Personal Finance

Deutsche Bank Five-year FD: A safe and sound tax-saving avenue

K Venkatasubramanian | Updated on March 17, 2019

The fixed deposit, which is eligible for benefits under Sec 80C, carries an interest rate of 8.25%

Among the most popular instruments for tax-saving purposes is the good old five-year bank deposit. Given its safety and reliability, it is the preferred avenue for risk-averse investors. However, the rates vary significantly among banks, making the final choice important.

In this light, investors can consider the tax-saving fixed deposit offered by Deutsche Bank given the reasonably attractive rate it offers.

What’s on offer

Deutsche Bank’s five-year deposit carries an interest rate of 8.25 per cent, among the highest offered by banks, public or private. The rate is the same for senior citizens, too.

For those in the 30 per cent slab, after taking the full deduction amount into account, the yield on a pre-tax basis works out to more than 10 per cent.

The minimum investment amount is ₹20,000 and the maximum is ₹1.5 lakh. Investors can fill a form that is available on the bank’s website.

Deposits can be opened individually or jointly. It is a good practice to add a nominee to your tax-saving deposit as well. In case the deposit is opened jointly or in an ‘either or survivor’ mode, the tax benefits will be available only to the first holder and not to both the persons.

There is a five-year lock-in for the deposit. Premature withdrawal is not allowed, and loans cannot be taken against tax-saving deposits. Presently, deposits of up to ₹1 lakh are insured and guaranteed by the government. So, there is an added aspect of safety. Five-year deposits of banks carry tax benefits under Section 80C of the Income Tax Act. Deduction of up to ₹1.5 lakh is available under the section. Those in the 30 per cent tax slab (excluding cess), can potentially save around ₹45,000 by investing ₹1.5 lakh in a tax-saving deposit.

For non-senior citizens, the interest earned is added to your income and taxed at your slab.

In the case of senior citizens, there are a few more tax benefits available. The 2018 Budget introduced a new section, 80TTB, which allows senior citizens (those aged 60 and more) to claim a tax break on interest income to the extent of ₹50,000 from FY2018-19 onwards.

Published on March 17, 2019

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