• July 22, 2024

10 Things To Know Before Investing In A Tax-Saving Fixed Deposit

 10 Things To Know Before Investing In A Tax-Saving Fixed Deposit

Fixed Deposit

Are you looking for a safe investment option that comes with tax benefits? If yes, investing in a tax-saving Fixed Deposit could be the best way to achieve your financial goals. Tax-saving FDs provide guaranteed returns and other associated benefits, such as exemption from tax and easy liquidity.

However, before blindly jumping into this investment avenue, it is crucial to understand its essential elements. This post highlights ten critical factors on Tax Saving Fixed Deposit. So keep reading on and get an insight into these crucial points that will help you make better investments!

How Does a Tax-Saving Fixed Deposit Work?

Tax free FD have a minimum deposit requirement; you need to invest lump-sum. The deposited amount is kept in the account for five years. And this FD is among the safest investment options because its returns don’t affect by unfavourable market conditions.

Additionally, tax-saving FD interest rates are usually similar to other FD interest rates. The drawback to this type of deposit is that your entire invested amount is locked in for the whole duration (five years), and you will not be able to make any premature withdrawals.

Finally, at the end of five years, you will be able to withdraw your FD with interest earned.

Below are a few essential facts you should be aware of before investing in tax-saving FDs:

  1. Tax-saving Fixed Deposits (FDs) are tax-exempt savings instruments that can help individuals and Hindu Undivided Families (HUFs) in tax saving.
  2. The minimum Fixed Deposit amount varies from bank to bank
  3. Tax-saving FDs are not accessible for acquiring loans or overdraft facilities
  4. This FD comes with a nomination facility 
  5. Tax free FD gets you deductions under Section 80C of the Income Tax Act, 1961, for investments up to Rs. 1.5 Lakh 
  6. The tax-saving FD interest rates are fixed on the deposit date and remain the same throughout the tenure
  7. The benefit of tax-saving FD is that you can reinvest the interest income into your original Fixed Deposit, which will also be tax-free.
  8. Interest earned from tax-savings FDs is subject to tax as per an investor’s tax bracket
  9. For senior citizens, tax deductions are available up to Rs. 50,000 under Section 80 TTB of the Income Tax Act
  10. Tax benefits are for the primary FD holder only in case of a joint account 

Instead of investing a fd minimum amount, you can avail the tax-saving FD interest rate benefits with large deposits. As there will be tax deductions available, so it will be beneficial. For senior citizens, this FD is an ideal investment option as they can enjoy higher tax-saving FD rates. After all, who wouldn’t like tax returns while enjoying safe returns on investments.

What Are The Main Benefits Of Investing In A Tax-Saving Fixed Deposit?

  1. Secured Returns: Tax-saving FDs provide fixed returns that are not affected by market fluctuations; hence, it is one of the most secure investment options.
  2. Tax Benefits: Under section 80C of the Income Tax Act, 1961, tax-saving FDs offer a deduction of up to Rs 1.5 Lakh per financial year on your taxable income.
  3. Wealth Tax Exemption: Investing in a tax free fd also offers an exemption from wealth tax.
  4. Flexibility In Investment Amount: Depending on the bank you choose, you may have to invest a minimum Fixed Deposit amount of Rs 10,000 or even less, depending on the bank.

These are vital points you should know before investing in a tax-saving FD. Remember, understanding these essential factors can help you make an informed decision and benefit from your investments. 

Researching thoroughly and then making a wise investment is always advisable for both new and old FD investors to achieve long-term financial goals.

By doing this, investors can easily cater their desired financial needs without worrying about taxation on the returns. We hope this article has given you an insight into the essential elements of tax-saving FD and will help you make better investments. So begin searching for an FD to plan your financial goals to meet them without hassle.

Shabbir Ahmad


Shabbir Ahmed is a professional blogger, writer, SEO expert & founder of Dive in SEO. With over 5 years of experience, he handles clients globally & also educates others with different digital marketing tactics.

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