Tax-saving FD allows you to make an investment to save tax under section 80C of the Income Tax Act. The minimum tenure for a term deposit under Tax Saving Scheme is 5 years. You can get a tax exemption of a maximum of Rs.1.5 lakh.
|Bank||Interest Rates (Regular Public)||Interest Rate (Senior Citizens)|
|State Bank of India||5.40%||5.90%|
|Punjab National Bank||5.25%||5.95%|
|Bank of Baroda||5.25%||5.75%|
|Lakshmi Vilas Bank||5.75%||6.25%|
*The interest rates of Tax Saver Fixed Deposits are subject to change at the discretion of the bank. The rates mentioned here are valid as of November 2021.
As per current tax laws an individual can claim a tax deduction for investments in tax saving fixed deposits of up to Rs.1.5 lakh. The amount will be deducted from the total gross income of the individual to arrive at the taxable income. Section 80C of the Income Tax Act permits this deduction. Listed below are some criteria to be fulfilled to claim for this deduction:
Tax Deducted at Source (TDS) is applicable to all interest income that is earned in India, including FDs. In every financial year if the income earned through interest exceeds Rs.10,000, the applicant or account holder will have to pay tax at any cost. However, if the interest earned is less than Rs.10,000, then the account holder will not have to pay tax.
FDs still remains one among the most preferred investment options because they offer certain guaranteed returns without any financial risk element. It is very important to take all necessary steps to do tax planning and better manage your investments instead of paying hefty taxes. Other than the methods mentioned above if one makes other investments, one can claim tax exemption, and this will help reduce the tax burden on the individual to a certain extent.
As per current tax laws, if one invests in a tax saving FD, he/she can claim the invested amount up to a maximum of Rs 1.5 lakh as a deduction from his/her income. The amount invested this way is meant to cut from gross total income to arrive at taxable income. This kind of deduction is permitted under Section 80C of the Income Tax Act. Section 80C further determines the upper-limit of investment – which is currently fixed at Rs 1.5 lakh. The Tax-saving fixed deposit is one of the few gateways presently permitted for investment for one to claim a tax break according to Section 80C of the Income Tax Act.
Only Individuals and HUFs can make investments in the tax saving fixed deposit (FD) scheme. This FD can be put together with a certain minimum amount - and this amount varies from one bank to another. Fixed deposits have a lock-in time of 5 years, and withdrawals before maturity are not permitted, as are not loans against these FD's.
One can invest in these FD's via any of the public or private sector banks, but not cooperative and rural banks. An investment made in the Post Office Time Deposit for a period of 5 years also qualifies one for deduction under the same section 80(C) of the Income Tax Act, 1961. This Post Office Fixed deposit comes with the provision of being transferable from one Post office to another.
Most banks require you to make a deposit of at least Rs.100 for this scheme.
No, banks do not allow premature withdrawal in tax-saving FDs.
An investor can claim up to Rs. 1.5 lakh per annum with tax-saving FDs.
Anyone who wants save money in taxes can invest in a tax saving FD.
No, usually there are no risks involved in tax-saving FDs.
The scheme comes with a tenure range lying between 5 years and 10 years.
When the fixed deposit period expires, the maturity sum will be transferred to the FD account’s savings bank account.
No, the interest is taxed under TDS.
Yes, most banks offer an additional FD interest rate to senior citizens.
DCB Bank offers 6.90% p.a. for the general public and 7.45% p.a. for senior citizens.
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