Bank FD rate: The maximum benefit that can be claimed through a five-year deposit is Rs 1.5 lakh a yearMajor lenders today offer income tax benefits under a special type of fixed deposit (FD).
Also known as tax-saving fixed deposit or tax-saving FD, this term depositallows a minimum maturity period of five years and a maximum of 10 years.
Using this FD, the investor can claim a deduction up to Rs 1.5 lakh a year from taxable income (under Section 80C of the Income Tax Act).
Top banks -from state-run State Bank of India (SBI) and Punjab National Bank (PNB), to private sector peers HDFC Bank and ICICI Bank- pay interest rates to the tune of6.7-7.75 per cent to senior citizens on tax-saving fixed deposits up to Rs 1 crore, according to their websites.BankInterest rateGeneral publicSenior citizenState Bank of India6.85%7.35%Punjab National Bank6.25%6.75%Bank of Baroda6.70%6.70%Canara Bank6.20%6.70%HDFC Bank7.25%7.75%ICICI Bank7.25%7.75%(Source: Bank websites)State Bank of India (SBI)The country's largest bank pays interest at the rate of 6.85 per cent to the general public, and 7.35 per cent to senior citizens,on five-year fixed deposits under its tax savings scheme, SBI Tax Savings Scheme, according to its corporate website - sbi.co.in.Punjab National Bank (PNB)To the general public, PNB pays an interest rate of 6.25 per cent, and 6.75 per cent to senior citizens, according to the bank's website - pnbindia.in.Bank of BarodaBank of Baroda pays interest at the rate of 6.7 per cent on investment in the tax-saving fixed deposit, according to the lender's website - bankofbaroda.com.Canara BankCanara Bank pays an interest rate of 6.2 per cent to the general public, and6.7 per cent to senior citizens on the tax-saving fixed deposits, according to the lender's portal -canarabank.com.ICICI BankICICI Bank offers interest at the rate of 7.25 per cent to the general public, and 7.75 per cent to senior citizens on deposits in five-year tax-saving fixed deposits, according to the lender's website - icicibank.com.HDFC BankHDFC Bank pays interest at the rate of 7.25 per cent to the general public and 7.75 per cent to senior citizens,on five-year tax-saving fixed deposit, according to its website - hdfcbank.com.Banks do not allow a premature withdrawal from such an FD account before completion of five years from the date of issue.
In other words, investment in these fixed deposits - tax-saving FDs - is locked in for a period of five years from the date of issue, which means the investor cannot withdraw money during this period in order to utilize the tax benefit.