How does it save tax along with interest?
If you are looking for a safe instrument to save income tax, a fixed deposit is one of them. You can get a tax rebate of up to Rs 1.5 lakh by investing in it under the existing tax rules. The amount that is invested in FD is deducted from your total taxable income. This option also helps you get interest along with your tax savings. Tax saving FD is exempt under Section 80C of Income Tax Act. Here we are telling you everything about investing in tax saving FD.
Can Can Invest?
Only Individuals and Hindu Undivided Family (HUF) get tax exemption on investment in tax saving fixed deposits.
Which documents are required?
In case of opening a new savings account for tax saving fixed deposits, some documents are required. They have to be given for KYC. These include ID proof (PAN), proof of address (passport, driving license, etc.) and a passport size photo.
How much minimum and maximum investment you can make?
The minimum amount of fixed deposits can vary according to each bank. However, the maximum investment limit in a financial year is Rs 1.5 lakh.
How is the payment of interest?
Most banks offer more interest on fixed deposits for senior citizens than normal ones. This also happens for tax saving FDs.
Tax saving fixed deposits come with a term of five years. Premature withdrawal is not available in this.
How can holding be held?
This type of FD can be in single or joint holding. If the fixed deposit is in the joint holding, then the exemption in income tax is available only to the first holder.
How does tax work?
It is true that under section 80C, there is a tax rebate on investments up to Rs 1.5 lakh. However, interest on such fixed deposits is not tax free. TDS is deducted accordingly by adding it to the income of the investor. Interest on these deposits is paid on monthly / quarterly basis, which can be reinvested again.
Keep these things in mind as well…
Nomination facility is available on such fixed deposits.
Regular bank FD can be used for taking loans as a guarantee. At the same time, a loan can not be taken on tax saving FD.