Tax-saving FDs offer high interest before March 31

As the financial year comes to an end, taxpayers are looking for ways to save on their taxes. Tax-Saving Fixed Deposits (FDs) are a popular option, especially for those who haven't yet made tax-saving investments. These FDs allow individuals to deduct up to Rs. 1,50,000 from their taxable income under Section 80C of the Income Tax Act. Tax-Saving FDs are different from regular FDs as they come with a mandatory five-year lock-in period. This means that investors cannot withdraw their money early. The interest rate remains constant for the entire term, providing stable returns. It's important to note that the tax deduction applies to the deposit amount only, not to the interest earned. Investors will have to pay income tax on the interest at their applicable tax slab. If the interest earned exceeds Rs. 40,000 in a year, banks will deduct TDS. Senior citizens have a higher threshold of Rs. 50,000. Investors also cannot borrow against Tax-Saving FDs, and there is no auto-renewal option. Once the FD matures, they will need to reinvest manually if desired. Current interest rates for Tax-Saving FDs vary across banks. DCB Bank offers the highest rate at 7.40%. Other banks like Axis Bank and IndusInd Bank follow closely with rates of 7.00% and 7.25%, respectively. With only two weeks left in the financial year, last-minute taxpayers should consider these options to optimize their tax savings.