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Fixed Deposit Under 80C

A Fixed Deposit is an excellent investment option for risk-averse individuals. Not only is it safe and flexible, it also comes with guaranteed returns and a predefined rate of interest. Another benefit is that it can easily be availed online across all banks and NBFCs in India.

Recently, there is a new type of FD that has become popular in the market and is known as the tax-saving FD. A tax-saver fixed deposit is a type of fixed deposit, under which you can avail a tax deduction as per Section 80C of the Income Tax Act, 1961. Section 80C of the Income Tax Act, 1961 allows taxpayers to avail certain deductions on their earned income, provided they have successfully made investment mentioned under Section 80C. A tax saver FD allows a tax deduction of up to ₹1.5 lakhs under Section 80C of the Income Tax Act, 1961.

A tax-saver fixed deposit scheme comes with a mandatory lock-in period of 5 years. The interest earned is taxable and varies from 5.5% to 7.75%.

Benefits of Tax Saving Fixed Deposits

The important benefits of Tax Saving FDs are:

  1. They are easily available across most banks in India.
  2. You can avail a tax deduction of upto ₹1.5 lakhs.
  3. The interest is paid out on a monthly or quarterly basis.
  4. Senior citizens are offered better rate of interest.
  5. It is a safe and secured investment for a medium tenure.

Features of Tax Saving Fixed Deposits

The important features of Tax Saving FDs are:

  • Comes with a fixed maturity period of 5 years.
  • You can open an account with a minimum investment of ₹100, and then in multiples of ₹100.
  • The maximum amount of investment is limited to ₹1.5 lakhs.
  • The interest rate is predefined and pre-decided by the banking or issuing authority.
  • In case of a joint FD account, only the primary account holder will be entitled to the tax-benefit.
  • You cannot make a premature withdrawal as you would already have earned the tax benefit from the predefined term.
  • Loan facility is not available under a Tax-Saver FD.
  • The Tax Deducted at Source stands at a flat 10%. If the FD account is not linked to a valid PAN, the TDS stands at a flat 20%.
  • Tax-Saver FD provides a higher interest rate in comparison to savings account.
  • This FD can be opened by Hindu Undivided Family (HUF).

FAQs on Fixed Deposit under 80C

Can we show FD in 80C?

No, you can only show a Tax-Saving FD under Section 80C. Normal FDs are shown via TDS certificate or Form 15H/15G under Form 26AS.

Does fixed deposits come under Section 80C?

No, only a tax-saving fixed deposit scheme comes under the purview of Section 80C of the Income Tax Act, 1961.

Does fixed deposit come under tax exemption?

No, only a tax-saving fixed deposit scheme comes under tax exemption.

Is Fixed Deposit exempted from tax?

No, only a tax-saving fixed deposit scheme is exempted from tax.

What comes under Section 80C of Income Tax?

PPF, EPF, Insurance, NSC, SCSS, ELSS, etc. come under Section 80C of the Income Tax, 1961.

Where can I save tax other than Section 80C?

You can save tax under Section 80CG, 80CCD, 80D other than Section 80C.

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