Best tax-saving fixed deposits to invest in 2021

Best tax-saving fixed deposits to invest in 2021


  • In Tax Saver Fixed Deposits you have the option of receiving monthly or annual interest
  • The maximum amount that can be invested during a fiscal year in a tax-saving FD is Rs 1.5 lakh
  • The amount you invest in a tax-efficient FD remains locked in for five years

New Delhi: When it comes to claiming tax breaks on investments, investing in a term deposit system in the debt category is still widely favored by risk averse investors, not just to generate safe returns and guaranteed, but also to benefit from tax advantages under Article 80C. Investments made in fixed bank deposits specified for a term of five years are eligible for income tax deduction under Section 80C of the Income Tax Act 1961.

To claim tax benefits of up to Rs 1.5 lakh on term deposits, you must remain invested for 5 years of the blocking period. which means you cannot make an early withdrawal before the 5 year expiration.

Here are the best budget term deposits in 2021 to invest in:

5-year tax-saving fixed deposits from small financing banks:

Under the current low bank interest rate regime, smaller financial banks still promise the best interest rates which are higher than major private and public sector banks on short and long term deposits. By investing in a term deposit system of small financing banks, you will not only get good returns, tax benefits, but their deposits will also benefit from insurance coverage of up to Rs 5 lakhs by the DICGC .

Small Finance Bank Tax Saver FD Rate:

Small finance banks with best interest rates on 5 year tax saving deposits under Rs 2 crore:

Bank Regular FD rates FD senior rates
Small Ujjivan Financial Bank 6.75% 7.25%
Jana Small Finance Bank 6.50% 7.00%
Small Equitas Corporate Bank 6.25% 6.75%
Suryoday Small Finance Bank 6.25% 6.50%
Utkarsh Small Financial Bank 6.00% 6.50%

Private Sector Banks Tax Saver FD Rate:

Private sector banks offering better interest rates on fixed deposits saving less than Rs 2 crore:

Bank Regular FD rates FD senior rates
RBL Bank 6.50% 7.00%
DCB Bank 6.50% 7.00%
Yes Bank 6.25% 7.00%
IndusInd Bank 6.00% 6.50%
Karur Vysia Bank 6.00% 6.00%

FD Tax Saver rate for public sector banks:

For a deposit amount of less than Rs 2 crore, here are the best public sector banks offering the best rates:

Bank Regular FD rates FD senior rates
Union Bank 5.50% 6.00%
Canara Bank 5.50% 6.00%
National Bank of India 5.30% 5.80%
Bank of Punjab and Sindh 5.30% 5.80%
Bank of India 5.15% 5.65%

Term deposit at the post office:

Aside from bank FDs, small savings plans are the safest investment in the debt category. Among all the small savings plans, the post office term account works like a term deposit from a bank where you can invest for a period of 1 to 5 years. You can open a post office term account at any post office by making an initial deposit of Rs 1,000 and in multiples of 100 with no upper limit.

Under Section 80C of the Income Tax Act, investments made within 5 years of TD are tax exempt. The deposit amount as well as the interest rate accrued on this term account are payable after 1 year, 2 years, 3 years and 5 years from the date of opening of the account. Post office term deposit accounts pay 5.5% interest on deposits of one to three years, and 6.7% on deposits of five years.

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