Top Benefits and Features of a Tax-Saving Fixed Deposit

  • Deposit
  • 4 Days ago

Written by - Shriram

Did you know that a tax-saving fixed deposit can help you get tax exemptions? Under Section 80C of the Income Tax Act, 1961, you can claim up to Rs 1.5 lakhs per annum on a tax-saving deposit. Your investment will remain secure as the interest rates are independent of market fluctuations. A regular FD (Fixed Deposit) has multiple features, but taxes are implied on the maturity amount.

A fixed deposit has multiple features that make it one of the best investment schemes to consider. Opening an FD is easy; you get assured returns with higher interest rates than savings accounts. However, you must invest in a 5-year fixed deposit to claim it in your taxes. With a regular FD, you get to select a tenure typically ranging from 7 days to 10 years.

Invest in a Shriram Fixed Deposit to get the best interest rates for your investments. You can get the additional interest of 0.25% per annum on all renewals after the maturity of your FD. Check interest rates through the Shriram interest rate chart to know how much you can get for a specific tenure.

Although a tax-saving FD may be similar to a regular fixed deposit, it is best to explore all the features before investing. Let's look at the characteristics and eligibility criteria of a tax-saving FD.

What is a Tax-Saving FD?

A tax-saving fixed deposit is a scheme in which you can get tax deductions under Section 80C of the Indian Income Tax Act, 1961. You will only get the interest and principal amount upon maturity of the deposit. The lock-in period is 5 years, and the tax-saving FD interest rates usually range from approx. 5.5% to 7.75% per annum. Anyone investing in this scheme can claim a deduction on this investment up to Rs. 1.5 lakh.

Key Features of a Tax-Saving FD

  • The maximum deposit amount that can be invested is Rs. 1,50,000.
  • According to the bank or NBFC, the minimum deposit for a tax-saving FD can be as low as Rs. 1000.
  • It is easy to save an income tax on an FD under Section 80C of the Income Tax Act.
  • Premature withdrawal is not permitted.
  • One-time investment with a lump-sum amount is needed to start a tax-saving FD.
  • You can open most of the tax-saving FDs with a joint account.

Eligibility for a Tax-Saving FD

Like a regular FD, a tax-saver deposit is easy to open, given that you meet the required eligibility criteria. Check with your bank or NBFC to know the exact eligibility, but generally, the standard measures include resident Indian citizens above 18 years of age and Hindu Undivided Families (HUF). Here's a list of documents you will need to apply for a tax-saver FD:
  • Permanent Account Number (PAN) Card
  • Aadhaar Card
  • Driving License
  • Passport
  • 2 recent passport-size photographs

Difference Between a Tax-Saving FD and a Regular FD

  • Tax Benefits:
A regular fixed deposit does not have any tax benefits, and TDS (Tax Deducted at Source) is applicable on the deposit. You can get good returns on a tax-saving FD, but the interest will be taxable upon maturity.

You can claim tax deductions on a tax-saving FD according to section 80C of the Income Tax Act, 1961. However, the interest earned on this deposit is still taxable.
  • Deposit Amount:
With a regular FD, you can invest according to your requirements or investment goals. The more you invest, the better interest you will earn.

You must invest a fixed amount for 5 years in a tax-saving FD to qualify for tax benefits.
  • Lock-in Period:
A regular FD has no lock-in period and has flexibility in terms of tenure. According to the bank or NBFC, you can open an FD for a minimum of 7 days to a maximum tenure of 10 years.

A tax-saving fixed deposit has a lock-in period of 5 years. During this lock-in period, you will not be allowed to withdraw the funds or take a loan against the FD.
  • Liquidity:
A regular fixed deposit can be quickly withdrawn. However, there will be a penalty for closing a fixed deposit prematurely.

Premature withdrawal of a tax-saver FD is not allowed, and the total amount will only be credited to the investor's account upon maturity.

Conclusion

If you are looking for an investment option that you can claim against your taxes, with guaranteed returns, zero risk and growth, you should apply for a tax-saving FD. A tax-saving FD comes with a fixed tenure, and market fluctuations will not impact the interest rate during this period.

Invest in a Shriram Fixed deposit to grow your money and give wings to your dreams. You can quickly achieve your financial goals with attractive features like flexible tenure, auto-renewal, auto withdrawal, higher interest rates, additional interest for senior citizens, and much more.

FAQs

1. Is tax-saving FD good?

Yes, a tax-saving FD can help you save tax and earn high-interest rates. Market fluctuations will not impact the deposit, and you can grow your finances securely.

2.
What is a tax-saving fixed deposit?

A tax-saving fixed deposit is a savings scheme through which you can claim an FD to get tax exemptions.

3.
What is the difference between a tax-saver FD and a normal FD?

The most important difference between a tax-saver and a normal FD is that one can help you save taxes and the other cannot. You can claim tax up to Rs. 1.5 lakhs per annum with a tax-saving FD.

Key Highlights:

  • You can get tax exemption under Section 80C of the Income Tax Act, 1961.
  • Your investment will be secure as the interest rates are independent of market fluctuations.
  • A regular FD may have many features but will also be taxable.
  • Senior citizens can earn more interest on a tax-saving FD if the bank or NBFC has special interest rates for older people.