qualify as tax saving instruments under Section 80C
Tax Savings FDs are a special fixed deposit instruments which provide
investors tax benefits
Section 80C along with satisfaction of holding a traditional Fixed
Deposit. These are like normal fixed deposits except their name,
tenure and deductibility as tax savings.
These are much safer and very
convenient as can easily be done online through net banking. Almost
every bank offers 'Tax Saving FDs' with slight changes in
interest rates and other related terms and conditions.
Post Office also
offers Tax Saving FDs on the same line called as Time Deposits.
is the area where tax saving FDs differ from other routine FDs. Tax
saving FDs have a minimum maturity period of 5 years which means funds
to be locked in for atleast 5 years. Some banks offer Tax Saving FDs
longer tenure too.
Post Office Time Deposits are also having maturity period of 5 years.
on Tax Saving FDs
of now ie financial year 2019-20 banks are offering interest of 5.25%
to 6.80% to their customers on
their Tax Saving FDs. For senior citizens this rate can be a bit
higher. Interest rates on Tax Savings FDs varies from year to year
depending upon various factors.
Post Office Time Deposits provide interest of around 7.70% per year.
Saving FDs as the name suggests are eligible for deduction as tax
savings under Section 80C within the overall limit of ₹
received is Taxable-
saving FDs should not be
confused as tax free FDs. The interest income from these FDs is taxable
as income from other sources. Due to this fact of interest being
taxable the final effective return from these FDs gets reduced.
- Tax Saving FDs are termed to be safe investments.
- Funds are invested for a short period of 5 years.
- These are convenient as many banks provide the
facility to invest the funds online.
- On redemption funds will directly be credited to your
- The Interest earned is taxable.
- Tax will be deducted(TDS) by bank at applicable rates
on interest earned.
- No premature withdrawal is possible, ie. you can not
withraw money before the 5 year lock in period.
- Can not be pledged with banks to secure Loans.
you are planning to invest in Tax Saving FDs, opt for some large public
and private sector banks. Lucrative schemes and higher interest rates
offered by small
co-operative banks are better to be avoided as these can be risky.
Other Tax Saving options:
Plan your taxes
Rules for FD interest income
Public Provident Fund(PPF)
(Equity Linked Saving Schemes)
Save the Girl Child Initiaive in tax savings-Sukanya Samriddhi Account
quick reads for Senior & Super Senior Citizens
No tax upto income of ₹ 3,00,000 / ₹ 5,00,000-
Read in detail the applicable Tax
limits for medical insurance premium u/s 80D
u/s 80DDB for expenditure on specified desease for senior citizens
benefit of ₹ 50000 as deduction of interest from
deposits u/ 80TTB