Indusind | RBL | IDFC First | DCB

Must read


A tax-saving FD is one of the tax-saving tools that qualify for tax benefit under section 80C of the Income-tax Act, 1961. In comparison to equities, these fixed deposits offer guaranteed returns and are low risk. This attribute is one of the reasons why they are so popular among taxpayers.

By investing in tax saving s FDs, an investor can claim a tax deduction of up to Rs 1.5 lakh per financial year. The interest earned on these fixed deposits is taxed according to the investor’s tax bracket. This sort of FD has a 5-year lock-in term and can only be liquidated after that.

The interest rate offered on such FDs varies across banks. You can choose from cumulative interest or non-cumulative options of tax-saving FDs which are normally offered by most banks.

According to current income tax laws, only individuals and Hindu Undivided Families (HUFs) can invest in tax-saving FDs. You can open a tax saving FD account either with a bank you already have a savings account with or with another bank, provided the bank allows you to do so without opening a savings account.

How tax-saving Fds are taxed

Section 80C of the Income Tax Act allows for a deduction of up to Rs 1.5 lakh in a single financial year. It’s important to remember, though, that interest paid or accrued on the principle is fully taxable in your hands. Interest will be applied to your earnings and taxed at the rates that apply to your income bracket.

TDS will be deducted by the bank if interest payments on FDs with a single bank reach Rs 40,000 in a financial year. Form 15G or Form 15H, as applicable, can be used to avoid TDS.

The bank cannot deduct any TDS if your total interest income from all FDs with the bank is less than Rs 40,000 in a year. In the case of a senior citizen aged 60 and above, the ceiling is Rs 50,000.

Tax benefit in case of a joint account

Single or jointly, you can invest in a tax-saving FD. If the mode of holding is joint, however, the deduction under section 80C is only available to the first holder listed on the FD receipt



Source link

More articles

- Advertisement -

Startup

- Advertisement -

Latest article