What are Tax-Saving Fixed Deposits?

Home > Tax-Saving Fixed Deposits: Maximize Returns and Save on Taxes

Tax-Saving Fixed Deposits: Maximize Returns and Save on Taxes

Learn how tax-saving fixed deposits help you earn secure returns while availing tax deductions under Section 80C. Discover features, benefits, and how they work.

Tax-Saving Fixed Deposits Overview: Tax-saving fixed deposits (FDs) are financial instruments offered by banks and NBFCs, allowing investors to earn a fixed interest rate while enjoying tax benefits under Section 80C of the Income Tax Act. You can invest up to INR1,50,000 and claim a tax deduction on the amount in the year of investment. These FDs come with a lock-in period of 5 years.

Key Features of Tax-Saving FDs: Tax-saving FDs offer tax deductions under Section 80C, but the interest earned is taxable. The investment is locked in for 5 years, and premature withdrawals are not allowed. These FDs cannot be auto-renewed, and no loan can be taken against them. They come with fixed interest rates and offer flexible interest payouts.

How Tax-Saving FDs Work: If you invest in a tax-saving FD, the principal amount qualifies for a tax deduction, but the interest earned is taxable. For example, if you invest INR50,000 in a tax-saving FD, you can claim this amount as a deduction under Section 80C in the year of investment.

Benefits of Tax-Saving FDs: Tax-saving FDs are a low-risk investment offering guaranteed returns. They are ideal for those seeking secure returns without market fluctuations. You can invest lump sums like bonuses or retirement benefits, with flexible deposit amounts ranging from INR100 to INR1,50,000.

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