It is that time of the year when you are supposed to submit your investment proofs for FY2023-24. If you haven’t invested in tax-saving instruments till now, don’t panic, you have till March 31 to do so. Investments made after the conclusion of FY24 will not be eligible for claiming deductions under the Old Tax Regime when filing the Income Tax Return (ITR) for FY24.
Tax Saving Fixed Deposits
After the Reserve Bank of India (RBI) raised the repo rate consecutively five times in 2022, several banks have increased the interest rates on tax-saving fixed deposits (FDs). Taxpayers can claim an income tax deduction by investing money in a five-year FD schemes under Section 80C of the Income Tax Act, 1961.
Here one should note that the investors should be an individuals or Hindu Undivided Families.
Any investor can claim a deduction of a maximum of Rs 1.5 lakh per annum by investing in a tax-saving fixed deposit account. These FD schemes have a lock-in period of five years, during which investors cannot withdraw the cash. Deposits can be made under a single or joint name, with the first holder eligible for the Income Tax advantage as per the government’s rules.
Investing in tax-saving FDs can be done through any public or private bank except cooperative and rural banks. The interest generated is taxable and may vary across different banks.
The Reserve Bank of India has introduced a new regulation regarding unclaimed, matured FD accounts. Under this rule, the funds in such accounts will be subject to an interest rate that is either equivalent to the rate applicable to savings accounts or the contracted rate of the matured FD, whichever is lower.
Here are some schemes to save on taxes under Section 80C of the Income Tax Act, 1961, under Old Tax Regime.
1. HDFC Bank
Interest rate on the 5-year tax-saving FDs: 7%
2. ICICI Bank
Interest rate on the 5-year tax-saving FDs: 7%
3. Axis Bank
Interest rate on the 5-year tax-saving FDs:7%
4. Yes Bank
Interest rate on the 5-year tax-saving FDs: 7%
5. Canara Bank
Interest rate on the 5-year tax-saving FDs: 6.70%
6. State Bank of India (SBI)
Interest rate on the 5-year tax-saving FDs: 6.50%
7. Punjab National Bank (PNB)
Interest rate on the 5-year tax-saving FDs: 6.50%
8. Kotak Mahindra Bank
Interest rate on the 5-year tax-saving FDs: 6.20%
One should note
If you withdraw funds from your tax saving FD before the specified time, you will be subject to a penalty and will not receive the tax exemption benefit.
In case of joint tax saving FD, only the first holder can avail the tax benefits.
FDs vs other saving instruments
| Investment Type | Returns | Lock-in Period | Tax on Returns |
| 5-Year Bank Fixed Deposit | 5% to 7% | 5 years | Yes |
| National Savings Certificate (NSC) | 6% to 8% | 5 years | Yes |
| National Pension System (NPS) | 8% to 10% | Till Retirement | Partially Taxable |
| ELSS Funds | 12% to 15% | 3 years | Partially Taxable |
Also read: Investment ideas: Term deposits vs Fixed deposits. What is the basic difference?