Tax Saving Fixed Deposits

As per income tax laws, if you invest in a tax saving fixed deposit scheme, you can claim up to Rs 1.5 lakh as a deduction from your income. This amount is to be deducted from gross total income to arrive at the taxable income. This deduction is allowed under Section 80C of the Income Tax Act.

Key features of tax saving fixed deposits –

  1. Only individuals and HUF can use avail this benefit
  2. There is a minimum FD amount that varies from bank to bank
  3. Loan against FD is not allowed
  4. Minimum lock in period for these fixed deposits is five years
  5. An investor can invest in these fixed deposits through any public or private sector banks but not through cooperative or rural banks
  6. If you invest in five year post office deposits, then that also is eligible for tax deductions under section 80C
  7. Post office fixed deposits can be transferred from one post office to any other post office
  8. TDS will be deducted on interest earned from these deposits as per the tax slab of the investor. The interest/ deposit can be paid monthly or quarterly. Investor can also reinvest the interest
  9. Investor can use nominee facility in these FDs
  10. For tax saving fixed deposits also there is a higher interest rate facility available for senior citizens like the normal FDs
  11. It does not have auto renewal facility

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