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This article is more than 1 year old.

Looking to invest in tax saving fixed deposits? Here's all you need to know

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Tax saving FD, a special category of fixed deposit, allows investors to claim deductions under Section 80C of the Income Tax Act.

Looking to invest in tax saving fixed deposits? Here's all you need to know
There are several tax savings investment options available in the markets that help investors in building wealth, such as ELSS, PPF, NPS, tax-saving fixed deposit and NSC. Among these, tax-saving fixed deposits (FDs) are deemed as one of the safest savings options. The amount invested in these is completely protected and the returns are also guaranteed.
Tax saving FD, a special category of fixed deposit, allows investors to claim deductions under Section 80C of the Income Tax Act. Any investor can claim a deduction of a maximum of Rs 1. 5 lakh by investing in tax saving fixed deposits.
Here's all you need to know about tax saving fixed deposits (FDs):
  • Only Individuals and HUFs (Hindu undivided family) can invest in the tax-saving fixed deposit (FD) scheme.
  • These tax saving FDs have a minimum lock-in period of five years.
  • Investors can open tax saving FD accounts online or by visiting a bank branch.
  • Different banks offer different interest rates on tax­ saving FDs. The interest rates for Indian citizens, NRIs and HUFs vary from bank to bank. Senior citizens and bank staff members are offered higher interest rates.
  • The interest is taxable, deducted at source, and added to the income.
  • Interest on income tax-saving deposits is payable on a monthly or quarterly basis. The interest amount earned can be also reinvested, if the investor wants so.
  • In case of joint accounts only the first holder are eligible for deduction from income under Section 80C of Income Tax Act.
  • Nomination facility is available for these FDs. However, no nomination facility is available in case the deposit is applied for and held by or on behalf of a minor.
  • One of the major differences between normal fixed deposits (FDs) and tax-saving fixed deposit is that the former can be redeemed before maturity, while the latter can't be redeemed before 5 years.