Find out what a Tax Saving FD is, its unique features and why should you invest in it.
Almost every bank in India offers Fixed Deposits wherein an investor can invest any big or small amount for a fixed period and get a fixed rate of return out of it. The interest rate ranges between 3% and 7.75% per annum, and you have to pay taxes on the returns accrued from your regular Fixed Deposits. However, the Government of India also offers Tax-Saving Fixed Deposits with significantly higher interest rates. Let us find out more about Tax-Savings FDs in this article.
Tax-Saving Fixed Deposit is a type of Fixed Deposit under which you can avail of tax deductions under Section 80C of the Indian Income Tax Act, 1961. You can claim the Fixed Deposit income tax exemption on investments of up to INR 1.5 Lakhs. Unlike a regular FD, which comes with varying lock-in tenures, a Tax-Saving Fixed Deposit comes with a lock-in period of five years. You can also earn higher interest rates ranging from 5.5% to 7.75% on these deposits.
While it is a tax-saving deposit, the interest earned on it is subject to Tax Deducted at Source. You can, however, avoid the TDS by submitting the relevant 15G or 15H Form.
The following are some of the principal features of Tax-Saving FDs
Download DBS Bank app to open your savings account and begin your journey to making successful investments.
You only need to provide a copy of your ID and address proof documents to open a Tax-Saving Fixed Deposit. These include:
The following are some reasons why you should open a Tax-Saving FD.
Tax-Savings FDs have a great interest-earning potential as compared to other instruments. The interest rate can be in the range of 5.5% and 7.75%.
You can conveniently open this FD online with your bank or visit a post office to open it and make a one-time lump sum deposit. Additionally, you can flexibly invest anywhere from INR 1,000 to INR 1.5 Lakhs per annum.
The most attractive benefit of the Tax-Saving FD is that it comes under Section 80C instruments, on which you can avail of tax deductions of INR 1,50,000. If you have not invested in any other tax-saving instrument, you can consider this.
Tax-Saving Fixed Deposits are risk-free as the principal amount is protected. You get both the principal investment amount and the interest amount when the FD matures.
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The 5 years Tax-Saving Deposit is an excellent investment option you should consider if you prefer to invest in safe investment instruments. With this investment, you can get tax savings benefits along with relatively high returns and a medium lock-in period. The fixed deposit tax exemption and high-interest rate make this instrument a risk-free and convenient investment option.
If you prefer to save time and effort, and open an FD account remotely, then download DBS Bank app right away!
*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.