Tax Saver Fixed Deposit is a type of fixed deposit, is an investment option where people invest to save tax under section 80C of the Income Tax Act, 1961. An investor can claim a deduction on the investment amount up to Rs 1.5 lakh. The lock-in period for this type of fixed deposit is 5 years. The interest earned on the tax saver fixed deposit is taxable, while the interest rate ranges between 5.5 percent – 7.75 percent, the interest rate varies from bank to bank.
Benefits of Tax Saving Fixed Deposits
For generations, people have trusted the tax-saving fixed deposit scheme as an investment option. In this scheme, people can see their money growing as well as can save up on tax. Investors feel safe while they invest in such a plan as banks are closely monitored by Reserve Bank of India, which means there will be transparency and they will not be trapped in a scam. Here are the few benefits of tax-saving fixed deposits:-
- FD has a higher interest rate than a savings bank account
- FD permits just a one-time lumpsum store
- TDS from the enthusiasm on FDs is applied
- Adaptability in the sum and residency for financial specialists
- Get charge allowance up to Rs.1, 50,000 under Sec 80C
- It is anything but difficult to get credit on the FD sum for lesser intrigue
- Untimely withdrawl isn’t accessible
Documents Required to invest in Tax Saver Fixed Deposit
To open a tax saver fixed deposit account in any financial organisation who need to submit various Identity and address proof. The document list can be different from every bank, but these are few of the common documents required. You should produce the original documents for verification and one set of photocopy. When you proceed to fill the form remember to fill it in CAPITAL LETTER and with a black ink pen. With address proof and identity proof, it is mandatory to provide permanent address and telephone number.
- PAN card
- Voter ID card
- Driving license
- Government ID card
- Senior citizen ID card
- Telephone bill
- Electricity bill
- Bank Statement with Cheque
- Certificate/ ID card issued by Post office
Comparison with other tax-saving investment plans
There are various tax-saving plans available in the market like ELSS Tax saving Mutual Funds, PPF and NSC. Returns from all the tax-saving scheme are taxed. But ELSS is different from all as it is tax-free and has a higher return.
|Investment||Returns||Lock-In Period||Tax on Returns|
|5-Year Bank Fixed Deposit||6% to 7%||5 years||Yes|
|Public Provident Fund (PPF)||7% to 8%||15 years||No|
|National Savings Certificate||7% to 8%||5 years||Yes|
|National Pension System (NPS)||8% to 10%||Till Retirement||Partially taxable|
|ELSS Funds||15% to 18%||3 years||Partially taxable|
Things to Remember:-
- Individual of Hindu Undivided Families (HUFs) can only invest in tax saving FD scheme.
- A minimum amount can only be invested which differ from bank to bank.
- Premature withdrawals and loan against these FDs are not allowed.
- Tax saving fixed deposits have a maturity period of 5 years.
- Such schemes are not available with the co-operative or rural bank, these are only available with public and private sector bank.
- If you invest in Post Office Fixed deposit then they can be transferred from one office to another.
- Tax saving fixed deposits can be held either individually or jointly. In the case of joint holders, both the persons will get a tax benefit.
- TDS is applicable also applicable on the tax saver fixed deposit. TDS deduction on the interest earned can be avoided by submitting Form 15G (or Form 15H for senior citizens) to the bank.
- You can make any family member or friend a nominee for emergency situations.