What is Tax Saving Fixed Deposit?

With Tax Saving Fixed Deposit, you can claim the amount invested up to Rs. 1.50 Lakhs as a
deduction from your income. So, to calculate your taxable income, you reduce the
amount of your Tax Saving FDs from your total gross income; and, that is how you get
your taxable income. The tax benefit or deduction which you get for your tax saving FDs is
under Section 80C of the Income Tax Act, 1961.

HOW TAX SAVING FDS ARE DIFFERENT

FROM REGULAR FDS?
The only additional benefit of a Tax Saving FD over a regular FD is that the original amount you
invest in a Tax Saving FD is exempted from taxes. Also, you can claim a tax deduction under
Section 80C of the Indian Income Tax Act, 1961 while filing income tax returns. However, the
interest income that is generated from Tax Saving FDs is subject to the same tax rules as any
other regular FD.
Recommended Read : Calculation of Income Tax on FD and RD Interest !!!
Also Read : How to save Money through SIP?
WHAT ARE SCHEMES FOR FIXED DEPOSITS UNDER
SECTION 80C?
Fixed Deposits schemed under Section 80C of
the Income Tax Act, 1961 are named as Tax
Saving Fixed Deposits. You get tax
deductions up to Rs.1.50 Lakhs per year under
Section 80C of the Income Tax Act, irrespective
of your tax bracket. Also, Section 80C can be
used to avail deductions on a number of
investments or expenditures such as PPF, NSC,
child education fees, infrastructure bonds,
pension funds, tax saver fixed deposits, senior
citizen savings scheme (SCSS), unit linked
insurance plans (ULIP), life insurance premiums,
home loan principal, etc. Most relevant is that
Section 80C provides cumulative deductions up to
Rs.1.50 lakhs per year from all investments in relevant instruments.
FEATURES OF TAX SAVING FDS:
Major features of Tax Saving FDs are:

Fixed maturity of 5 years.

Minimum investment must be Rs.100. Further, investments can be made in multiples
of Rs.100 only. This limit may vary from bank to bank.
The maximum limit of investments Rs.1.50 Lakhs.
Interest rate will be as per your bank or financial institution.
Individuals including senior citizens and NRIs; and Hindu Unified Families (HUF) can open
this account.
In case of joint accounts, only the first holder will get tax deductions as per the section 80C
of the Income Tax Act, 1961.
Premature withdrawal is not allowed.
You cannot avail loan against your tax saving fixed deposits.
Your interest from FDs are taxable. TDS is charged at 10% pa, if you have given your PAN
details to your bank, else TDS will be charged at 20% pa.
Recommended Read : Calculation of Income Tax Deduction on FD and RD Interest !!!
Also Read : Which Banks offer Higher Rate of Interest on Deposits in India?

BENEFITS OF INVESTING IN TAX SAVING FDS:

Tax saving FDs come with lot of benefits. You can get more
out of your investments through Tax Saving FDs.
Though, there are a few limitations as well, such as
you cannot withdraw premature and you cant avail loan
against it, etc. However, at the same time, there are many
benefit from the same:
The major benefit of investing in tax saving
deposit fixed
is that it helps you save income tax.
Open throughout the year; unlike, tax free bonds
issued by the government from time to time.
You can start investing with as little as Rs.100
add to your
and savings.
Also, you can avail a tax benefit on amount invested
up to Rs.1.50 Lakhs per year.
 You can take advantage of interest paid out on monthly
or quarterly basis.
Special rates are available for senior citizens, depending
on bank.
Secure investments for the medium term.
Since, premature withdrawal is not available in case of
tax saver fixed deposits, you can be sure of
receiving assured returns, apart from saving tax.
Also, nomination facility is available. You can nominate
or authorize someone to withdraw your deposit before or
post maturity in the event of your death.
And, Tax saving fixed deposits may not earn you
as high as some other tax saving investment avenues;
such as tax saving mutual funds or insurance
policies, these will ensure that you have a peace
of mind while investing your hard-earned savings, and
get assured pay- outs at regular intervals

ELIGIBILITY TO OPEN A TAX SAVING FD?

All resident individuals who have a pan card.
Nonresident Indians (NRIs).
Senior citizens above 60 years of age.

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