Many people invest in such a place to save income tax, from where they can get the benefit of tax exemption. Under this, many people invest in tax saving FD (5 years FD), but to get the benefit of income tax rebate, you have to invest in it for 5 years. Before withdrawing money, you will not get the benefit of tax exemption. We are telling you how much tax you will have to pay in such a situation.
What is tax saving FD?
A 5-year FD is called a tax-saving FD. In this, tax exemption of up to Rs 1.5 lakh can be taken under Section 80C of Income Tax Act on investment. All banks offer tax saving FD.
How much tax will be paid for breaking FD before 5 years?
On the year you invested in these schemes, you availed tax exemption of Rs 1.5 lakh under Section 80C of the Income Tax Act. If you remove it before maturity, then the year you did it, that year, the entire amount will be added to your income, on which you have availed income tax rebate. Apart from this, the interest received will also be added to your income.
After this, you will be charged tax based on the income tax slab you will come across.
Understand by example:Suppose by availing tax saving FD in 2019 (2019-20) you have availed tax exemption of Rs 1.5 lakh on annual income. But if you break it after one year instead of 5 years in 2020, then the tax rebate on 1.5 lakh rupees that you have taken will be added to your 2020 (FY 2020-21) income. After this, you will be charged tax based on the income tax slab you will come across.
What is section 80C?
Section 80C of the Income Tax Act is actually a part of the Income Tax Law, 1961. It mentions the investment channels in which income tax exemption can be claimed after investing. Many people start investing to save tax before the end of the financial year. Under Section 80C of the Income Tax Act, you can claim deduction of Rs 1.5 lakh from the total income. Understand this in easy language, you can reduce your total taxable income up to Rs 1,50,000 through Section 80C.
