Tax saving Fixed Deposit schemes to save tax
Fixed deposit is most popular method of investment. Do you know that you can also save tax with your fixed deposit income? If invested wisely, you can easily save tax with investment.
Fixed deposit is one of the term deposit schemes offered by banks. As the name specifies, you receive a fixed return from bank as per the predetermined rate. Fixed deposit also provides you tax benefits which are not generally available on other term deposits. Government had declared tax exemption on term deposits of more than 5 years in a finance bill of year 2006 under Section 80C of Income Tax Act, 1961. Features of tax saving fixed deposit
Tax saving Fixed Deposit (F.D.) features are as follow:
To calculate tax benefit, the 'year' is defined as financial year. The minimum deposited amount can Rs. 100 and maximum amount is limited to Rs. 1,00,000, which is maximum possible tax exemption under Section 80C. How to save tax with fixed deposit
You have to deposit fixed deposit receipt of bank to avail tax exemption benefit in Fixed Deposit. But if any couple invest in same tax saving deposit as joint holders, then the tax benefit will be limited only to the first holder. Thus joint holders don't get double benefit.
Interest rate on term deposit schemes with tax benefit is generally accumulated on quarterly basis. Interest on tax saving fixed deposits ranges from 8.25% to 10% on the basis of amount invested. You can take your interest returns either on predetermined intervals or on cumulative basis.
However, if you avail interest on cumulative basis, then reinvestment of such interest will not be considered as fresh investment under section 80C. Thus, it will be unable to save tax as in case of Public Provident Fund (PPF).