Tax saving fixed deposits: All you need to know in 10 slides

Apr 24, 2018, 04:09 PM IST

Tax saving fixed deposits: Are you a risk-averse investor and prefer investing in fixed deposits? If yes, then you must know about tax-saving fixed deposits which are available under Section 80C of the income tax act to claim deduction on your taxabale income. As the new financial year has just started, it will be prudent for you to sit and calculate your taxable income now and thus plan your investments for the financial year 2018-19. "Since tax-saving fixed deposit is a bank-based investment product, closely monitored by Reserve Bank of India (RBI), investors are assured of its safe and low-risk nature. The money deposited is safe and is easily redeemable with interest once it reaches maturity," according to tax planner firm ClearTax. Here are 10 key details of tax-saving FDs: 


Tax saving fixed deposits: It is a one-time investment with a lock-in period of five years. Premature withdrawals are prohibited.


Tax saving fixed deposits: Any investor can claim a deduction of a maximum of Rs 1.5 lakh by investing in tax saver fixed deposits under section 80C of the Indian Income Tax Act, 1961.


Tax saving fixed deposits: One cannot take loan against tax-saving FDs.


Tax saving fixed deposits: FDs could be started through any public or private sector bank except for co-operative and rural banks. 


Tax saving fixed deposits: The minimum amount to be invested in FDs varies from one bank to another.


Tax saving fixed deposits: Tax-saving FDs can be held in 'Single' or 'Joint' mode of holding. However, if the mode of holding is joint, the tax benefit will be available only to the first holder. 


Tax saving fixed deposits: Nominations are allowed on these FDs. 


Tax saving fixed deposits: The interest earned on tax-saving FDs is taxable as per the individual's tax bracket. The interest on fixed deposits is paid on monthly or quarterly basis and can be reinvested.


Tax saving fixed deposits: Needless to say TDS is applicable on these deposits. TDS deduction on the interest earned could be avoided by submitting Form 15G (or Form 15H for senior citizens) to the bank. 


Tax saving fixed deposits: Rate of interest on tax-saving FDs ranges from 5.5 per cent to 7.75 per cent. Banks usually offer slightly higher interest rates for senior citizens.