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Five Year Tax Saving Bank Fixed Deposit

Last Update Date : April 29, 2019
Estimated Read Time: 6 min

tax saving fd

The act of saving and investing money regularly will significantly change the way you live your life in the future. But investing isn’t about beating others at their game, it’s about controlling yourself at your own game. Fixed Deposits are one of the ways to invest and also save taxes, which will be discussed in this guide.

What is a Five-year Tax Savings Bank Fixed Deposit?

A five-year tax saving fixed deposit type of fixed deposit investment, which is tax deductible under section 80C of the Indian Income Tax Act 1961.

Who can Open this Account?

A five-year tax savings fixed deposit account can be opened by all resident individuals (holding a PAN card). In this scheme, senior citizens above the age of 60 years are also eligible.

Furthermore, tax savings fixed deposits can be opened both singly and jointly. If it is a case of a joint account, in accordance with the section 80C of the Income Tax Act, 1961, tax benefit will be availed by the first holder of the deposit.

How to Open this Account?

One can invest in a five years tax savings fixed deposits in any private or public-sector bank, except co-operative and rural banks.  In accordance with the Term deposit scheme, 2006, issued by the Central Government of India, a five-year tax savings Fixed Deposit scheme will not have the facilities of premature withdrawal, loan against Fixed Deposit, and Auto-renewal.

The interest rates on fixed deposits vary from time to time. However, it is possible to check the latest interest rates with the respective bank where you intend to open the fixed deposit with.  As of May 1st, 2018, banks are offering interests at the rate of 6.00% – 7.50% for general public and 7.00% – 8.00% for Senior Citizens.

The Ratnakar Bank offers most handsome rate of interest of 7.50% on a five-year tax Saving general Public and 8.00% for Senior Citizens  These fixed deposits are like any other fixed deposits. The only difference is they comes in with a lock-in period of five years.

The minimum amount that can be invested is INR 1000, and in multiples thereof. There is no upper limit for investment in this scheme. (The minimum investment amount can vary from bank to bank)

Documents Required

The following documents are required as KYC details, to invest in a five-year tax savings fixed deposit scheme:

  1. Identity Proof
    • Passport
    • PAN card
    • Voter ID card
    • Driving license
    • Government ID card
    • Senior citizen ID card
  2. Address Proof
    • Passport
    • Telephone bill
    • Electricity bill
    • Bank Statement with Cheque
    • Certificate/ ID card issued by Post office

Note: An account opener can submit any other identity proof or address proof, subject to the respective Bank’s approval.

Application Procedure

Any individual can invest in a five-year tax savings fixed deposit (FD) through any public or private sector bank except for co-operative and rural banks.  The investor receives FD receipt from the bank at the time of opening the Tax-Saver Fixed Deposit Account.  It can be applied online as well as offline. All banks provide facility to download their form and submit along with the required amount of cash / cheque / direct debit.

Procedure to Open Tax Saving FD

Produce the original document(s) for verification & a photocopy of each document.

  • Fill the application form in block letters i.e. capital letters using Black ink.
  • Countersign in case of any overwriting.
  • Avail the nomination facility, if required.
  • Mandatorily provide permanent residential address and contact number

Top 5 banks Offering Tax Saver FD’s

Many banks in India offer tax savings deposits for five years. The below mentioned are recognized as TOP five Indian Banks offering tax saver fixed deposits:

  • Axis Bank
  • ICICI Bank
  • HDFC Bank
  • SBI Bank
  • IDBI Bank

Rates of interests as on 1 May 2018 under a five-year tax savings fixed deposit scheme

