What is a Tax-Saving Fixed Deposit for Section 80C Deductions?

Posted on Thursday, October 24th, 2024 | By IndusInd Bank

Tax-saving fixed deposits (FDs) are an ideal investment option if you are looking to save on taxes while earning assured returns. These FDs offer a dual benefit: they provide tax deductions under Section 80C of the Income Tax Act, 1961, and ensure a fixed interest income. 

So, if you are wondering, ‘Does an FD come under 80C deductions?’, the answer is yes. Let’s explore more in this regard. 

Understanding How Tax-Saving Fixed Deposits Work

A tax-saving FD is designed to provide tax benefits under Section 80C of the Income Tax Act. 

Here are some points explaining how they work:

1. Investment Tenure

Tax-saving FDs come with a mandatory lock-in period of five years. During this period, the premature withdrawal of the deposited amount is not permitted.

2. Tax Benefits

Investments in tax-saving FDs qualify for a deduction of up to ₹ 1.5 lakh under Section 80C. This reduces the taxable income and lowers your tax liability.

3. Fixed Interest Rate

A tax-saving fixed deposit offers a fixed interest rate. It is determined at the time of investment and remains constant throughout the tenure. The interest you earn on these deposits is taxed as per the tax slab you are in.

4. Investment Limit

FDs usually do not have an upper limit in regard to the amount. However, the tax deduction is capped at ₹1.5 lakh per financial year for fixed deposits under Section 80C.

5. Interest Payout Options

Investors can choose to receive interest payments at regular intervals, i.e., monthly, quarterly, half-yearly, yearly, etc.

6. Eligibility

Individuals and commercial entities, such as Hindu Undivided Families (HUFs), partnerships, sole proprietors, etc. can enjoy tax benefits by investing in FDs under Section 80C. 

7. Maturity

After the lock-in period ends, you can withdraw the FD amount. The total amount will include the principal amount as well as the accumulated interest. 

A tax-saving FD can provide more than just tax benefits. Keep reading to know more. 

Other Benefits of Tax-Saving Fixed Deposits

Along with tax deductions for fixed deposits under Section 80C, you also enjoy the following benefits: 

1. Low Risk and Guaranteed Returns

Tax-saving FDs are considered a safe investment option as they are not subject to market fluctuations. The principal amount and interest are guaranteed, which makes it a low-risk investment.

2. Easy to Open

It is very easy to book a tax-saving FD. One can do it digitally or via a bank branch. IndusInd Bank offers a 100% online, hassle-free FD booking process. 

3. Competitive Interest Rates

IndusInd Bank offers high FD interest rates of up to 7.75% (depending on the tenure). This makes them an attractive option for low-risk investors.

These rates are subject to change. Please refer to the updated interest rates. 

4. Nomination Facility

Investors can nominate a beneficiary for their tax-saving FD. This ensures that the funds are passed on smoothly in case of any unfortunate event.

5. Documentation

You need to submit minimal documentation to book a tax-saving FD. The list usually includes proof of identity, address, and PAN card.

Also Read: How Can Nominee Claim a Fixed Deposit After Holder’s Death

Conclusion

Tax-saving fixed deposits are a useful tool for individuals looking to grow their savings while minimising their tax liability.  With high interest rates, guaranteed returns, and the added benefit of tax deductions, tax-saving FDs offer a secure and rewarding investment avenue.

With IndusInd Bank, booking a tax-saver FD is as easy as ever. We offer high Fixed Deposit rates and a 100% online, hassle-free process so that your money starts working hard for you at the earliest. With us, choose from flexible tenure options ranging from 7 days to 10 years as well as the freedom to opt for an interest payment frequency. 

We make FDs easier, more attractive and more manageable. Open a Fixed Deposit account with IndusInd Bank today! 

Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.