Tax planning should always be a part of your financial planning, not a task to be completed at the end of the financial year. If you have not started your tax planning, do it now. Invest wisely keeping your financial goals in mind. After the Reserve Bank of India (RBI) increased the repo rate five times in a row in 2022, many banks have increased the interest rates on tax saving FDs. Small banks are offering rates up to 7.60 percent on such FDs.
To save tax, investing in Tax Saving Fixed Deposit is a good option. Investors get double benefit in FD. On one hand, it offers higher interest rates than a normal savings account. At the same time, tax deduction can also be availed by investing in tax saver fixed deposits.
Let us tell you that under Section 80C of the Income Tax Act, tax saver fixed deposit is eligible for tax deduction of up to Rs 1.50 lakh. So let us know what this saver fixed deposit is and how it benefits.
What is Tax Saving FD?
Tax saving FD is a type of fixed deposit in which tax deduction can be claimed on two banks like single holder deposit and joint holder deposit. Tax Saver FD has a maturity period of 5 years and is available to Hindu Undivided Family (HUF) and individuals under Section 80C.
For tax saving, it is given by banks and NBFCs, in which the tenure of tax saving fixed deposit is 5 years. It has a lock-in period and at the time of maturity of the tax saving FD, the amount is deposited in the savings account linked to your FD. This amount gives the benefit of tax deduction under Section 80C of the Income Tax Act, 1961.
People or institutions who can invest in tax saving FDs-
Any person can invest in this FD. In case of joint tax saving FD, only the first holder can avail the tax benefits.
Hindu Undivided Families (HUF) can invest in tax-saving FDs.
Investing in tax saving FD can be done through any public or private bank except cooperative and rural banks.
Time deposits can be invested in post office for 5 years.