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Federal Bank Tax Saving Fixed Deposit

Updated 30 Aug 2023

In today's turbulent financial landscape, smart investment choices are paramount. One avenue that amalgamates growth with tax benefits is the Tax-Saving Fixed Deposits. Federal Bank, a trusted name in the banking sector, offers this advantageous investment instrument.

 

These FDs boost your savings with competitive interest rates and play a pivotal role in reducing your taxable income, thanks to the provisions under the Income Tax Act. In this blog, we'll delve deep into Federal Bank's Tax-Saving FDs, exploring its features and why it is a preferred choice for many savvy investors.

Features of the Tax-saving FDs by Federal Bank

Duration: Tax Saving FDs usually come with a 5-year lock-in period, prohibiting any withdrawals during this time.

Interest Offerings: Competitive interest rates are a highlight, and institutions like Federal Bank often provide an additional rate increment for senior citizens.

Borrowing against FD: Given their fixed tenure, these FDs typically can't be used as loan collateral.

Interest Disbursement: Different payout options, such as monthly, quarterly, or annual intervals, might be available. Some banks also provide reinvestment of the earned interest.

Renewal Policy: Unless instructed otherwise, these FDs can be automatically renewed upon maturity for an equivalent period at the current interest rate.

Early Withdrawal Charges: Withdrawals before the end of the lock-in period aren't permissible. Withdrawing after the lock-in but before FD maturity might invite penalties.

Investment Limits: While there's a minimum deposit requirement to start a tax-saving FD, the upper limit typically remains INR 1.5 lakh annually, aligning with the 80C guidelines.

Tax Deduction at Source (TDS): TDS might be deducted if the interest income surpasses a specified limit.

Eligibility Criteria and Documents Required

  • Both individuals and Hindu Undivided Families (HUFs) are qualified to invest in these tax-saving FD schemes.
  • For the purpose of tax savings, one can opt for fixed deposits in either public or private sector banks. However, cooperative and rural banks don't qualify.
  • A 5-year term deposit in a post office is also recognized as a tax-saving instrument.
  • Deposits can be made individually or as a joint account. However, only the first account holder is entitled to the associated tax advantages.

Regarding the documents required-  

Identity Proofs

  • Aadhar Card
  • Passport
  • Drivers License

Address proofs

  • Gas Bills
  • Utility Bills
  • Bank Statement Or a Cancelled Bank Cheque

FAQs

Can I open a joint account for this FD?

Yes, you can open a joint account. However, the tax benefit is applicable only to the first account holder.

Is TDS applicable on the interest earned?

Yes, if the interest earned exceeds the threshold limit specified by the government, TDS (Tax Deducted at Source) will be applicable.

Can I avail of a loan against this FD during the lock-in period?

Typically, loans against Tax Saving FDs during the lock-in period are not provided by the bank.

How can I open a Tax Saving FD with Federal Bank?

You can open a Tax Saving FD through Federal Bank's internet banking, mobile banking, by visiting a branch, or by calling their customer care.

Are there any penalties after the lock-in period if I break the FD?

After the lock-in period, a penalty might be levied if you decide to break the FD before its maturity. It's advised to check the exact terms with the bank.
Always remember to consult with the bank directly or refer to their official documents and guidelines to get the most accurate and updated information.

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Disclaimer: Wint Wealth makes no guarantee or warranty on the accuracy of the data provided on this site, the information displayed is subject to change and are provided on an as-is basis. Nothing contained herein is intended to or shall be deemed to be investment advice, implied or otherwise. You are advised to make your own enquiries, consult a professional advisor and verify the information prior to taking any investment decisions. We accept no liability for any loss arising from the use of information contained on this website.

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