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Tax Saving FD Scheme: If you are looking for better returns, risk-free investment and income tax saving scheme, then fixed deposit is good. Although fixed deposit can be done anywhere and in any way. But, if you do it with planning and get tax exemption on good returns, then it has double benefit. You will get tremendous benefits in tax saving FD scheme with a lock in period of 5 years. So let's know why this scheme is great.
Why Tax Saving FD Scheme is a good investment?
As the name suggests, this is a tax saving scheme…so it is clear that income tax exemption will be available in this. Actually, the returns you will get in the 5-year lock-in period will be tax free. However, only interest up to Rs 40,000 in 1 year is tax free. According to the Income Tax Act 1961, tax exemption will be available in section 80C. Investment up to Rs 150,000 in every financial year will be completely tax free. There is no risk in this because fixed deposits are guaranteed by the government. Fixed deposits can be made in any government or private bank. At the same time, there is also a facility to make tax saving FD in the post office.
Where is FD interest rate available?
Bank of Baroda: 6.50%
SBI: 6.50%
PNB: 6.35%-6.50%
Canara Bank: 6.70%
Union Bank: 6.50%
Indian Overseas Bank: 6.50%
Post Office TD: 6.9% to 7.5%
HDFC Bank : 7.00%
ICICI Bank: 7.25%
Axis Bank : 7.00%
Indusind Bank: 7.25%
Kotak Bank: 6.20%
Yes Bank: 7.25%
DCB Bank: 7.40%
RBL Bank: 7.10%
IDFC Bank : 7.00%
(Source: Interest rates are taken from the websites of all banks)
Note: Senior citizens get 50 basis points more interest on tax saving FDs than a normal investor. This is applicable in most of the banks.
Lock in period in tax saving FD scheme
Tax saving FD scheme is for 5 years. Your money remains locked in these 60 months. There is no exemption for withdrawal of money before 5 years i.e. before maturity. In case of death of the FD holder, the nominee is allowed to withdraw the money before maturity.
The return limit is fixed, TDS will be deducted if the return is more than this limit
There is no tax on tax saving FD. But, if the interest received on the invested money is more than Rs 40 thousand in a year, then tax will have to be paid. In the case of senior citizens, the exemption limit is up to Rs 50 thousand. On maturity, the bank will pay the remaining amount only after deducting TDS.
Tax Saving FD Benefits
– Tax exemption under section 80C of Income Tax
– Deduction on investment up to Rs 1.50 lakh per annum
– Fixed interest rate for 5 years, no risk
– Nominated Facility
– 0.50% more interest for senior citizens
– There is no facility of breaking FD before maturity and auto-renewal
If you want to invest in tax saving FD then these documents are necessary
– Identity proof (Aadhaar card, PAN, driving license, passport)
– Address Proof (Aadhaar Card, Electricity Bill, Ration Card, Voter ID, Driving License, Passport)
– Signature proof (passport or driving license)
– 2 passport size photographs