10 important things to know about Tax savings

tax saving image 10 important things to know about Tax savings

As per the present income tax laws, under Section 80C of the income tax act, you can claim deduction for investments up to Rs 1.5 lakh in tax-saving fixed deposits. The amount so invested is to be deducted from gross total income to arrive at taxable income.

Below are a few important points you should be aware of before investing in tax saving FDs.

1 . Only Individuals and HUFs can invest in tax saving fixed deposit(FD) scheme.

2. The FD can be placed with a minimum amount which varies from bank to bank.

3. These deposits have a lock-in period of 5 years. Premature withdrawals and loan against these FD’s are not allowed.

4. A person can invest in these FD’s through any public or private sector bank except for co-operative and rural banks.

5. Investment in Post Office Time Deposit of 5 years also qualifies for deduction under section 80 (C) of the Income Tax Act, 1961.

6. Post Office Fixed deposit can be transferred from one Post office to another.

7 . One can hold these FD’s either in ‘Single’ or ‘Joint’ mode of holding. In the case the mode of holding is joint, the tax benefit is available only to the first holder.

8. The interest earned is taxable as per the investor’s tax bracket and therefore, TDS is applicable. The interest on deposits is payable on either monthly/quarterly basis or can be reinvested. A person can avoid TDS deduction on the interest earned by submitting Form 15G (or Form 15H for senior citizens) to the bank

9. Nomination facility is available for these FDs.

10. Most banks offer slightly higher interest rates on FDs to senior citizens (as compared to the interest rate offered on the same FD to a non-senior citizen). This interest rate differential exists for tax saving FDs also.

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