National Saving Certificate
Punjab and Sind Bank 6.45% 6.95% PSB Fixed Deposit Tax-Saver Scheme
Punjab National Bank 6.30% 6.80% PNB Tax Saver Fixed Deposit Scheme
Ratnakar Bank 7.35% 7.85% Ratna Tax Saving Scheme
South Indian Bank 6.50% 7.00% SIB Tax Gain 2006
State Bank of India 6.00% 6.50% SBI Tax Savings Scheme 2006 (SBITSS)
Syndicate Bank 6.25% 6.75% SyndTaxShield Deposit Scheme
Tamilnad Mercantile Bank 6.60% 7.10% TMB TSD (Mullai)
UCO Bank 6.25% 6.75% UCO Tax Saver Deposit Scheme – 2006
Union Bank of India 6.30% 6.80% Union Tax Saver
United Bank of India 6.00% 6.50% United Bank of India Tax Saver FD
Yes Bank 7.25% 7.75% Yes Bank Tax Saver FD

Taxation & TDS – Tax Saving Fixed Deposits:

The interest received on tax saving Fixed Deposit is fully taxable. The interest income is considered as “income from other sources” for Tax filing and taxed at marginal tax rates applicable.

TDS (Tax deduction at source) at the rate of 10% is deducted, if the interest income is more than Rs 40,000 in a financial year per bank (changed from Rs 10,000 limit in Budget 2019)

In the case of Senior citizens, TDS would be deducted at the rate fo 10%, if the interest income exceeds Rs 50,000. You can see the same in Form 26AS.

In case your income does not exceed taxable slab and so want to avoid TDS, you can submit Form 15G or 15H when making the deposit. You would also need to submit the form at the start of every financial year to the concerned bank branch.

Key Points – Tax Saving FD:

Below are some points to keep in mind while investing in Tax Saving Deposits:

  • As the Tax Saving FD scheme was introduced in Budget of 2006, it’s also known as Tax Saving Deposit scheme 2006 (Notification Number 203/2006 and SO1220 (E) dated 28/07/2006)
  • Most of the banks accept the deposit of 5 Years only. However, there are banks with deposit tenures of more than 5 Years
  • You can deposit on either Single or Joint name. However, the benefit of the tax deduction is available for the first holder only.
  • Most banks offer interest rate which is similar to their 5 years term deposits. Only a few banks give a slightly higher interest rate for their Tax Saving Fixed Deposits
  • Most banks give Senior citizens and their staff members additional interest of 0.25% to 0.5%
  • A depositor can opt for either a cumulative or non-cumulative way of crediting periodical interest
  • Don’t get mislead by bank advertisements about their yield on Tax Saving FDs. Those are manipulative calculations
  • Be cautious of small co-operative banks as they have a higher risk than bigger private and public sector banks
  • Depositor gets benefit U/s.80C of the Income Tax Act. 1961
  • The minimum deposit is Rs.100 and in multiples thereof
  • Maximum deposit in a Financial Year Rs.1,50,000/- [i.e., 1st April to 31st March of the following calendar year]
  • Deposits cannot be withdrawn prematurely
  • Deposits cannot be pledged to secure a loan or as security

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