Top 5 tax-saving bank FDs: Tax-saving fixed deposits (FDs) offer a deduction of up to Rs 1.5 lakh under Section 80C of the Income-tax Act, 1961. The maximum investment allowed in a tax-saving FD per year is Rs 1.5 lakh, and the deposit has a mandatory lock-in period of five years.
Since tax saving FDs come with a tenure of five years, no premature withdrawal is allowed in tax-saving fixed deposits.To put it in simple terms: your money will be locked in for five years.
It is important to note that the interest earned on tax-saving FDs is subject to tax deducted at source (TDS) based on the investor’s tax bracket. TDS applies to individuals if the total interest earned exceeds Rs 40,000 in a financial year, according to ET. However, senior citizens can claim an annual interest deduction of up to Rs 50,000 under Section 80TTB.

Top 5 Tax-Saving Bank Fixed Deposits

When choosing a bank for a tax-saving FD, it is essential to compare interest rates offered by different banks rather than simply opting for the bank where you have a savings account. A higher interest rate translates to better returns over the long term.
We take a look at the top 5 tax-saving bank FDs as per data compiled by ET Intelligence Group:

TENURE: 5 YEARS AND ABOVE Interest Rate (%) What Rs 10,000 Will Grow To
DCB Bank 7.4 14,428
Dhanlaxmi Bank 7.25 14,323
IndusInd Bank 7.25 14,323
YES Bank 7.25 14,323
City Union Bank 7.1 14,217

Experts are of the view that interest rates on fixed deposits have likely reached their peak in the current cycle. As soon as the Reserve Bank of India (RBI) reduces the repo rate, banks will begin to lower the interest rates on fixed deposits.
“Considering how interest rates are elevated right now and the fact that we have hit the plateau in terms of rate hikes, current times offer an opportunity to lock in to higher yields before the reversal cycle kicks in,” advises Nirav Karkera, Head of Research at Fisdom.