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Tax Saving Fixed Deposit

The only additional benefit of a Tax Saving FD over a regular FD is that the original amount you invest in a Tax Saving FD is exempted from taxes. Also, you can claim a tax deduction under Section 80C of the Indian Income Tax Act, 1961 while filing income tax returns. However, the interest income that is generated from Tax Saving FDs is subject to the same tax rules as any other regular FD.

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Tax Saving Fixed Deposit

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  1. WhatisTax SavingFixedDeposit? WithTaxSavingFixedDeposit,youcanclaimtheamountinvesteduptoRs.1.50Lakhsasadeduction fromyour income.So, tocalculateyour taxableincome, you reducetheamountof your Tax SavingFDs fromyour totalgross income;and, thatishow you getyour taxable income.Thetaxbenefitordeductionwhich you getfor yourtaxsavingFDs isunderSection80C of theIncomeTaxAct, 1961. HOW TAX SAVING FDS ARE DIFFERENT FROM REGULAR FDS? The onlyadditionalbenefitofaTaxSaving FDovera regularFDisthattheoriginalamountyou investinaTaxSavingFDisexemptedfromtaxes.Also,youcanclaimataxdeductionunder Section80CoftheIndianIncomeTaxAct,1961whilefilingincometaxreturns.However,the interestincomethatisgeneratedfromTaxSavingFDsissubjecttothesametaxrulesasany otherregular FD. Recommended Read :Calculation ofIncomeTaxon FDand RDInterest!!!Also Read :How to saveMoneythrough SIP?

  2. WHAT ARE SCHEMES FOR FIXED DEPOSITS UNDER SECTION 80C? Fixed Depositsschemedunder Section 80Cof theIncomeTax Act,1961 arenamedas Tax Saving Fixed Deposits.You gettaxdeductions up to Rs.1.50 Lakhs per year under Section 80Cof the IncomeTax Act,irrespectiveof yourtaxbracket. Also,Section80Ccanbeusedtoavaildeductions onanumberofinvestmentsorexpendituressuchas PPF, NSC, child education fees, infrastructure bonds, pensionfunds, taxsaver fixed deposits, seniorcitizen savings scheme(SCSS), unitlinked insuranceplans(ULIP), lifeinsurancepremiums,homeloanprincipal,etc.Most relevantisthat Section80Cprovidescumulativedeductionsupto Rs.1.50 lakhsperyear fromall investments in relevantinstruments.

  3. FEATURESOF TAXSAVING FDS: • Major featuresof TaxSaving FDsare: • Fixed maturityof 5years. • MinimuminvestmentmustbeRs.100. Further, investmentscan bemadeinmultiplesof Rs.100 only.This limit mayvaryfrombank to bank. • The maximumlimit of investmentsRs.1.50Lakhs. • Interestratewillbeasperyourbank orfinancial institution. • Individuals including senior citizensandNRIs;and Hindu UnifiedFamilies(HUF)canopen thisaccount. • Incaseofjointaccounts,onlythefirstholderwillgettaxdeductionsasperthesection80Cof theIncomeTaxAct, 1961. • Prematurewithdrawalisnotallowed. • You cannotavailloanagainstyour taxsavingfixed deposits. • YourinterestfromFDsaretaxable.TDSischargedat10%pa,ifyouhavegivenyourPAN details toyour bank, elseTDS willbechargedat20%pa. • Recommended Read :Calculation ofIncomeTaxDeduction on FDand RDInterest!!!Also Read :WhichBanksoffer Higher Rate ofInterest on Deposits inIndia? BENEFITSOF INVESTINGINTAXSAVING FDS: TaxsavingFDs comewithlotofbenefits.Youcangetmoreoutof your investmentsthroughTax SavingFDs. Though, thereareafew limitationsas well,such as you cannotwithdrawprematureandyoucan’tavailloanagainstit,etc. However,atthesametime,therearemany benefitfromthe same: The majorbenefitof investing intaxsavingfixed  depositis that ithelpsyou saveincome tax. Open throughouttheyear;unlike, taxfreebonds  issued bythegovernment fromtime to time. You can startinvesting withas littleas Rs.100and  add toyour savings. Also,youcanavailataxbenefitonamountinvested  up to Rs.1.50Lakhsperyear.

  4. Youcantakeadvantageofinterestpaidoutonmonthly or quarterlybasis. • Specialratesareavailableforseniorcitizens,depending on bank. • Secure investments for themedium term. • Since,prematurewithdrawalisnotavailableincaseof taxsaver fixed deposits,you can besureof receiving assuredreturns,apartfromsaving tax. • Also,nominationfacilityisavailable.Youcannominate or authorizesomeone towithdrawyour depositbeforeor postmaturityin the eventofyour death. • And, Tax saving fixed depositsmay notearn you as highassomeothertaxsavinginvestmentavenues;such as taxsavingmutualfunds or insurancepolicies, these willensure thatyou haveapeaceof mind whileinvestingyourhard-earnedsavings,andgetassuredpay- outsatregularintervals • ELIGIBILITYTO OPENATAX SAVING FD? • Allresidentindividuals who haveapan card. • Non–residentIndians(NRIs). • Seniorcitizensabove60 yearsof age. • SbiAccount Balance CheckOnline

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