Points to save tax on fixed deposits
Tax Saving Fixed Deposits
If you are planning to invest in a Tax Saving Fixed Deposits you can claim the amount invested up to Rs 1.5 lakh as a deduction from your income, as per current tax laws. This deduction is allowed under Section 80C of the Income Tax Act. Here is the importance of Tax Saving Fixed Deposit. Section 80C also defines the limit of investment for which deduction can be claimed under it. Currently, Section 80C investment limit is fixed at Rs 1.5 lakh. Tax saving is possible by taking advantage of the various provisions contained in the Income-tax Law.
Points to remember with Tax Savings Deposit:
- Individuals and HUFs(Hindu Undivided Family) only can invest in tax saving fixed deposit(FD) scheme. The maximum deduction of interest on the housing loan as we know very well will be Rs. 1,50,000 which will be allowed as a deduction in the name of the HUF.
- Tax Saving Fixed Deposits have a lock-in period of 5 years. Premature withdrawals and loan against these FD’s are not allowed with the deposit scheme.
- This FD can be placed with a minimum amount which varies from bank to bank.
- Any one can invest in Tax Saving FD’s through any public or private sector bank except for co-operative and rural banks.
- Investment in Post Office Time Deposit of 5 years also qualifies for deduction under section 80 (C) of the Income Tax Act, 1961. Post Office Fixed deposit can be transferred from one Post office to another.
- Nomination facility is available for these FDs. Any one can hold Tax Saving FD’s either in ‘Single’ or ‘Joint’ mode of holding. If this is ‘Joint Holding’, the tax benefit is available only to the first holder.
- Banks offer slightly higher interest rates on FDs to senior citizens (as compared to the interest rate offered on the same FD to a non-senior citizen).