However, it is essential that you need to contemplate some elements earlier than investing in an FD.With quite a few competing tax-saving funding choices, is an FD the optimum alternative? Additionally, regardless of FD curiosity rates nearing their peak of the previous 3-4 years, is it advisable to invest now as the rate of interest cycle is anticipated to change quickly? Here’s all the pieces you want to know:
What are tax-saving FDs?
According to ET, tax saving FDs include a fixed tenure of 5 years, disallowing untimely withdrawals. Investors can deposit a most of Rs 1.5 lakh, with the minimal funding various throughout totally different banks.
Interest on tax-saving FDs may be paid month-to-month, quarterly, or reinvested. Remember, the curiosity earned is topic to Tax Deducted at Source (TDS) primarily based in your tax bracket. Individuals face TDS if their complete curiosity exceeds Rs 40,000 in a monetary yr. Senior residents can declare an annual curiosity deduction of up to Rs 50,000 below Section 80TTB.
ALSO READ | High fixed deposit rates for senior residents: List of 6 small banks providing 9% or above FD curiosity rates
Now, the place must you e-book an FD? Don’t choose a financial institution solely as a result of you have got a financial savings account there. Your financial institution won’t all the time present the finest rate of interest. Compare curiosity rates supplied by totally different banks.
A better rate of interest in your funding leads to higher returns over time. Most banks present barely greater curiosity rates on tax-saving FDs for senior residents compared to non-senior residents.
Here are the newest tax-saving FD curiosity rates compiled from numerous banks to simplify your resolution-making:
Tax-saving FD rates of varied banks compared: Full checklist
| Tax-saving FD curiosity rates | ||
| Bank |
General Citizen |
Senior Citizen |
| State Bank of India | 6.50% | 7.50% |
| HDFC Bank | 7.00% | 7.50% |
| Axis Bank | 7.00% | 7.75% |
| ICICI Bank | 7.00% | 7.50% |
| DCB Bank | 7.40% | 7.90% |
| IndudInd Bank | 7.25% | 7.75% |
| YES Bank | 7.25% | 8.00% |
| RBL Bank | 7.10% | 7.60% |
| Bandhan Bank | 7.00% | 7.50% |
As on February 29, 2024
Most main non-public sector banks provide curiosity rates starting from 7% to 7.4% on tax-saving FDs, with senior residents eligible for rates of up to 7.9%. Comparatively, the National Savings Certificate (NSC) gives 7.7% for the January-March quarter, whereas 5-yr submit workplace time deposits present 7.5% for the March quarter. Senior residents can avail themselves of an rate of interest of 8.2% in the Senior Citizen Savings Scheme (SCSS).
Bank tax-saving FDs may be an interesting alternative for traders who aren’t senior residents, contemplating the curiosity rates. Even for senior residents, some banks provide aggressive rates. This may very well be engaging to seniors who’ve reached the Rs 30 lakh funding restrict of SCSS and search one other dependable fixed-income funding possibility.
ALSO READ | HDFC Bank raises FD curiosity rates, now earn up to 7.75%; know the newest FD rates right here
Now begs the query: Why act now?
Current curiosity rates for fixed deposits are at their peak inside the cycle. Any upcoming reductions in the Reserve Bank of India‘s (RBI) repo price might immediate banks to decrease FD curiosity rates. Seizing this opportune second permits traders to lock in greater yields for the subsequent 5 years.
Abhishek Kumar, a SEBI-registered funding advisor, predicts, “As inflation continues to decrease, the repo rate is likely to go down in the next few quarters.”
Ajinkya Kulkarni, Co-Founder and CEO of Wint Wealth, expects, “We count on FD rates to begin lowering just a few quarters down the line.”
If you intention to safe a excessive-rate of interest in your FD and profit from it over the subsequent 5 years, it is advisable to e-book a tax-saving FD instantly.
Nirav Karkera, Head of Research at Fisdom, recommends making the most of the present excessive curiosity rates and secure price hikes to safe greater yields earlier than the cycle adjustments.
It’s essential to notice that when locked in, the rate of interest stays fixed for the complete tenure of 5 years.
Kumar highlights a restricted alternative for traders to safe tax-free fixed deposits, suggesting that people ought to contemplate investing in these FDs primarily based on their funding horizon.
This additionally gives you with an opportunity to safe tax-saving FDs at a excessive rate of interest presently, which could not be accessible subsequent yr.
