Tax saving FD: SBI, HDFC Bank, ICICI Bank, PNB, Kotak Mahindra, and others — Which bank offers the highest interest?

Tax saving FD: SBI, HDFC Bank, ICICI Bank, PNB, Kotak Mahindra, and others — Which bank offers the highest interest?

Tax-saving fixed deposits (FDs) are one of the popular investment options, especially among traditional investors who are averse to risks. Tax-savings FDs are fixed deposits that allow investors to claim income tax deductions under section 80C of the Income-tax Act, 1961. Tax-saving FDs have a lock-in period of five years. An investor can claim a deduction of up to Rs 1.5 lakh under section 80C per financial year by investing in these tax-saving fixed deposits. Do remember that the interest earned on these fixed deposits is taxable as per the tax bracket of the investor.

All popular banks offer tax-saving fixed deposits. If you are planning to invest in a tax-saving FD, do remember that your money will be locked for at least five years. For investors planning to book FDs now, Suresh Sadagopan, an RIA and founder of Ladder7 Financial Advisors, said, “Ideally FD tenure should match one’s investment horizon. Proper planning and thought should hence go into this before investment.” Simply put, your tax-saving FDs must fit your financial planning.

Also Read: Tax-saving FD: Highest interest rate, tax benefits, premature withdrawal

If you are planning to invest in fixed deposits to save tax in the financial year 2022-23, you need to book FD by March 31, 2023. Do not wait till the last day to book your FD. “Whilst it may be a good idea to wait till the end of the financial year as interest rates are going up, one should avoid leaving it to the absolute last minute so that the FD created has a value date of this financial year itself, so that the tax benefits are available as planned,” said Vishal Dhawan, a CFP and founder of Plan Ahead Wealth Advisors.

There are multiple ways you can earn interest on these tax-saving fixed deposits. You can go for a cumulative FD where the interest is accrued and paid at the time of maturity of the deposit. You also have the option to choose a regular payout of interest rates during the entire tenure of the fixed deposit. You can go for a monthly or quarterly or half-yearly payout option. If you go for the reinvestment option while booking your FD then the maturity amount will be re-invested after maturity for the next five years.

DCB Bank offers the highest interest rate of 7.6 per cent on tax-saving fixed deposits. SBI offers an interest rate of 6.5 per cent on five-year tax-saving fixed deposits. Meanwhile, HDFC Bank offers an interest rate of 7 per cent on tax-saving FDs.

To make your journey easy, we have made a list of popular banks and how much they are offering on tax-saving FDs. Take a look

Tax-saving FD interest rates
Bank 5-year FD interest rate (%)
General citizen
Axis Bank 7
Bandhan Bank 5.85
Bank of Baroda 6.5
Canara Bank 6.5
Central Bank of India 6.25
DCB Bank Ltd. 7.6
Federal Bank 6.6
HDFC Bank 7
ICICI Bank 7
IDBI Bank 6.25
IDFC First Bank 7
Indian Bank 6.25
Indian Overseas Bank 6.5
Induslnd Bank 7.25
Kotak Mahindra Bank 6.2
Punjab & Sind Bank 6.25
Punjab National Bank 6.5
RBL Bank 7
State Bank of India 6.5
YES Bank 7

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Author: Shirley