Tax Saving FDs: In the past few years, the Reserve Bank of India (RBI) has increased the repo rate six times to control inflation, which has resulted in increased interest rates on bank fixed deposits. Consequently, some banks are now offering higher interest rates to attract investors, especially for tax-saving fixed deposits.
So, what exactly is a tax-saving fixed deposit? It is a type of fixed deposit that not only gives you a fixed return on your investment but also offers the benefit of tax exemption under Section 80C of the Income Tax Act, 1961. This means that you can claim tax exemption on the amount invested in a tax-saving FD, up to a maximum of Rs. 1.5 lakh.
The features of a tax-saving fixed deposit are as follows: you can open an account with an investment ranging from Rs. 100 to Rs. 1.5 lakh, and the lock-in period is for five years. You can opt for interest payment on a monthly or quarterly basis, but the interest earned is taxable. There is no provision for premature withdrawal, and a joint account option is also available.
Now, let's compare the interest rates offered by various banks on their tax-saving fixed deposits. SBI Bank is offering an interest rate of 6.50%, while HDFC Bank, ICICI Bank, Axis Bank, and IndusInd Bank are offering 7%. DCB Bank is currently offering the highest interest rate of 7.60% on a five-year tax-saving fixed deposit.
It is always recommended to do thorough research before investing in any financial product. You can compare the interest rates offered by different banks and choose the one that suits your investment goals and financial requirements. However, keep in mind that higher returns come with higher risks, and you should invest wisely to avoid financial losses.
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