Tax saving is what every individual wants to do. There are various options available for an individual to invest in helping to save the tax. Out of the many options, 5 of them are usually opted out namely, Term Insurance, PPF, NSC, FD and ELSS. All of them have major advantages and shortcomings but the Tax saving Fixed Deposit is usually preferred by all. Before investing your hard-earned money, you must be well aware of what you are investing in.
First of all, let us understand some of the points related to FD, which you must be aware of.
Attributes of tax saving FD
- First of all opening an account is very easy in any of the private or govt banks. The FD is easily transferrable from one branch to another. Make sure you cannot open an Tax saving FD account in cooperative or rural banks. You must be an Individual, HUF or NRI to be able to invest in tax saving FD. The FD can be done in any Govt or private sector banks with a minimum amount of Rs 100 to max Rs 1.5 lakhs.
- At present, the top banks providing Tax saving FD are SBI bank, ICICI bank, IDBI bank, Axis bank and HDFC Bank.
- The rate of Interest remains fixed during the 5-year lock in period. It may happen that interest rate differ from bank to bank because banks decide the interest rate on FDs. The rate of interest is more for Senior Citizens. The interest on FD earned either monthly or quarterly is taxable hence; TDS is applicable for the same.
- The FD holds a lock in period of 5 years, which cannot be withdrawn before the maturity date. Also loan against the FDs are not given.
- The Tax savings FDs can be in Single holder name or be hold jointly. But the benefit would be enjoyable by primary holder only. You can hold up a nominee in your Tax saving FDs though.
- The Tax saving FD comes in Deduction Under 80(C) where the investment in Post office Fixed deposit is also applicable. These FDs can be transferred to other post offices as well. Submit 15H or 15G at the beginning of financial year in bank to avoid TDS. To claim the TDS provide the 16A certificate which is for TDS deduction.
Is it profitable to invest in tax saving FDs?
One of the most simple and easy ways for saving tax is investing in Tax saving FDs. It may happen that return earned on it might be higher than all other Tax saving options. There is hardly any risk involved in it. It is just you need to have lock in period of 5 years. Senior citizens gain more interest in Tax saving FD. Also, if the amount summing up from principle and Interest is under your tax limit then you are not entitled to pay tax as well. You can easily carry out any calculations related to fixed deposits on https://www.upwardly.in/fixed-deposit-calculator. Assured reruns along with tax savings is the major benefit accrued from Tax saving FDs.