BankGeneral Interest RateSenior Citizen Interest RateScheme Name
Allahabad Bank6.50%6.50%Allahabad Bank Tax Benefit Term Deposit Scheme
Andhra Bank6.25%6.75%AB Tax Saver Deposits
Axis Bank6.90%7.40%Axis Bank Tax Saver Deposits
Bandhan Bank6.40%6.90%Bandhan Bank Tax Saver FD
Bank of Baroda6.70%7.20%Baroda Tax Savings Term Deposit
Bank of India6.25%6.75%Star Sunidhi Tax-Saving Deposit Scheme
Bank of Maharashtra6.00%6.50%Bank of Maharashtra Tax Saver FD
Canara Bank6.00%6.50%Canara Tax Saver Scheme
Catholic Syrian Bank6.50%7.00%CSB Tax Savings Support
Central Bank of India6.50%7.00%CENT Tax Saving Deposit
City Union Bank7.10%7.10%CUB Tax Saver Gold Deposit
Citibank5.25%5.75%Citibank Tax Saver FD
Corporation Bank6.50%7.00%Corp Tax Saver
DCB Bank7.20%7.70%DCB Bank Tax Saver FD
Dena Bank6.30%6.80%Dena Maha Tax Bachat Yojna
Dhanalakshmi Bank6.50%6.50%Dhanam Tax Advantage Deposit
Federal Bank6.50%7.00%Federal Tax Savings Deposit
HDFC Bank7.00%7.50%HDFC Bank Tax Saver FD
ICICI Bank6.50%7.00%ICICI Bank Tax Saver FD
IDBI Bank6.75%7.25%Suvidha Tax Saving Fixed Deposits
IDFC Bank7.20%7.70%IDFC Tax Saving Fixed Deposits
Indian Bank6.00%6.50%IB Tax Saver schemes
Indian Overseas Bank6.80%7.30%IOB Tax Saver Deposit Scheme
Indus Ind Bank6.50%7.00%Indus Tax Saver Scheme
J&K Bank6.80%7.30%Tax Saver Term Deposit Scheme
Karnataka Bank6.50%7.00%KBL – Tax Planner
Karur Vysya Bank7.00%7.00%KVB – Tax Shield Deposits
Kotak Mahindra Bank6.25%6.75%Tax Saving Deposits
Lakshmi Vilas Bank7.30%7.90%Lakshmi Tax Saver Deposits
Oriental Bank of Commerce6.40%6.90%Oriental Bank Tax Saving Term Deposit
Post Office NSC (5 Years)7.60%7.60% National Saving Certificate
Punjab and Sind Bank6.55%7.00%PSB Fixed Deposit Tax-Saver Scheme
Punjab National Bank6.25%6.75%PNB Tax Saver Fixed Deposit Scheme
Ratnakar Bank7.15%7.65%Ratna Tax Saving Scheme
South Indian Bank6.50%7.00%SIB Tax Gain 2006
State Bank of India6.75%7.25%SBI Tax Savings Scheme 2006 (SBITSS)
Syndicate Bank6.50%7.00%SyndTaxShield Deposit Scheme
Tamilnad Mercantile Bank Ltd6.90%7.40%TMB TSD (Mullai)
UCO Bank6.25%6.75%UCO Tax Saver Deposit Scheme – 2006
Union Bank of India6.50%7.00%Union Tax Saver
United Bank of India6.00%6.50%United Bank of India Tax Saver FD
Vijaya Bank6.50%7.00%Vijaya Tax Savings Scheme
Yes Bank7.00%7.50%Yes Bank Tax Saver FD

Benefits of Investing in the Scheme

  1. It is an affordable savings option. The minimum investment amount is INR 1000, and in multiples thereof. There is no upper limit for investment in this scheme
  2. Senior citizens are offered slightly higher returns on their investments by banks on Tax Saving Fixed Deposits.
  3. Nomination facility is available. You can nominate/authorize someone to withdraw your deposit before or post maturity in the event of your death.
  4. The major benefit of investing in tax saver fixed deposit is that it helps you save income tax.

Tax Benefits of Investing in Scheme

Investment under a five-year tax savings fixed deposit is eligible for tax deduction u/s 80C.

  1. Any investor can claim a deduction of maximum INR 150000 by investing in tax saver fixed deposits.
  2. Tax deduction is obtainable by individuals, members of Hindu undivided family (HUF), senior citizens and NRIs.
  3. Maturity amount at the end of the tenure is exempted from tax.
  4. Investment amount is eligible for tax deduction but returns received as interest income is taxable under “income from other sources“.
  5. TDS on Interest received on Fixed Deposit is liable to be deducted @ 10% by the Bank if the amount paid or expected to be paid during the financial year exceeds INR 10000

Maturity and Withdrawal of Tax Saving FD

In accordance with Government notification, premature withdrawal of FD is not allowed prior to the completion of original tenure i.e. five years.  In case, anyone redeems the amount of the fixed deposit prior to completion of tenure (five years), interest is paid at the rate applicable on the date of deposit, for the period for which the deposit has remained with the Bank.  In case of premature withdrawal, the deposit may be bound by penal rate of interest as set by the Bank on the date of deposit.  Under certain conditions, withdrawal is allowed for the Tax-Saver FD; but, there is no facility to avail a loan against tax saver fixed deposits.

How H&R Block India Can Help?

To explore all your tax savings options, including five year FD’s, enlist the aid of the experts at H&R Block India to maximize your tax savings and for better tax planning.

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Chetan Chandak (B.Com, LLB)
Chetan is the Head of Tax Research at H&R Block (India) with an experience of more than a decade in tax advising. He is also a regular contributor for some of the leading news publications in India such as Economic Times, Financial Express and Money Control. Professionally, Chetan is fascinated by international taxation and expat-related tax research.

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