How to Benefit from Income Tax Exemptions on Tax Saver FD 2024?

By Anupama Deshpande | May 01, 2024

An FD account is an excellent option to invest for risk-averse investors seeking steady returns. Fixed Deposits offered by various banks help people save funds for their future or to arrange for funds to meet any specific objective. While a regular FD allows you to select any tenure between 7 days and 10 years as per your convenience and financial objective. A 5-year Bank FD is offered for tax saving.

If you are seeking an investment alternative which fulfils the criteria of guaranteed returns, minimal risk and tax saving, you should pick a Tax Saving Fixed Deposit. You can compare from the interest rates offered by various banks on Tax Saving FD and then choose the one that fits your investment objectives.

How to Benefit from Income Tax Exemptions on Tax Saver FD 2024?

Tax-Saving FD: Key Features

Tax-Saving FDs come with the following features,

Lock-in Period5 years
Interest RatesDiffer from bank to bank, currently in the range from 5% to 9% p.a. and rates for Senior Citizens also vary
Interest EarnedTaxable and remains unchanged over the five-year period
TDSTDS @10%, if interest income exceed Rs.40,000 for citizens aged below 60 and Rs.50,000 for senior citizens
Auto-renewal FacilityNo
Mode of HoldingSingle or Joint mode

It is important to note that premature withdrawal and loans or overdraft (OD) facilities are not available for a Tax Saving FD. FD holder can choose to renew the FD in case of non-withdrawal at the time of maturity. You can use Tax Saver FD Interest Calculator to calculate the interest earned and maturity value.

Benefit from Income Tax Exemptions on Tax Saver FD

Income Tax SectionEligible AmountType of FD Account Holder
Tax Exemption under Section 80CUp to Rs.1.50 lakh per financial yearRegular as well as Senior Citizen
Tax Exemption under Section 80TTBUp to Rs.50,000 per financial yearSenior Citizen

(1) Tax Exemption under Section 80C

Under Section 80C of the Income Tax Act, 1961, tax-saving FD schemes offer a tax deduction benefit. These FDs come with a lock-in period of 5 years and deposits of up to Rs.1.50 lakh per financial year are eligible for the deduction. FDs allow only a one-time lump sum deposit. Minimum tenure for receiving tax benefits is five years.

Main advantage that a Tax Saving FD has over ELSS is that unlike ELSS, Tax Saving FD is not market-linked.

(2) Tax Exemption under Section 80TTB

Tax Exemption under Section 80TTB is available only to Senior citizens who can get a tax deduction under Section 80TTB of the Income Tax Act, 1961 on the interest earned from FDs. They can take benefit up to Rs.50,000 deduction on the interest income from FD accounts opened with banks.

It's essential for investors to remain aware that the interest income earned from FDs is taxable as per individual's income tax slab and is categorized as 'Income from other sources' while filing the Income Tax return (ITR).

Comparison Among Tax Saving Investment Options

Tax Saving InstrumentInterest Rate (p.a.)Lock-in PeriodInterest Taxable
5-Year Bank FD5% to 9%5 yearsYes
Public Provident Fund (PPF)0.07115 yearsNo
National Pension Scheme (NPS)4% to 15%Till RetirementIncome exempt up to 60% of the total amount payable
National Savings Certificate (NSC)0.0775 yearsYes
ELSS Funds10% to 20%3 yearsTax-free income up to Rs.1 lakh per year

Tax Saver FD is Suitable for Whom?

Suitability of investment in Tax Saving FDs depends upon your age, risk appetite, purpose of investment and investment time horizon. Tax Saving FD is Suitable for persons falling in any of the following categories,

  1. If you are around your retirement age: You would want to invest your hard earned money to a safe, secured and guaranteed return bearing instrument which is not volitile with the stock market fluctuations. Tax saving FD will be one of the best options for you to invest in.
  2. If you want a long-term fixed rate option: Tax saving FD offers 5-year long term investment with fixed returns.
  3. If you have a low risk appetite: A Tax Saving FD provides both the benefits of guaranteed fixed returns and low-to-zero risk, so it will be a good choice for you.
  4. If you need to save tax: Tax saving FD offers income tax exemption under Section 80C to save taxes.

Top 5 Tax Saving FD Interest Rates

BankRegularSenior Citizen
Suryoday Small Finance Bank8.25%8.75%
Utkarsh Small Finance Bank7.75%8.35%
Yes Bank7.25%8.00%
AU Small Finance Bank7.25%7.75%
IndusInd Bank7.25%7.75%

Tax Saving FD FAQs

Who is eligible to invest in Tax Saving FD?

Resident individuals and Hindu Undivided Families (HUF) are eligible to invest in Tax Saving FD.

What are the benefits of Tax Saving FD?
  • Guaranteed fixed interest rate
  • Simple documentation
  • Safe and secured investment option
  • Tax exemption under section 80C and 80TTB of Income Tax Act, 1961
  • Not volitile with the stock market fluctuations
What is minimum deposit amount under Tax Saving FD?

Minimum deposit amount under Tax Saving FDs is Rs.100 and in the multiples of Rs.100.

What is maximum deposit amount under Tax Saving FD?

Maximum deposit amount under Tax Saving FDs is Rs.1.50 lakhs in a financial year.

What is the lock-in period of Tax Saver FD?

Lock-in period of Tax Saver FD is 5 years.

Is there any additional benefit available for senior citizens under Tax Saver FD?

Senior citizens are offered 0.25% to 1% more interest rate as compared to regular investors. Moreover, they will also claim tax benefit up to Rs.50,000 deduction on the interest income.

What is interest pay out available?

Monthly, quarterly or reinvestment in principal options are available under Tax Saver FD.

Who is eligible for tax benefit in case of joint holding under Tax Saving FD?

In the case of joint holding under Tax Saving FD, the tax benefit under 80C of Income Tax Act, 1961 will be available only to the first holder of the account.

What are the drawbacks of Tax Saving FDs?

Premature withdrawal and auto-renewal facilities are not available. 5-year lock-in period will be there.

Is interest earned taxable under Tax Saving FD?

Yes. Interest earned is taxable according to the tax slab of the investor Tax Saving FD.

Can I invest in Tax Saving FD online?

Yes. Most of the banks in India offer the facility to invest in Tax Saving FDs online.

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About Anupama Deshpande
Anupama is a Co-Founder of She is an MBA (Finance) and Chartered Financial Analyst (CFA). She also carries a Fellowship degree in Life Insurance Sector and is a Master of Computer Application (MCA). She is an expert in Finance Field with an experience of over 18 years on different managerial positions in finance industry including Stock Market, Depository and Mutual Fund Sectors. Apart from that she has remained for few years in the field of marketing as well. Her suggestions and advice for investments have been very useful to many people.
Her vast interest & expertise in the field of finance have encouraged her to write the articles so that others can also get benefitted out of them. She never loses any opportunity to learn and be creative. She is a valuable asset for & important resource to all those around her.