As per the present income tax laws, under Section 80C of the income tax act, you can claim deduction for investments up to Rs 1.5 lakh in tax-saving fixed deposits. The amount so invested is to be deducted from gross total income to arrive at taxable income.
Below are some of the essential points you ought to be mindful of before investing in tax saving FDs.
1. Just Individuals and HUFs can invest in tax saving fixed deposit (FD) scheme.
2. The FD can be set with a minimum amount that shifts from bank to bank.
3. These deposits have a secure period of 5 years. Premature withdrawals and credit against these FD’s are not permitted.
4. A person can invest in these FD’s through any open or private sector bank aside from co-operative and country banks.
5. Investment in Mail station Time Store of 5 years also meets all requirements for deduction under section 80 (C) of the Income Tax Act, 1961.
6. Mail station Fixed store can be exchanged from one Mail station to another.
7. One can hold these FD’s either in ‘Single’ or ‘Joint’ method of holding. In the case, the method of holding is joint; the tax benefit is accessible just to the first holder.
8. The interest earned is taxable as per the investor’s tax section and therefore, TDS is appropriate. The interest on deposits is payable on either month-to-month/quarterly basis or can be reinvested. A person can stay away from TDS deduction on the interest earned by submitting Form 15G (or Form 15H for senior citizens) to the bank
9. Nomination office is accessible for these FDs.
10. Most banks offer marginally higher interest rates on FDs to senior citizens (when contrasted with the interest rate offered on the same FD to a non-senior national). This interest rate differential exists for tax saving FDs also.
Benefits of investing in Tax Saver FDs
Tax saver fixed deposits accompany a number of benefits that include:
- The significant benefit of investing in tax saver fixed store is that it causes you spare income tax.
- You can begin investing with as little as Rs.100 and add to your savings.
- Since premature withdrawal is not accessible in case of tax saver fixed deposits, you can be certain of receiving assured returns, aside from saving tax.
- Nomination facility is accessible. You can nominate/approve someone to pull back your deposit before or post maturity in case of your death.
Thus it is advised to invest in Tax Saving FDs and get tax benefit under section 80C.