Among the tax saving instruments under section 80C, most of the risk-averse investors consider investing in PPF, Life Insurance Premiums, 5-Year NSC, Post Office Time Deposit and so on. Tax-saving FDs, on the other hand, are ideal for seniors and risk-averse investors. Individuals who invest in tax-saving FDs are eligible for a tax deduction under Section 80C. The tax gain is only applicable to the first holder of a tax-saving fixed deposit made in joint name. Tax-saving FDs have a 5-year lock-in period and no option for early withdrawal. The minimum deposit amount to invest in tax-saving FDs varies between banks. Tax-saving FDs also have a nomination option, which allows a holder in case of his or her death to designate someone to redeem the deposit before or after maturity. The following are tax-saving FDs of private, public, and small finance banks that give higher returns over a five-year period.
Benefits of investing in tax-saving fixed deposits
Tax-saving fixed deposits are known to be one of the best investment strategies available. As a consequence, it is a common option among risk-averse investors. The below are some of the benefits of a tax-saving FD:
Income earned in such FD schemes is tax-deductible under Section 80C of the Income Tax Act of 1961.
In a financial year, a limit of Rs. 1.5 lakh as deductions can be claimed.
In tax saving FDs investors earn promised returns, as well as an insurance cover of Rs. 5 lakh by DICGC against bank fixed deposits in the case of a bank's liquidation.
For the AY 2019-20, the TDS rate on fixed deposits (FDs) is 10% if the interest amount for the entire financial year surpasses Rs 10,000. If you do not submit your PAN card to the bank, the TDS limit on fixed deposit interest is 20% under current Income Tax laws. Form 26AS comprises the specifics of the TDS withheld by the bank. For either a Time Deposit (FD) or a Recurring Deposit (RD) made with a post office, no TDS is withheld respectively. Senior citizens (those over 60) are able to receive up to Rs 50,000 per year in tax-free FD interest, with no TDS deducted on interest received up to Rs 50,000 annually. You can submit or use form 15G/15H if your gross income for the year is less than Rs 2.5 lakh. Since your income does not fall within the taxable slabs, the bank will not subtract TDS and you will not be eligible to pay income tax.