Last minute tax saving: Here’s a list of tax saving FDs with high interest rates, lock in before March 31, 2025

What is a Tax Saving FD?

A Tax Saving FD is a special term deposit offering tax benefits under Section 80C of the Income Tax Act, 1961. In a given fiscal year, this gives investors the opportunity to seek a deduction of up to Rs. 1,50,000 from their taxable income. These deposits have a five-year term, during which the rate of interest is constant. This guarantees steady and safe returns on the investment.

Also read: Should you stop investing in PPF, SSY, NPS when switching to the new tax regime?

Lock-in period
Premature withdrawals from the fixed deposit are prohibited for the five-year mandatory lock-in term. This guarantees that the investment will increase over the allotted time.

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Interest taxation
Investors can claim a deduction of up to Rs 1,50,000 per financial year under Section 80C. This deduction helps reduce the taxable income, thereby lowering the overall tax liability.

However, the deduction applies only to the principal amount and not to the interest earned. The interest income is added to the investor’s total taxable income and is taxed according to the applicable income tax slab rate. Banks deduct Tax Deducted at Source (TDS) on the interest earned if it exceeds Rs 40,000 in a financial year (Rs 50,000 for senior citizens).

Also read: NSC vs bank FDs: Which is a better tax saving option?

Investors can claim a refund or adjust the TDS amount while filing their income tax returns (ITR) if their total tax liability is lower than the TDS deducted.

Unlike regular FDs, investors cannot