All popular banks offer tax-saving fixed deposits. If you are planning to invest in a tax-saving FD, do remember that your money will be locked for at least five years. For investors planning to book FDs now, Suresh Sadagopan, an RIA and founder of Ladder7 Financial Advisors, said, “Ideally FD tenure should match one’s investment horizon. Proper planning and thought should hence go into this before investment.” Simply put, your tax-saving FDs must fit your financial planning.
Also Read: Tax-saving FD: Highest interest rate, tax benefits, premature withdrawal
If you are planning to invest in fixed deposits to save tax in the financial year 2022-23, you need to book FD by March 31, 2023. Do not wait till the last day to book your FD. “Whilst it may be a good idea to wait till the end of the financial year as interest rates are going up, one should avoid leaving it to the absolute last minute so that the FD created has a value date of this financial year itself, so that the tax benefits are available as planned,” said Vishal Dhawan, a CFP and founder of Plan Ahead Wealth Advisors.
There are multiple ways you can earn interest on these tax-saving fixed deposits. You can go for a cumulative FD where the interest is accrued and paid at the time of maturity of the deposit. You also have the option to choose a regular payout of interest rates during the entire tenure of the fixed deposit. You can go for a monthly or quarterly or half-yearly payout option. If you go for the reinvestment option while booking your FD then the maturity amount will be re-invested after maturity for the next five years.
DCB Bank offers the highest interest rate of 7.6 per cent on tax-saving fixed deposits. SBI offers an interest rate of 6.5 per cent on five-year tax-saving fixed deposits. Meanwhile, HDFC Bank offers an interest rate of 7 per cent on tax-saving FDs.
To make your journey easy, we have made a list of popular banks and how much they are offering on tax-saving FDs. Take a look
|Tax-saving FD interest rates|
|Bank||5-year FD interest rate (%)|
|Bank of Baroda||6.5|
|Central Bank of India||6.25|
|DCB Bank Ltd.||7.6|
|IDFC First Bank||7|
|Indian Overseas Bank||6.5|
|Kotak Mahindra Bank||6.2|
|Punjab & Sind Bank||6.25|
|Punjab National Bank||6.5|
|State Bank of India||6.5|