5 Important Things You Need To Know About Tax-Saving Fixed Deposits


Tax-saving fixed deposits are lucrative investment options. They provide you with tax benefits along with good return on maturity. But, before you take the plunge, learn more about them to see if they’re right for you.

Take a look at 5 important things to know about tax-saving fixed deposits.

  1. You can benefit from deductions on your investment

These fixed deposits allow you to claim up to Rs.1.5 lakh as a deduction on your investment under Section 80C of the Income Tax Act, 1961. Post this limit, your investment will be taxed as per your tax slab.

  1. They have a fixed 5-year tenor

Tax-saving fixed deposits come with a lock-in period. You have to keep your fixed deposit untouched for a tenor of 5 years. Premature withdrawal of the invested sum or pledging the same to avail a secured loan is not permitted for this variant of FDs. So, you may lose out on liquidity when it comes to these FDs.

If you want a more liquid option, you can choose company FDs like those offered by Bajaj Finance for a high interest from 7.85% to 8.20%. You can also get a loan against this FD when you need funds, and do not want to face the premature withdrawal penalties.

  1. Interest is taxable as per your income bracket

The interest from tax-saving fixed deposits is taxable if your earnings cross Rs.10,000. However, if you are a senior citizen, your interest earnings are taxed only when they cross Rs.50,000, according to the recent Union Budget announcement, 2018. The tax deductions on the amount exceeding this get calculated as per your tax bracket.

Banks usually deduct TDS at 10% or 20% if they don’t have your PAN information. However, if you can avoid this deduction through category exemption with forms 15H or 15G, in case your total income is below a certain limit.

  1. These FDs have a nomination facility

Just like other FD schemes, tax-saving fixed deposits also feature a nomination facility. Choose your spouse, sibling, child, grandchild, etc., as a beneficiary to claim the matured sum.

  1. Senior citizens receive higher rates of interest

If you are 60 years of age or more, then you get more benefits from tax-saving fixed deposits. Not only do you get the tax benefits on the investment, but you also get better value on maturity. This is because, according to present market standards. On Senior Citizens FD Schemes one can get higher interest on their investment.

Knowing these five facts about the tax-saving fixed deposits will help you make the right investment decision.

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