Tax Saving Fixed Deposit For Section 80c Deductions

If you are looking to save tax via investments, there are a plethora of options for you. The question here is - are you ready to take risks or navigate the complicated financial investment alley? If no, then look at tax-saving FD

Fixed Deposits or FDs are one of the most popular investment options for many, especially those with an aversion to risks. It is an easy investing option without any need for financial experts to advise you. Anyone can go to their bank and get an FD. For long, it was, and maybe, even today, it remains one of the most trustworthy and no-hassle forms of investing your money.There are different types of FDs, but not all help to save tax. A tax saving FD offers tax exemption under Section 80C of the Income Tax Act, 1961. You could get tax exemption up to Rs. 1, 50,000. You should also know that a tax saving fixed deposit scheme comes with a lock-in period of 5-10 years.A lock-in period means you will not be able to withdraw your money until the maturity of the deposit.

Apart from tax-saving FDs, some other investment schemes that attract tax deduction include

• ELSS or Equity Linked Savings Scheme
• National Savings Certificate or NSC
• Public Provident Fund or PPF
• National Pension Scheme or NPS
• Unit Linked Insurance Plans or ULIP
• Senior Citizens Savings Scheme or SCSS
• Sukanya Samriddhi Yojana or SSY

Each of these investment instruments enables tax saving under Section 80C but vary in the amount to be invested, lock-in period, eligibility criteria, etc. For example, the SSY scheme is an excellent tax-saving option, but it is only for parents of girl children under ten years.Then there are some like ELSS or Equity Linked Savings Scheme which have high return potential but are accompanied by risk as the scheme invests in equity or stocks. Some like PPF has a long lock-in period.Thus, compared to other schemes, tax-saving Fixed Deposits seems to be more encompassing. Here is a comparison.

Fixed deposits are safe investments schemes with guaranteed returns. No wonder, it remains the preferable saving option for the traditional investors or those who prefer bank deposits to any other types of saving instruments. There are several benefits to a tax-saving fixed deposit, such as:

• Anyone from a homemaker to a businessman can opt for tax-saving fixed deposits
• You don’t even have to visit the bank as an FD can be created online as well
• Tax deduction up to Rs. 1.5 lakhs every financial year during the period of investment
• Higher rates of interest than some other fixed-income schemes and even saving accounts
• Longer the tenure, better is the interest accrued due to power of compounding
• Risk-free investments as FDs are not affected by market upheavals
• You can open more than one FD either at a single bank or other banks
• You can also avail a loan using your FD
• The lock-in period of 5 years helps your money to grow as you would not be able to withdraw before the maturity period
• Senior citizens enjoy higher interest rates on FDs from banks offer them a higher rate of interest
• NRIs can also open a tax-saving fixed deposit account. In this case, it is termed as NRE or Non-Resident External FDs

A chance to double your money and at the same time, getting tax benefits is a good idea. What works in favour of tax-saving fixed deposit scheme is that the process is simple and comes with guaranteed returns. You don’t have to about market fluctuations and money safety. That is the reason, FDs continue to enjoy the trust of lakhs of Indians.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.