Tax-Saving Fixed Deposit 2026
A 5-year bank FD that qualifies for the ₹1.5 lakh deduction under the old tax regime.
Rates for July–September 2026 (Q2 FY 2026-27) · Updated 30 September 2026What is Tax-Saving Fixed Deposit?
A tax-saving FD is a regular bank fixed deposit with a mandatory 5-year lock-in that makes it eligible for deduction under Section 80C (Section 123 of the Income-tax Act, 2025). It suits conservative taxpayers who want a known return from their own bank without market risk. Unlike PPF or SSY, the interest is taxable, so the post-tax return is lower for higher tax slabs.
Tax Saver FD at a glance
| Particular | Details |
|---|---|
| Lock-in | 5 years — no premature withdrawal |
| Deduction | Up to ₹1.5 lakh (combined with other 80C/123 items) |
| Rate range | ≈5.5%–7.75% (general); senior citizens get ~0.25–0.50% extra |
| Payout | Cumulative or monthly/quarterly payout |
| Loan / pledge | Not allowed |
| Holders | Single; joint allowed but deduction only to first holder |
| TDS | Applicable on interest; Form 15G/15H if eligible |
| Insurance | DICGC up to ₹5 lakh per depositor per bank |
Government-notified terms for July–September 2026 (Q2 FY 2026-27). Verify the latest notification before investing.
Features & benefits of Tax Saver FD
Rate is locked at booking for 5 years.
Instant online booking through net banking.
Higher rate for 60+ customers.
Receive interest periodically or reinvest.
Eligibility — who can invest?
- Resident individuals and HUFs
- NRIs cannot claim this deduction through NRE/NRO tax-saver FDs in most banks
- Only the first holder of a joint FD gets the deduction
How does Tax Saver FD work?
- Book a 5-year tax-saver FD with PAN.
- Interest compounds quarterly (cumulative) or is paid out.
- The bank issues an interest certificate; TDS is deducted if interest exceeds the threshold.
- Proceeds are credited on maturity after 5 years.
Tax benefits of Tax Saver FD
| Stage | Tax treatment |
|---|---|
| Deposit | Deduction up to ₹1.5 lakh under Section 80C / 123 (old regime only) |
| Interest | Fully taxable at slab rate every year (accrual) |
| TDS | Above ₹50,000 (₹1 lakh for senior citizens) per bank per year |
| Post-tax return | At 7%: ~4.9% post-tax in the 30% slab |
Section 80C of the Income-tax Act, 1961 is Section 123 of the Income-tax Act, 2025 from tax year 2026-27. Deductions apply only in the old tax regime.
Withdrawal, premature closure & maturity rules
| Situation | Rule |
|---|---|
| Before 5 years | Not allowed (except on death of depositor) |
| On maturity | Principal + interest credited or renewed |
At maturity
| Option | What happens |
|---|---|
| Auto-renewal | Renews as a regular FD unless instructed — the renewal does not give a new deduction |
Tax Saver FD returns — worked examples
| Deposit | Rate | Maturity after 5 years (cumulative) | Interest (taxable) |
|---|---|---|---|
| ₹1,00,000 | 6.5% | ≈ ₹1,38,042 | ≈ ₹38,042 |
| ₹1,50,000 | 7.0% | ≈ ₹2,12,217 | ≈ ₹62,217 |
| ₹1,50,000 | 7.5% (senior) | ≈ ₹2,17,492 | ≈ ₹67,492 |
Quarterly compounding, before tax. Compare the post-tax figure with PPF (7.1% tax-free).
Tax Saver FD calculator
How to open / invest in Tax Saver FD
- Log in to net banking → Fixed Deposit → Tax Saver FD.
- Choose amount (≤ ₹1.5 lakh for deduction) and payout option.
- Confirm PAN and nominee.
- Download the FD advice for your tax proof.
Documents required
- PAN (mandatory)
- KYC-compliant savings account
Important forms
| Form | Purpose |
|---|---|
| FD advice / receipt | Proof for tax deduction |
| Form 15G / 15H | Avoid TDS if eligible |
Compare bank-wise rates: Tax-saving FD rates by bank →
Advantages & limitations
- Simple and familiar
- Fixed return
- Senior-citizen extra rate
- Booked instantly online
- Interest taxable — lower post-tax return
- Strict 5-year lock-in
- No loan facility
- Deduction only in old regime
Mistakes to avoid
- Booking above ₹1.5 lakh expecting additional deduction
- Ignoring TDS and not declaring interest
- Choosing it over PPF/ELSS without comparing post-tax returns
Tax Saver FD vs other saving schemes
| Scheme | Rate | Tenure | Minimum | Tax |
|---|---|---|---|---|
| Tax Saver FD | ≈5.5% – 7.75% p.a. (bank-wise) | 5 years (lock-in) | ₹100 – ₹1,000 (bank-wise) | Deduction on deposit; interest taxable |
| PO TD | 6.9% – 7.5% p.a. | 1, 2, 3 or 5 years | ₹1,000 | 5-year TD qualifies for deduction; interest taxable |
| PPF | 7.1% p.a. | 15 years + 5-year extension blocks | ₹500 per financial year | EEE |
| NSC | 7.7% p.a. | 5 years | ₹1,000 | EET (reinvested interest deductible) |
| ELSS | Market-linked | 3-year lock-in per instalment | ₹500 (some AMCs ₹100 SIP) | Deduction; LTCG 12.5% above ₹1.25 lakh |
Frequently asked questions
Can I break a tax-saver FD?
No, not before 5 years (except on death of the depositor).
Is tax-saver FD interest taxable?
Yes, at your slab rate.
Can I take a loan against it?
No.
Tax-saver FD or 5-year PO TD?
Both give the deduction; PO TD is sovereign-backed at 7.5%, bank FDs are DICGC-insured up to ₹5 lakh.
Information is for education and comparison. Interest rates are notified by the Government every quarter and scheme rules can change — confirm with India Post, your bank, EPFO or PFRDA before investing. FinancePortal is not a financial or tax adviser.