Tax-saving FDs are suitable for seniors and also risk-averse investors. An individual gets tax deduction under Section 80C for investment in tax-saving FDs.

They have a minimum of five-year lock-in, and the minimum amount that an individual can invest varies from one bank to another.

If you make a tax-saving fixed deposit in joint name, the tax benefit is available only to the first holder.

Investment advisors don’t recommend tax-saving fixed deposits as their returns are taxable, besides the longer lock-in. Banks deduct tax at source every year on the interest earned and deposit it with the tax department.

If your income is not taxable, you will need to fill a form and submit it to the bank. Seniors (60 and above) should fill the Form 15H, and others need to submit Form 15G.

It comes with a nomination facility whereby investors can nominate someone to withdraw the deposit before or after maturity in the event of their demise.

You can book an FD with either private or government banks. Co-operative banks don’t offer tax-saving FDs. However, if you invest in a 5-year time deposit with Post Office, you can claim the tax deduction.

Here are the tax-saving FDs from the private, public sector, and small finance banks as of 16 March 2021 (Source: Paisabazaar.com). Do note that banks offer 0.5% higher rates for seniors, except for AU small finance bank, which offers 0.75% higher rates. India Post offers 6.7% on its 5-year time deposit.

SMALL FINANCE BANKS

Suryoday Small Finance Bank - 7.25%

Jana Small Finance Bank - 7.00%

Utkarsh Small Finance Bank - 6.75%

Ujjivan Small Finance Bank - 6.75%

AU Small Finance Bank - 6.25%

 

PRIVATE SECTOR BANKS

DCB Bank - 6.75%

IndusInd Bank - 6.50%

Nainital Bank - 6.35%

RBL Bank - 6.25 %

IDFC First Bank - 5.75%

 

PUBLIC SECTOR BANKS

Union Bank of India - 5.55%

Canara Bank - 5.50%

State Bank of India - 5.40%

Bank of India - 5.30%

Punjab National Bank - 5.30%