• Notification Date: 19-02-2024
• Notification No: N/A

Bank FDs, PPF, ELSS, NSC: Last-minute Income Tax Saving Options for Taxpayers

With just 45 days left in this fiscal year, taxpayers are looking to make last-minute income tax savings. A significant amount of money can be saved through different options for income tax savings if properly planned. Before making your tax-saving investments, it is crucial to determine the exact amount you need to invest.   

Taxpayers opting for Old Tax Regime can save taxes by investing in life insurance premium, tuition fees, home loan principal repayment, and saving up to Rs 1.5 lakhs against these under Section 80C. Fixed deposits are one of the best tools for tax saving. Tax saving FD schemes have a five-year lock-in period, during which the invested funds are not accessible. The amount invested in a tax-saving fixed deposit is eligible for deduction under Section 80C of the Income Tax Act. The first holder of the fixed deposit can claim a maximum deduction of Rs 1.50 lakh in a financial year. Additionally, it is also possible to open a tax-saving fixed deposit for minors. 

Taxpayers, whether general or senior citizens, should submit forms 15G and 15H to the respective bank to avail of TDS relief on FD. By submitting these self-declaration documents to the bank where the FD account is held, account holders can prevent TDS from being deducted on the interest income if their income is below the basic exemption level. If a taxpayer has an annual income of less than Rs 2.5 lakh and there is no tax owed, they must file Form 15G or Form 15H with the bank. 

Tax-saving fixed deposits (FDs) offered by banks are protected by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the Reserve Bank of India (RBI). The coverage extends up to Rs 5 lakh per bank and per depositor. 

State Bank of India: Tax saving FD schemes: 

a. Regular interest rate - 6.5% 

b. Senior citizens rate - 7.5% 

c. Tenure-5 years and up to 10 years 

HDFC Bank: Tax saving FD schemes: 

a. Regular interest rate - 7% 

b. Senior citizens rate - 7.5% 

c. Tenure-4 Year 7 Months 1 day to 5 Years 

ICICI Bank: Tax saving FD schemes: 

a. Regular interest rate - 7% 

b. Senior citizens rate - 7.5% 

c. Tenure-3 years 1 day to 5 years 

Bank of Baroda: Tax saving FD schemes: 

a. Regular interest rate - 6.5% 

b. Senior citizens rate - 7.15% 

c. Tenure-Above 3 Years and upto 5 Years 

Besides, tax-saving fixed deposits, a range of eligible investments under section 80C are available, which include investing in Public Provident Fund, equity-linked savings scheme (ELSS), National Savings Certificate (NSC), and more. 

Public Provident Fund (PPF) scheme is a long-term investment option that offers an attractive rate of interest and returns on the amount invested. PPF investments qualify for Exempt-Exempt-Exempt or EEE status, which means the interest and returns are not taxable under Income Tax. At present, it offers an interest rate of 7.1%. PPF comes with a lock-in period of 15 Years.  

An Equity-Linked Savings Scheme (ELSS) is the only mutual fund that qualifies for tax deductions under the Section 80C of the Income Tax Act, 1961. By investing in ELSS mutual funds, taxpayers can avail a tax rebate of up to Rs 1,50,000 and potentially save up to Rs 46,800 annually on taxes. 

The National Savings Certificate (NSC), an initiative by the Government of India, is a fixed-income investment scheme that can be opened at any post office branch. The Finance Ministry determines the periodic interest rate for the NSCs. Currently, for the fourth quarter of the fiscal year 2023-24 (January-March), the NSC interest rate is set at 7.7% per annum.