What is Tax Saving Fixed Deposit (FD)

Note: Interest rates updated on 31 Aug 2026. 

Key Features of Tax Saver FD

You can get a tax exemption of a maximum of Rs.1.5 lakh.

• Tenure: 5 years to 10 years
• Interest rates available: 5.00% p.a. to 8.25% p.a. for the general public
• Deposit range: Rs.100 to Rs.1.50 lakh p.a.

Key Benefits of Tax Saver FD

• Tax exemptions as listed out in Section 80C of the Income Tax (IT) Act, 1961.
• Premature withdrawal is allowed after completing 5-year lock-in period.
• Most banks offer 0.50% hike in interest rates to senior citizens.
• Most Tax Saving FD schemes come with an option of joint account.
• In case of a joint account, only the primary account holder is eligible for tax benefits.
• Tax Saving FDs are also covered by DICGC deposit insurance of up to Rs.5 lakh per depositor per bank, covering the principal and interest together, the same protection that applies to other bank deposits. 

Top Small Finance Bank Tax Saving FD Interest Rates 

High-interest rates are offered on FDs for accounts under Rs.2 crore by small finance banks. Apply to deposits under Rs. 2 crore 

Note: Interest rates updated on 31 Aug 2026.  

Eligibility Criteria for Tax Saving Term Deposit

• Resident Indians
• Individuals
• Hindu Undivided Families (HUF)
• You can open a tax saved FD in single and joint account.
  

Documents needed to open a Tax Saving FD account

• Permanent Account Number (PAN) Card
• Government-recognized ID proof:
  • Aadhaar Card
  • Driving Licence
  • Passport
  • Ration Card
  • Voter ID Card
  • Government-recognized address proof
  • Proof of age (for senior citizens)
  • 2 recent color passport-size photographs

How Does Tax Saving FD Work? 

• Investing in a bank's tax-saving FD will lock in your money for five years until it matures. 

• During this time, you won't be allowed to take it out or take out a loan against it. 

• For the duration of the loan, the bank will pay you a set interest rate, typically between 5.00% p.a. and 8.25% p.a.

• Section 80C of the Income Tax Act allows you to deduct up to Rs.1.5 lakh from your investment.

• The interest you earn, however, is taxed and is included in your income.

• There is very little overall risk involved, and your profits are guaranteed. 

Who Can Invest in Tax Saving FDs? 

Tax-Saving Fixed Deposits are available for investment by NRIs, Hindu Undivided Families (HUFs), Indian nationals, and senior citizens. These FDs are particularly good for people who want a safe, low-risk investment, especially those who are getting close to retirement and want consistent, certain earnings. 

Tax Deducted at Source (TDS) on Tax Saving FDs

As per current tax laws an individual can claim a tax deduction for investments in tax saving fixed deposits of up to Rs.1.5 lakh. The amount will be deducted from the total gross income of the individual to arrive at the taxable income. Section 80C of the Income Tax Act permits this deduction. Listed below are some criteria to be fulfilled to claim for this deduction:

• Hindu United Families (HUF) and individuals only are eligible to invest in tax saving fixed deposit schemes.
• The Fixed Deposit can be of the minimum amount as stipulated by the bank.
• The tax saving fixed deposits have a 5-year lock-in period. Premature withdrawals and loans against the Fixed Deposit is not permitted.
• Individuals may invest in these Fixed Deposits through any private or public sector banks, except co-operative and rural banks.
• The Post Office Time Deposit of 5 years also qualifies for deductions under Section 80C of the Income Tax Act of 1961.
• Post Office Fixed Deposits are transferable between post offices.
• Fixed Deposits can be held either individually or jointly. In case of a joint fixed deposit the tax benefit will be given to the first holder of the Fixed Deposit.
• Interest earned on these Fixed Deposits is taxable under the investor's tax bracket, therefore, Tax Deductible at Source (TDS) is applicable. The interest payable on the investment is either on a monthly basis or quarterly basis, this interest may be reinvested.
• Tax Deductible Fixed Deposits have a nomination facility.
• Banks offer slightly higher interest rates to senior citizens on these Fixed Deposits. This increased interest rate exists for Tax Saving Fixed Deposits.

