The fiscal year FY20 has kick-started, and as a taxpayer, it is advisable to begin investing in various schemes in order to save taxes. Every individual has to pay taxes on their income and income from other services. However, these taxpayers also have a backdoor, where they can save hefty by just putting their money in schemes like national pension scheme (NPS), public provident fund (PFF), insurances and mutual funds among others. However, there are many banks who have been encouraging customers to opt for their tax saving fixed deposit schemes, where they can enjoy interest rates like normal FDs and still save taxes. However, terms and conditions vary from bank to bank, and most of them offer this tax saving scheme as a lock-in period of 5 years. Banks like SBI, HDFC Bank, ICICI Bank, Axis Bank and Bank of Baroda are some of the largest lenders to offer this service. 

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Hence, if you are planning to save taxes for the assessment year 2019-20, then here’s a list of some of the best fixed deposits tax saving schemes. 

HDFC Bank! 

Any resident and HUF can open a tax saving FD with HDFC Bank. This scheme can be opted with a minimum amount of just Rs 100 and can go up to maximum Rs 1.5 lakh. 

Here for FDs made up to 5 years, a customer will enjoy 7.25% interest rate, while senior citizen gets 7.75% interest rate. However, above 5 years, the rate goes to 6.50% to normal category and 7% to senior citizen.

Your interest will be calculated on a quarterly basis. The interest for re-investment is calculated every quarter, and the Principal is increased to include interest earned during the previous quarter. Tax at source is deducted as per the Income Tax regulations prevalent from time to time.

ICICI Bank! 

Here, you can make a minimum investment of Rs 10,000 and a maximum up to Rs 1.5 lakh. Nominate a single nominee to your account proceeds, whether held solely or jointly. Applicants are required to fill a form prescribed under the Banking Companies (Nomination Rules), 1985.

Just like HDFC Bank, ICICI Bank also gives 7.25% interest rate on 5-year tax saving FDs, while a senior citizen enjoys 7.75% rate. 

Axis Bank! 

At Axis Bank, the tax saving scheme comes in three options Choose from Tax Saving - Reinvestment Deposit, Tax Saving - Quarterly Interest Payout or Tax Saving – Monthly Interest Payout depending on the interest pay-out most suitable for you. You can begin investment with just Rs 100 and maximum up to Rs 1.5 lakh. 

Even Axis Bank gives 7.25% interest on 5-year FDs, and 7.75% interest rate to senior citizens. 

Bank of Baroda!

Notably, BoB pays 0.5% over and above the tax saving FD rates to senior citizens. This is available for deposits below Rs. 1 crore. It is possible to set up nomination for the tax saving FD. At BoB, a customer enjoys interest rate of 6.70% on their 5-year FDs. This means a senior citizen will get 7.20% rate. 

The tax saving FD can be transferred from one branch to another branch at the request of the customer. This can be done by submitting a written request to the branch where the customer has the tax saving FD.

SBI!

At SBI, a customer can open their tax saving scheme with minimum amount of Rs 1,000 and maximum Rs 1.50 lakh. The lock-in period is for 5 years tenure, and can go maximum up to 10 years. No term deposit shall be encashed before the expiry of five years from the date of its receipt.

Resident Indians for himself/ herself as an individual or in the capacity of the Karta of the Hindu undivided family, having Income tax Permanent Account Number (PAN) can open this investment scheme at SBI.

SBI offers 6.85% interest rate on deposits kept for 5-years and above. While here a senior citizen will enjoy 7.35% rate.

Tax benefits! 

Firstly, you can claim up to Rs 1.50 lakh tax benefit in this scheme under section 80c of IT Act. Also, there will be no TDS on income gains below Rs 40,000 for general category and Rs 50,000 for senior citizens. 

Banks deduct TDS when interest payable or reinvested on RD and FD per customer across all branches, exceeds Rs 40,000/- (Rs 50,000/- for senior citizens) in a financial year. However, if you are exempt from paying tax, you need to present Form 15G/H when you open a Fixed Deposit and subsequently at the beginning of the following financial year.

You must contact your bank about the form 15G/H facility and whether you are allowed or not. According to 206AA introduced by Finance (No. 2) Act, 2009, every person who receives income on which TDS is deductible shall furnish his PAN, failing which TDS shall be deducted at the rate of 20%(as against 10% which is existing TDS rate) in case of Domestic deposits and 30.90% in case of NRO deposits.

In the comparison of the above, it can be said that private banks offer much attractive interest rates on tax saving FDs than compared to PSBs. However, if you are not comfortable with the TDS cut on your interest income, then you can always decide to opt for government saving schemes which also includes NPS and PPF.