Working-class individuals tend to find fixed deposits as the best option to increase their savings safely and steadily. They prefer to invest in investments that will offer a fixed amount as returns on maturity. Various financial institutions offer different schemes so that the middle-class population gets a reliable investment option. Some working individuals, especially those who fall under the income tax slab, avail of tax-saving investments like tax-saving insurance schemes or tax savings FDs. If you are interested in investing in fixed deposits to save tax, then it is ideal that you invest in Tax Saver FD. You are likely to benefit from a fixed deposit income tax exemption.
Since FDs are not exposed to market volatility, an ordinary man can consider it as an alternative for his investment. An individual can invest through any financial institution or bank to avail of the tax-saving facility. There is a 5 years lock-in for these fixed deposits, and the interest rate ranges from 5.5% to 7.5%, which may vary from institution to institution. It is considered the best fixed deposit option with the comparatively highest FD rates. If you haven’t thought of any investment yet and are looking for some tax benefit, then Tax Saving Fixed Deposit is the option.
Key features of Tax Saver Fixed Deposits:
- It is considered the easiest way to save tax under section 80C of the Income Tax Act.
- An Individual benefits from tax exemption with the highest FD rates and is likely to get higher returns.
- Premature withdrawals of the fixed deposits and loan applications against such fixed deposits are not allowed.
- The interest rates for tax-saving fixed deposits remain the same throughout the term.
- Tax Saver fixed deposit accounts can be held in single or joint names. In a joint Tax Saver FD account, only the first account holder can avail of the tax-saving benefit.
- With tax-saving fixed deposits, there is no facility for auto-renewal.
Documents required for Tax Saver Fixed Deposits:
- Copy of Identity Proof – Passport, Aadhar Card, Voter Id card, Driving License, Govt. Id card, Senior Citizen Card.
- Copy of Address Proof – Passport, Telephone Bill, Electricity Bill, Bank Statement with a copy of the canceled cheque.
- Photograph of the applicant.
- Introduction of the applicant by any other account holder of the same bank for six months. (Depends as per the norms of the bank that you opt to invest).
Things to consider while investing in Tax Saver FD.
While opting to invest in the Tax Saver Fixed Deposit, you need to check for eligibility. The minimum amount that can be invested in these accounts can vary from bank to bank. The maximum amount can be up to 1.5 lakhs as per section 80C of the Income Tax Act. Like any other fixed deposit, a nomination facility is provided, and the nominee can withdraw the FD amount at any point in time after the demise of the said account holder. If you are close to your retirement period, tax-saving FD is an ideal choice for investment. It provides guaranteed returns and involves zero risks.