How to Reduce TDS on Tax Saving Fixed Deposits

Tax Deducted at Source (TDS) is applicable to all interest income that is earned in India, including FDs. In every financial year if the income earned through interest exceeds Rs.50,000 (Rs.1,00,000 for senior citizens), as of April 2025, the applicant or account holder will have to pay tax at any cost. However, if the interest earned is below this threshold, then the account holder will not have to pay tax.

• Self-declaration: If the interest earned from FDs and the total taxable income earned during the financial year is not more than the prescribed taxable limit, please submit form 15G or 15H, whichever is applicable.
• Which form is for whom: Form 15G is for the general public while Form 15H is for senior citizens. The applicant must be a resident of India who is 60 years or less and his/her income should not exceed the prescribed tax limit. Form 15H can only be filled by an Indian resident above 60 years of age and by an individual who falls below the prescribed tax limit.
• Managing investments better: You can make investments in such a way that it does not exceed Rs.10,000 in one year. For example, one could invest in a 1 year FD in the month of October, in such a manner, the financial year will be split into two. As the financial year ends on 31 March, you can save TDS on your investment.
• The second applicant waived off TDS: If you are the first applicant in a joint FD, then TDS will be deducted from your account automatically if the interest income earned exceeds the limit. However, if you are the second applicant in a joint account, TDS is not likely to be deducted.
• Distributing investments: Another option that investors have is to distribute investments across various banks, instead of putting it all in one bank.
• PAN - You need to submit your PAN details to the bank for your FD investment. If you don't submit your PAN details, banks will deduct TDS at a higher rate, which is usually 20%.
• Late submission: If you forget to submit the self-declaration forms and the TDS has been deducted, the Income Tax department will make a refund, if the account holder files for tax returns. However, you will have to wait until the next July and for the refund to be processed it will take another few months.

FDs still remain one among the most preferred investment options because they offer certain guaranteed returns without any financial risk element. It is very important to take all necessary steps to do tax planning and better manage your investments instead of paying hefty taxes. Other than the methods mentioned above if one makes other investments, one can claim tax exemption, and this will help reduce the tax burden on the individual to a certain extent.

Important Information About Tax Saving FD Interest Rates

• As per current tax laws, an individual investing in a tax-saving FD can claim the invested amount up to a maximum of ₹1.5 lakh as a deduction from income.

• The invested amount is deducted from the gross total income to calculate taxable income.

• This deduction is permitted under Section 80C of the Income Tax Act.

• Section 80C also defines the upper investment limit, currently fixed at ₹1.5 lakh.

• A tax-saving fixed deposit is one of the few investment options eligible for a tax break under Section 80C.

• Only Individuals and Hindu Undivided Families (HUFs) can invest in tax-saving FDs.

• The minimum investment amount varies from bank to bank.

• Tax-saving FDs have a lock-in period of 5 years; premature withdrawals and loans against these FDs are not permitted.

• These FDs can be opened in public or private sector banks, but not in cooperative or rural banks.

• Investments made in a Post Office Time Deposit (5 years) also qualify for deduction under Section 80C.

• The Post Office Fixed Deposit can be transferred from one post office to another.
• The Section 80C deduction for a tax-saving FD is available only if you opt for the old tax regime; it cannot be claimed under the new tax regime, which is the default regime for individual taxpayers. 

Summary 

A Tax Saving Fixed Deposit (FD) is a straightforward way to earn a Section 80C tax deduction of up to Rs.1.5 lakh while keeping your money safe over a fixed 5-year lock-in. Rates vary widely across banks and small finance banks, so compare the current Tax Saver FD rate tables above before you invest. Since premature withdrawal isn't allowed, choose a bank and tenure you are comfortable committing to for the full 5 years.