Like most of us can concur, personal finance is an important aspect of life. Tax-saving FDs (Fixed Deposits) are an attractive investment option for those looking to save on their taxes while also earning competitive interest rates.
They offer the dual benefit of tax savings and higher returns than traditional fixed deposits. This makes them a great choice for savvy investors.
Let us discuss the different types of tax-saving FDs available in India, their features and benefits, and how you can make the most out of your investment in these schemes.
Features of Tax Saving FDs
Some of the inducive features of tax saving fixed deposit schemes are as follows:
Attractive tax savings
Investors can claim deductions of up to Rs 1.5 lakh for the amount invested in these FDs under Section 80C of the Income Tax Act.
This means that you can save a significant amount of money on your taxable income. This makes them an ideal choice for investors looking to reduce their tax burden.
Higher interest rates
These FDs generally offer higher interest rates than traditional fixed deposits. This makes them an attractive option for those looking to maximise their returns on investment.
They come with a lock-in period of 5 years
The major drawback of investing in fixed deposits that save tax is that they come with a 5 year lock-in period.
This means that you cannot withdraw your money before the end of this period. Hence, it is important to consider whether you’ll have the liquidity available to sustain such a long term investment.
Types of Tax Saving Fixed Deposits and Their Rates
There are various types of tax saving FDs available throughout the world. These points will help you choose the best one, suitable for your needs among the available options.
Public Sector Banks:
Public sector banks such as State Bank of India (SBI), Bank of Baroda, Punjab National Bank, etc., offer tax-saving fixed deposits with interest rates ranging from 5.75%-7.10%.
Private Banks:
Private banks such as HDFC Bank, Axis Bank, ICICI Bank and more offer tax-saving Fixed deposits with interest rates ranging from 6%-7.25%.
Small Finance Banks:
Small finance banks such as Ujjivan Small Finance Bank, AU Small Finance Bank, etc., offer tax-saving Fixed deposits with interest rates ranging from 6.25%-7.50%.
Cooperative Banks:
Cooperative banks such as Mahanagar Co-operative Bank, Saraswat Co-operative Bank, etc., offer tax saving fixed deposits with interest rates ranging from 5.75%-7%.
Things to Consider Before Investing in FDs
Any investment is subject to risks. Hence, here are things you need to consider and know before investing in tax saving FDs.
Consider Your Financial Goals:
Before choosing a tax-saving FD scheme, you should consider your financial goals and how long you are willing to stay invested in the scheme. This will help you determine which tax-saving FD best suits your needs.
Research Different Tax Saving Schemes:
Once you know what your financial goals are, you should research different options and their features. Compare interest rates, lock-in periods and other features to ensure that you choose the right scheme for you.
Invest in a Reputable Institution:
It’s important to invest in a tax-saving FD from a reputable institution. This will ensure that your money is safe and secure.
Conclusion
Tax-saving FDs are an attractive investment option for those looking to save on their taxes while also earning competitive interest rates.
With a variety of schemes available, it’s important to research different them and their features in order to choose the right one for your needs. Investing in a tax-saving FD from a reputable institution is the best way to ensure that your money is safe and secure.
By following these tips, you can make the most out of your investments and benefit from attractive features. Make sure to invest wisely and reap the rewards!