Returns on fixed deposits (FDs) are no longer as high as they used to be ten or twenty years ago. Most FDs do not give investors an interest rate of even 6% per annum. And while investors have plenty of other options to invest in now, such as land, gold, digital assets, stocks, etc., one cannot deny how secure and easily liquidable FDs are.
Then comes the tax-saving benefit that certain five-year fixed deposits come with, where taxpayers can claim a deduction of up to Rs.1.5 lakh under Section 80C of the Income Tax Act. Fixed deposits also offer investors a guaranteed rate of return.
This article lists down some tax-saving fixed deposits that provide the highest returns. It is important to note that tax-saving FDs have a five-year lock-in period, and premature withdrawals are not allowed.
Suryoday Small Finance Bank offers investors an interest rate of 6.75% per annum on its tax-saving deposits. Similarly, AU Small Finance Bank offers an annual interest rate of 6.75%. For reference, an investment of Rs.1 lakh today will grow to almost Rs.1.4 lakh in five years. These banks also offer senior citizens a higher rate at 7.25% per annum.
IndusInd Bank offers investors an interest rate of 6.5% per annum on its tax-saving deposits and 7% for senior citizens. RBL Bank is currently offering an interest rate of 6.3% per annum on tax-saving deposits. Senior citizens investing in RBL Bank FDs benefit from a higher rate of 6.8% per annum.
Following up next and close behind are four banks – DCB Bank, IDFC First Bank, Yes Bank, and Deutsche Bank, who are all offering 6.25% per annum on their tax-saving FDs. For senior citizens, the rate offered by DCB Bank and IDFC First Bank is 6.75% per annum. Yes Bank offers senior citizens a rate of 7% per annum.
Since it’s been just one month into the financial year, now would be a good time to invest in these tax-saving FDs, which will not just generate interest through the year but also not put any year-end pressure to find tax-saving avenues to bring down your tax liability.
Disclaimer: The above interest rates are taken from the respective banks’ websites as of the date of writing this article. Investors are advised to verify the rates in force with the concerned bank prior to investing. Also, please note that the rates for deposits exceeding Rs.2 crore and NRO/NRE accounts could vary from the ones listed above.
For any clarifications/feedback on the topic, please contact the writer at athena.rebello@cleartax.in
I’m a Chartered Accountant by profession and a writer by passion. ClearTax lets me be both. I love travel, hot tubs, and coffee. I believe that life is short, so I always eat dessert first. Wait.. life is also too short to be reading bios… Go read my articles!
