A tax saver FD is a type of Fixed Deposit where the investors can claim a deduction. Such relaxation on income tax is available under Section 80C of the Indian Income Tax, 1961. There are a few steps with which you can easily open your tax saver FD online in a bank:
Step 1- Visit the official website of your preferred bank
Step 2- Go to the “Fixed Deposit” option
Step 3- Now click on the option named tax savings FD and then click on “proceed”.
Step 4- Now, choose the specific account from which the money will be debited, type the FD amount, and click on the “Submit” button.
Tax saver FDs rates
Interest rates on tax saver FDs usually differ from 3.5%-7.8%. However, the earned interest from these FDs is taxable. You can deposit a minimum amount of Rs. 100 and a maximum amount of Rs. 1.5 Lakh. The lock-in period in these FDs is 5 years; before the term ends, you can not withdraw money from the FD account. If you withdraw your fund before maturity, the bank will calculate the interest at the applied rate for the duration the deposit has remained in the account and a penalty will be imposed.
Things to remember before investing in a tax saver FD
Here are some things to remember before investing in a tax-saver FD:
- Eligibility: Individuals above the age of 18 and HUFs (Hindu Undivided Family) can apply for tax-free Fixed Deposits. A minor can invest in FD with an adult (parent/guardian) as well.
- Documentation: You need to remember the documents required are your proof of identity. Keep the Aadhaar card or PAN card handy to make the process smooth.
- Minimum and maximum deposit: Tax-free Fixed Deposits can be opened by depositing a minimum amount of Rs.100-1,000 and a maximum amount of Rs. 1.5 Lakh.
- Lock-in period or Tenure: Tax saver Fixed Deposits have a tenure of 5 years. For some banks, it can be extended to 10 years.
- Nomination facility: These FDs provide a nomination facility. But, this facility is not available if the Fixed Deposit is held by a minor or on behalf of a minor.
- Interest rates on tax-saver FDs for senior citizens: Most banks offer highest fixed deposit interest rates for senior citizens, and the same applies to these kinds of FDs as well.
How to avoid TDS on FDs?
Here are some ways to avoid TDS on FDs –
- By submitting Form 15G and 15H
- Timing the investments in a better way
- Splitting the investment
Benefits of tax saving FD
- Attractive interest rates are available.
- Customers can easily save tax on their deposits that range from Rs. 100 to Rs. 150,000.
- A 5 years tenure ensures that the depositors enjoy increased liquidity.
- Bank offers several options for the interest payout. You can even choose to get a high amount after maturity.
- Partial and premature withdrawal of the invested amount is permitted.
- A nomination facility is also available for the tax saver FD scheme.
- Banks provide an overdraft facility that will go up to 90% of the deposited amount.
Tax-saving Fixed Deposits are one of the most secure investments that will reduce tax liability. The amount invested in the Fixed Deposit will stay protected, with the assurance of the returns. Moreover, in these types of FDs, the interest percentages will stay fixed which will ensure secure savings for you.