10 Best Tax-saving Fixed Deposits to invest for FY 2022-23 and avail income tax deduction under Sec 80C

Tax-saving FDs offer tax deduction under section 80C of Income Tax Act 1961.

Tax Saving Fixed Deposits

Fixed deposits are among the best tax-saving investments in India. They are very popular, safe, and offer reasonable interest rates. Fixed Deposits or FDs are suitable for investors who dislike taking much risk and provide different interest rates for different tenures. Moving to tax-saving FDs, they offer tax deduction under section 80C of Income Tax Act 1961. Investors invest lump sums with banks at a pre-determined interest rate for a fixed tenure. Investors receive the principal amount and the interest once the term is over.

What are Tax Saving FDs?

Tax-saving FDs offer tax deduction under sec 80C of Income Tax Act 1961. You can use a free FD calculator online to calculate potential returns from tax-saving FDs. You can invest in such FDs online and offline. You cannot withdraw prematurely with tax-saving FDs. You are not allowed to take loans against your fixed deposit account. You must invest for a five-year time frame (minimum lock-in) and pay tax according to the tax slab. 

Top 10 Tax Saving FDs (Schemes) in India

Top Tax Saving FD Schemes In India


How does a Fixed Deposit work?

Fixed deposits have a lock-in period, and investors earn interest cumulatively. You have various options for FDs as they vary in tenure. One investor might invest in a fixed deposit for 90 days, while another for 180. Fixed deposits carry higher returns compared to bank savings accounts. Section 80C of Income Tax Act allows tax exemptions on tax-saving FDs up to Rs. 1.5 lacs. You must pay tax according to your tax slab. A tax-saving FD has a 10% TDS if you have over Rs. 40,000 income. The amount moves up to Rs. 50,000 for senior citizens. 

TDS Rates

The interest you earn on tax-saving FDs is subject to tax and TDS. However, a TDS deduction happens on interest earned over a financial year. 

No TDS Deduction

No TDS will be deducted if your bank FDs have returned less than Rs. 40,000 interest in a financial year. For senior citizens (over 60 years), the limit is Rs. 50,000. 

10% TDS 

10% TDS will be deducted if your bank FDs have returned over Rs. 40,000 interest in a financial year. For senior citizens (over 60 years), the limit is Rs. 50,000. 

Also ReadHow to invest in FDs and save income tax?

20% TDS

20% TDS will be deducted if a taxpayer does not furnish their PAN to their bank. 

Less than Rs. 2.5 Lac Income

TDS is not deducted if your total income, including interest from FDs, is less than Rs. 2.5 lacs. It is so because taxable income is subject to TDS deduction. The TDS deduction is not helpful if you come in the "exempt from tax" slab. As a taxpayer, you would have to bear the burden of deduction and then refund during ITR filing unnecessarily. 

Tax Exemptions on Fixed Deposits

You can claim tax exemptions on tax-saving FDs. Sec 80c of Income Tax Act allows a tax deduction of up to Rs. 1.5 lacs. 

Also Read5 Banks offering 6% FD rates 

You need two passport-size photos, a PAN card, address proof, tax-saving FD dorm, ID proof, and senior citizen ID (if applicable) to open a tax-saving FD account. You can open this account either online or offline. 


Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.


Related Article

Premium Articles

Union Budget