Main features of tax-saving FDs
· The lock-in period is five years
· The interest earned, as a part of the Tax Saving Fixed Deposit, is taxable, and is deducted at source.
· Premature withdrawals, Loans or Overdraft (OD) facilities are not available for a Tax Saving FD.
· There is no auto-renewal facility for Tax Saving Fixed Deposits
· Tax Saving FD interest rates remain unchanged over the five-year period
· Interest rates differ from bank to bank, and rates for Indian citizens, Hindu Undivided Family (HUF) also vary.
· If it’s a joint Tax Saving Fixed Deposit, tax benefits are available only to the first account holder.
· Additionally, interest payments received up to Rs 50,000 in a fiscal year will not be subject to TDS deductions. A senior citizen might avoid TDS deduction by giving the bank Form 15G/15H
· According to the recently amended Income Tax Act section 80TTB, interest payments paid on deposits kept with banks, co-operative banks, or post offices up to Rs 50,000 are in fact tax-exempt.