10 Things to Know About Tax Saving Fixed Deposits

As per the Indian Tax Act 1961, deduction on investments can be claimed under Section 80C of the Act. The deduction can be claimed for investments of up to Rs. 1.5 lakhs in any given financial year. FDs are deposits made to the bank for a fixed tenor on which the depositor earn an interest. According to the law, tax on fixed deposit the amount you invest will be deducted from the gross total income so as to arrive at the income that is taxable. 

But, before you begin investing in tax saving FD, here are a few things to consider:

1. This investment option is available to only Individuals and Hindu Undivided Families (HUFs) 
2. Jointly holding the FD with a spouse or any other person is allowed 
3. A minimum amount of deposit is required - this amount will vary across banks. 
4. A minimum lock-in period of 5 years is necessary for your Fixed deposit. During this period, you cannot withdraw any amount from your FD. 
5. You cannot invest in such FDs through corporate and rural banks. You can choose any public or private sector bank and NBFC. 
6. If you plan to invest in the Post Office Time Deposit (for a minimum of 5 years), you can avail tax-saving deduction. 
7. You can exercise the option of transferring your Time Deposit from one post office to another. 
8. Whatever interest you earn will be taxable as per your income bracket 
9. The nomination facility is available 
10. Interest rates offered to senior citizens FD may be offered, and are allowed to avail deductions.

Bottom line: Check out different FD schemes on the internet and choose the best for yourself.

Also, Read Related Article: Fixed Deposit Interest Rates: How Are They Beneficial?