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Save on your taxes and enjoy benefits with this 5-year fixed deposit

Tax Saver Fixed Deposit

You can save tax and earn interest with Tax Saver Fixed Deposits. It not only helps you build a corpus by way of attractive interest rates, but also tax benefits.

Fixed Deposits can help you plan for future expenses or set aside funds for any kind of emergency. You can start with as little as ₹100 and invest up to ₹1,50,000 in Axis Bank's Tax Saver Fixed Deposits. The Tax-Saver Fixed Deposit offers flexible interest pay-out options designed to fit your financial needs. You can select from a reinvestment plan or opt for regular interest payouts — monthly or quarterly — to align with your cash flow needs and tax-saving goals.

Tax Deductible on Fixed Deposits

Tax-Saver Fixed Deposits yield higher interest rates than Savings Accounts and have a fixed tenure of five years. Investors can claim deductions up to ₹1,50,000 annually under Section 80C of the Income Tax Act, 1961, with a tax-saving FD. This effectively reduces an individual’s gross total income.

For FY24, interest earnings over ₹40,000 attract tax liabilities, adjusted from ₹10,000 in the previous year. Such interest falls under the 'income from other sources' category for tax considerations. This is Tax Deducted at Source (TDS). Tax-saving FDs serve as a prudent method for enhancing savings while offering tax benefits, aligning with financial growth objectives.

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How to Avoid TDS on FDs?

You cannot completely avoid TDS on tax-saving fixed deposits, but there are a few ways to minimise the tax outgo under various provisions of the Income Tax Act. These include:

  • Tax-saving with Form 15G

  • Eligibility to submit Form 15G for tax-saving Fixed Deposits is when the annual income is below ₹2,50,000. This form is a declaration that one's income sits beneath the taxable threshold, cancelling TDS on the interest generated from such FDs.

  • Tax-saving with Form 15H

  • Form 15H serves as a tool for senior citizens — 60 years or more, whose annual income does not cross ₹2,50,000 — to claim an exemption on the interest from Fixed Deposits. This form is a testament to their tax-exempt status, preventing TDS on their FD interest earnings.

  • Tax-saving with a joint applicant

  • In joint Fixed Deposit accounts, TDS can be sidestepped if the joint holder is specified as the primary account holder and submits a valid Form 15G or 15H, as applicable. The interest income is then not subjected to TDS for the secondary holder, thus optimising tax benefits.

  • Tax deductions for re-investment FDs

    • Tax Deducted at Source (TDS) comes into effect when the aggregate interest earned across all branches on Recurring Deposits (RD) and Fixed Deposits (FD) for an individual exceeds ₹40,000 within a financial year – the threshold is higher at ₹50,000 for senior citizens.
    • A TDS Certificate outlining the details of the tax deducted will be dispatched to the depositor each quarter, offering transparency on the TDS applied throughout the fiscal year.
  • Documents required for tax-saving FD

  • Opening a tax-saving Fixed Deposit requires furnishing valid identification and address verification. Accepted documents include Aadhaar, PAN, Voter ID, Driving Licence, Passport or any OVD document for identity verification.

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Things to know about Tax-Saving Fixed Deposits

  • Guaranteed returns: Tax saver FDs offer fixed and predictable returns, unaffected by market fluctuations.
  • Risk-free: Tax-free FD are insulated from market risks, ensuring capital safety.
  • Senior citizen advantage: A preferential interest rate that exceeds the standard rate by 0.25% to 0.5% is available for senior citizens.
  • Tax deduction: Investments qualify for a deduction under section 80(C) of the Income Tax Act, up to ₹1,50,000 annually.
  • Minimum investment: Initiating a tax-free Fixed Deposit is possible with an investment as small as ₹100.
  • Maximum investment: The upper limit for investment in tax-saving FDs is ₹1,50,000.
  • Eligibility: Only Indian citizens and Hindu Undivided Families (HUFs) can open tax-saving FDs.
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Comparison with other Tax-Saving Investments

In comparison to other tax-saving instruments, the rate of interest is mediocre. However, the upside is that the tax-saver fixed deposit rates and returns are guaranteed and risk-free. This is because the returns do not depend on the performance of the capital or stock market. Here are some other tax-saving investments with their rate of interest:

InstrumentType of investmentInterest rateLock-in period
Equity Linked savings schemeMarket-linked10%-12%3 years
Public Provident fundGovernment scheme7%-8%15 years
Sukanya Samriddhi YojanaGovernment scheme7.6%21 years
National Savings certificateGovernment scheme6%-8%5 years
National pension schemeGovernment market-linked scheme8%-10%Till retirement
Unit-linked insurance planMarket-linked7%-25%5 years

To know your tax-saver FD rates, you can use a fixed deposit interest rate calculator.

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Frequently Asked Questions

You can open a Tax-Saver FD with a minimum of ₹100.

Tax-Saver FDs have a five-year tenure, hence premature withdrawals are not permitted.

With a Tax-Saver FD, you are eligible for deduction up to ₹1,50,000 under section 80C of the I-T Act.

Tax-Saver FDs are ideal for those seeking secure, non-market-linked investments and for individuals preferring guaranteed returns.

Tax-Saver FDs carry minimal risk as they are not linked to market fluctuations. The interest rate at which you book the FD is locked into for the entire five-year period.

Tax-Saver FDs have a single term of five years, unlike regular FDs, which offer a range of maturity periods.

Upon maturity of the Tax-saver FD, both the principal and the accumulated interest is credited to the depositor's Savings Account.

To open a Tax Saver FD, log into Axis Bank's net banking, go to the FD/RD section, select Tax Saver FD, and follow the prompts to invest. You can also invest through Axis mobile app or by visiting an Axis Bank branch.

A tax saver fixed deposit which is easy on your pocket.Open Tax Saver FD Online

A tax saver fixed deposit which is
easy on your pocket

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