Personal Finance

10 Tax-Saving Fixed Deposits That Offer The Best Interest Rates

Investments up to Rs 1.5 lakh can be claimed for deduction under section 80C of the income tax law

Fixed Bank Deposit (FD) has been the most preferred investment option in India. Investors of all age groups love to park their savings on this investment path, as DFs are safe and returns are safe. Certain conservative investors prefer tax-saving FDs to take the section 80C deduction benefit. Investments up to Rs 1.5 lakh can be claimed for deduction under section 80C of the income tax law. Tax-saving DFs have a five-year blocking period and premature withdrawals are not allowed.

In these uncertain times of COVID-19, investors are turning from riskier assets to safer options, like DFs to preserve their capital, despite the steady decline in interest rates in the past year. Some small and private financial banks offer better rates.

Up to 10 private banks offer FDs that save taxes at rates of 6 percent or more. AU Small Finance Bank tops the table at 7 percent interest, followed by private banks such as DCB Bank, IDFC First Bank, IndusInd Bank, Yes Bank and RBL Bank, according to data compiled by BankBazaar.

Tax-Saving Deposits Offering The Highest Rates

Investments of up to Rs 1.5 iakh allowed for 80C tax deduction

Bank Annual rate of interest What Rs 1.5 lakh grows to in 5 years to
AU Small Finance Bank 7.00% 212,217
DCB Bank 6.95% 211,696
IDFC First Bank 6.75% 209,625
Induslnd Bank 6.75% 209,625
RBL Bank 6.75% 209,625
Yes Bank 6.75% 209,625
Deutsche Bank 6.25% 204,531
Ujjivan Small Finance Bank 6.25% 204,531
Bandhan Bank 6.00% 202,028
Karur Vysya Bank 6.00% 202,028

Data as on respective banks’ website on July 29 2020. Interest rate of all listed (BSE) public 8, private banks and foreign banks considered for data compilation. Banks for which verifiable data is not available are not considered. Table includes only tax-saving FDs (for non-senior citizens) for 5years tenure. For all FDs quarterly compound is assumed. Compiled by

After allocating to small savings and other avenues of tax savings, investors can park any surplus available in such FDs.

Axis Bank, ICICI Bank offer 5.5 percent and HDFC Bank offer 5.35 percent on five-year fixed deposits. State Bank of India (SBI) and Bank of Baroda (BOB) pay 5.40 percent and 5.30 percent, respectively. A sum of Rs 1.5 lakh invested in the AU Small Finance Bank tax saving FD grows to Rs 2.12 lakh after five years.

Back to top button