Banks such as SBI and HDFC are offering an interest rate of 5.40 and 5.60 percent on tax-saving FDs respectively. PNB offers 5.25 percent on its Fds over 5 years. Here are some banks which are offering the highest rates;
Post Office time deposit
Under Section 80C of the Income Tax Act of India, 1961, the deposit you placed in the 5-year fixed deposit account qualifies for an income tax deduction. Post office time deposit Interest is paid annually but calculated quarterly. The interest rate offered on a 5-year post office time deposit is 6.7 percent.
Tax Deducted at Source (TDS)
Interest on tax-saving fixed deposits is paid out on a monthly or quarterly basis. You can also choose to reinvest it. The interest earned is taxable according to the income tax bracket in which your taxable income falls. You can avoid paying TDS by submitting Form 15G to the bank.
Form 15H can be used by senior citizens to submit to the bank. TDS becomes applicable to people if their total interest earned in a financial year exceeds Rs 40,000. Section 80TTB of the Income Tax Act allows senior citizens to deduct up to Rs 50,000.
Premature withdrawals from tax-deferred savings accounts are not permitted. You cannot break these FDs before the five-year term expires, according to the Bank Term Deposit Scheme 2006. Premature withdrawal or a borrowing facility are not available with tax saver FDs.
If you compare, you can notice that the Post office time deposit is offering the highest interest rates when compared to other bank fixed deposits. It’s worth noting that most banks give senior citizens who invest in tax-saving FDs a greater interest rate usually by 0.25 percent to 0.5 percent. Post Office Time Deposits, on the other hand, do not offer any higher tax-saving interest rates for senior citizens.