Understanding More On Tax Saving Fixed Deposit
In the year 2006, the Indian finance ministry announced that all fixed deposits with minimum maturity period of 5 years shall be eligible for deduction of tax under Section 80C of the Income Tax Act to give the falling interest in the fixed deposits of retail investors a boost thereby making the idea of fixed deposits very attractive with regards to saving tax. The maximum investment that could be made in tax saving fixed deposits was capped at One Lakh rupees. However the maximum amount that can be invested has been revised to One Lakh Fifty Thousand rupees.
What else?
Premature withdrawal of the amount invested in the tax saving fixed deposit is not permitted. A minimum of five years have to be completed before withdrawing the amount invested in the tax saving fixed deposit.
Loan against tax saving fixed deposit cannot be availed.
The interest earned from the tax saving fixed deposit is taxable.
The investment in the tax saving fixed deposit can be made as an individual or as a joint account except that in the case of joint account the tax benefits can be enjoyed only by the first applicant.
PAN card is a must have to invest In the tax saving fixed deposit.
Conclusion
The introduction of tax saving fixed deposit has not only rekindled the retail investor’s interest in the concept of fixed deposit but also has given another dimension and meaning to fixed deposits. Fixed deposits are no more the boring instruments where you deposit a lump sum amount for a set time and forget about it. This is the age of flexi fixed deposit where you can enjoy the high returns of the fixed deposit as well the liquidity of a savings or current account.
Everybody aspires to save tax. Investing in Tax saving fixed deposits is one of the best options. Though I was aware of this type of FD, I did not have knowledge on the terms and conditions and how best I could make use of the tax saving benefit. Thanks to the author for providing minute details about such deposits.
The current rate of interest on tax saving FD is 8.25%. To add on to the above article, even NRIs and people above 60 years of age are eligible. And the minimum amount which can be deposited is Rs.100. The only disadvantage is the interest earned after five years is taxable. As per my calculations, assuming we deposit 1.5 lac every year, at the end of 5 years, net interest at 8.25% (post tax deduction of 10%) is Rs 65665.77. Investor needs to check for other options to see the overall benefits.
The article provides details on the various terms and conditions that are implied during investment of money in tax saving services.It is one of the best options and the most admired and desirable too.
Though this concept involves a bit of risk but again with a bit carefulness we can make the best out of it.