Tax saving methods include investing in Tax Saving FD. In this article we will know what is tax saving FD? Where can it be opened? How does this help in saving tax? We are also giving information about other terms and conditions related to this. (Information about tax saving FD in hindi)
What is Tax saving FD
Tax saving FD is also a fixed deposit scheme. In this, there is a condition of depositing money for a certain minimum period. It also has the terms of Minimum Deposit and Maximum Deposit.
The advantage is that, there is a fixed return on the amount deposited in it. And, there is also a tax rebate on deposits. Therefore, it is called Tax saving FD. Some banks have named their scheme as Tax Saver FD.
Tax Saving Account is usually for 5 years. Some banks also have the facility of opening tax saving FDs ranging from 5 to 10 years.
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Account opens in commercial banks
Its account can be opened in government and private commercial banks. Such as SBI, PNB, BOB, ICICI, HDFC, Axis Bank etc. Co-operative banks and rural banks do not have the facility of opening Tax Saving FD accounts.
If you want to open this account, then the bank officer has to clearly tell that you want to open Tax Saving Account. Even if you want to open an online account, choose only option of tax saving FD, not normal FD.
Tax rebate on post office FD also
Like banks, Post Office also has a 5-year Post Office Time Deposit Account. Even if Tax Saving FD is not associated with its name, but it also gets a tax rebate along with a fixed return on the amount deposited. Its interest rate is also generally higher than that of public sector banks.
Three types of tax saving FD
- He also has the right to decide when the customer wants to take the interest received on the deposit. On the basis of this property, there are three types of tax saving FD accounts –
- Tax Saving – Reinvestment Deposit: In this, the interest generated on the tax saving FD goes to your account (reinvestment). After maturity (5 years), the deposit and interest get lump sum.
- Tax Saving – Quarterly Interest Payout : By choosing this option, you get interest on tax saving FD every quarter. This interest reaches your savings or current account.
- Tax Saving – Monthly Interest Payout: By choosing this option, you get interest on your FD every month. Its interest rate is slightly lower than the quarter.
Minimum deposit for opening an account Minimum deposit for tax saving FD The minimum deposit required for a tax saving FD can vary from bank to bank. Such as-
- In Punjab National Bank (PNB), HDFC and Axis Bank, you can also open Tax Saving FD by depositing at least 100 rupees.
- It is necessary to deposit at least 1000 rupees for tax saving FD in State Bank (SBI) and at least 10 thousand rupees in ICICI Bank.
Can deposit a maximum of 1.5 lakhs
In Tax Saving FD, all banks have the same rules regarding maximum deposit amount. Within a financial year, you can deposit up to Rs 1.50 lakh in it. Tax exemption is also at a maximum of Rs 1.50 lakh only.
Who can open Tax saving FD
The facility of opening Tax Saving FD in India is available only to Indian citizens. Among them only individuals and Hindu undivided families only. Foreign citizens, companies or institutions are not allowed to open this account.
Joint account and child names account
Joint accounts can also be opened jointly in the names of two or more adult persons. However, the right to withdraw money will be given to the same person, whose name is a money-saving savings account.
A parent can also open a tax saving fixed deposit in the name of his child. A child above 10 years can also open a tax saving fixed deposit in his name bank.
Premature closure not allowed before 5 years
The lock in period (minimum deposit period) of tax saving FD is 5 years. That is, you cannot close this account before 5 years. If for some reason, you break it before maturity (5 years), then you will get 1 percent less interest rate than the fixed rate.
No penalty for death of account holder
During the lock in period, after the death of the account holder, the account can be closed in the middle and the entire money can be withdrawn. Penalty will not be levied in such a situation, ie interest will not be cut. His nominee or legal heir will get the money back with full interest.
Interest rates on tax saving FD
Interest rates on FDs of banks vary. For example, on February 1, March 2020, SBI’s tax-saving FD was getting 6.25 per cent, while ICICI Bank’s tax-saving FD was getting 6.40 per cent and HDFC’s tax-saving FD was 6.80 per cent. To find out the current interest rate, you can search from your bank branch or on their website.
Elderly gets more interest
Banks above 60 years of age pay half percent (0.50%) more interest on Tax Saving FD. In case of a joint account, more interest can be availed only if the main account holder is more than 60 years of age. But, keep in mind, the elderly get this facility only in banks. The elderly do not get much interest on 5-year FD of post office. Everybody gets a similar interest on FD there.
saving FD Tax benefits on Tax saving FD
Tax saving FD gets tax exemption under Section 80C of Income Tax Act. In fact, all investments and expenses under 80C are tax-exempt for Rs 1.50 lakh annually. Such investments also include EPF, PPF, life insurance, etc.
That is, if you have not made any other investment under section 80C, then you can take tax rebate on the entire Rs 1.50 lakh deposited in the tax saving FD. If you have invested money on such other investments also, then everyone will be able to get tax rebate on Rs 1.50 lakh.
But TDS can be deducted on interest
Tax exemption on Rs 1.50 lakh is only on the amount deposited. There is a rule to deduct TDS on the interest received. But this TDS can be deducted only if you are getting more than 40 thousand rupees interest within a year.
Here too, there is some relief for the elderly, TDS is deducted if they get an interest of 50 thousand rupees or more within a year.
Even if interest is added to your FD deposit, TDS will be deducted after calculating it. It deducts TDS bank and deposits it with the government.
To avoid TDS, submit 15g / 15h
Despite merging the FD interest, if your annual income is not enough to make it a tax liability, then you can stop the TDS deduction. To avoid TDS, one has to submit Form 15 G or Form 15 H.
Form 15G is required to be submitted to people below 60 years of age, while Form 15H is required to be submitted by senior citizens above 60 years of age.
Form 15G and Form 15H are a form of declaration in which you declare that your annual income is within the limit of income tax. Therefore TDS should not be deducted on the amount you pay.
Tax exemption only to the first account holder
Even if a joint tax saving FD account is opened in the name of more than one person, only the main account holder (first holder) will have the right to get tax exemption under section 80C.
Nominee creation and account transfer facility
You can enter the name of Nominee in your Tax Saving FD account. A nominee is a person who has the right to receive a deposit upon death of the account holder.
But in a FD account only one person’s name can be registered as nominee, whether it is a single account or a joint account.
On account of the child, there is no facility to enter the name of Nominee in it. Even if he has opened the account himself or the guardian has opened it in his name.
If you open an account online, then the name of No Mini will be automatically recorded, which will be added to the debit account (debit a / c). If someone wants to make a nominee other than that, then you have to go to the bank branch and apply.
Can transfer to another branch
You can transfer Tax Saving FD account to another branch of the same bank in case of change of residence or due to any other necessary reason. For this, you have to make a written application to the branch where your FD account is present. Like banks, the post office also has the facility to transfer FD account to any other branch.
No loan facility. loan is not available
Loan facility is not available during the 5-year lock-in period of tax saving FD. Whereas loan can be taken on the basis of deposit in normal FD and RD account.
Tax saving FDs can also be opened online
Many major banks also provide the facility of opening an online Tax Saving Account. However, for this you must already have a savings / current / OD account in that bank. Also, there should be facility of internet banking.
By logging into your account through NetBanking, you can open this account. Money deducted from the same account (savings / current / OD) will be deposited in your Tax Saving FD.
