Tax saving fixed deposits of banks under section 80C

Updated: Thursday, March 14, 2013, 11:43 [IST]

With filing of tax returns set to begin from April 1, 2013, Bank tax Savings Fixed Deposits are one of the safest investment avenues to consider for savings under 80C of the IT Act.

Bank Tax Savings Fixed deposits are a favorite investment avenue for many Indians as they are simple and easy to understand as compared to other 80C instruments like ULIPs, which are rather complicated.

One can save tax by investing in Bank Tax Savings Fixed Deposits, where the only problem is the 5-year lock-in, as compared to three years in ULIPs or ELSS.

Features:

* Tax Savings Bank Fixed Deposits are offered by banks
* Investment can be made up to Rs 1 lakh under Section 80C of the IT Act.
* In case of joint accounts, only first holder can avail tax benefit.
* Interest earned is taxable.
* No sweep-in facility.
* No overdraft facility.

It's pertinent to note that tax would be deducted at source (TDS), as in the case of normal FDs, where an interest in excess of Rs 10,000 is subject to TDS.

One can also apply for exemption on TDS if total income does not fall within the taxable limit. This can be done by submitting form as per Income Tax Act.

Banks offering Tax Savings Fixed Deposits.