How to Benefit from Income Tax Exemptions on Tax Saver FD 2024?

An FD account is an excellent option to invest for risk-averse investors seeking steady returns. Fixed Deposits offered by various banks help people save funds for their future or to arrange for funds to meet any specific objective. While a regular FD allows you to select any tenure between 7 days and 10 years as per your convenience and financial objective. A 5-year Bank FD is offered for tax saving.

If you are seeking an investment alternative which fulfils the criteria of guaranteed returns, minimal risk and tax saving, you should pick a Tax Saving Fixed Deposit. You can compare from the interest rates offered by various banks on Tax Saving FD and then choose the one that fits your investment objectives.

Tax-Saving FD: Key Features

Tax-Saving FDs come with the following features,

It is important to note that premature withdrawal and loans or overdraft (OD) facilities are not available for a Tax Saving FD. FD holder can choose to renew the FD in case of non-withdrawal at the time of maturity. You can use Tax Saver FD Interest Calculator to calculate the interest earned and maturity value.

Benefit from Income Tax Exemptions on Tax Saver FD

(1) Tax Exemption under Section 80C

Under Section 80C of the Income Tax Act, 1961, tax-saving FD schemes offer a tax deduction benefit. These FDs come with a lock-in period of 5 years and deposits of up to Rs.1.50 lakh per financial year are eligible for the deduction. FDs allow only a one-time lump sum deposit. Minimum tenure for receiving tax benefits is five years.

Main advantage that a Tax Saving FD has over ELSS is that unlike ELSS, Tax Saving FD is not market-linked.

(2) Tax Exemption under Section 80TTB

Tax Exemption under Section 80TTB is available only to Senior citizens who can get a tax deduction under Section 80TTB of the Income Tax Act, 1961 on the interest earned from FDs. They can take benefit up to Rs.50,000 deduction on the interest income from FD accounts opened with banks.

It's essential for investors to remain aware that the interest income earned from FDs is taxable as per individual's income tax slab and is categorized as 'Income from other sources' while filing the Income Tax return (ITR).

Comparison Among Tax Saving Investment Options

Tax Saver FD is Suitable for Whom?

Suitability of investment in Tax Saving FDs depends upon your age, risk appetite, purpose of investment and investment time horizon. Tax Saving FD is Suitable for persons falling in any of the following categories,

1. If you are around your retirement age: You would want to invest your hard earned money to a safe, secured and guaranteed return bearing instrument which is not volitile with the stock market fluctuations. Tax saving FD will be one of the best options for you to invest in.
2. If you want a long-term fixed rate option: Tax saving FD offers 5-year long term investment with fixed returns.
3. If you have a low risk appetite: A Tax Saving FD provides both the benefits of guaranteed fixed returns and low-to-zero risk, so it will be a good choice for you.
4. If you need to save tax: Tax saving FD offers income tax exemption under Section 80C to save taxes.

Top 5 Tax Saving FD Interest Rates

Tax Saving FD FAQs

Who is eligible to invest in Tax Saving FD?

Resident individuals and Hindu Undivided Families (HUF) are eligible to invest in Tax Saving FD.

What are the benefits of Tax Saving FD?

• Guaranteed fixed interest rate
• Simple documentation
• Safe and secured investment option
• Tax exemption under section 80C and 80TTB of Income Tax Act, 1961
• Not volitile with the stock market fluctuations

What is minimum deposit amount under Tax Saving FD?

Minimum deposit amount under Tax Saving FDs is Rs.100 and in the multiples of Rs.100.

What is maximum deposit amount under Tax Saving FD?

Maximum deposit amount under Tax Saving FDs is Rs.1.50 lakhs in a financial year.

What is the lock-in period of Tax Saver FD?

Lock-in period of Tax Saver FD is 5 years.

Is there any additional benefit available for senior citizens under Tax Saver FD?

Senior citizens are offered 0.25% to 1% more interest rate as compared to regular investors. Moreover, they will also claim tax benefit up to Rs.50,000 deduction on the interest income.

What is interest pay out available?

Monthly, quarterly or reinvestment in principal options are available under Tax Saver FD.

Who is eligible for tax benefit in case of joint holding under Tax Saving FD?

In the case of joint holding under Tax Saving FD, the tax benefit under 80C of Income Tax Act, 1961 will be available only to the first holder of the account.

What are the drawbacks of Tax Saving FDs?

Premature withdrawal and auto-renewal facilities are not available. 5-year lock-in period will be there.

Is interest earned taxable under Tax Saving FD?

Yes. Interest earned is taxable according to the tax slab of the investor Tax Saving FD.

Can I invest in Tax Saving FD online?

Yes. Most of the banks in India offer the facility to invest in Tax Saving FDs online.