Benefits of Investing in Tax-Saving Fixed Deposits

In our ongoing quest to reduce tax burdens and maximize savings, tax-saving fixed deposits (FDs) emerge as a valuable investment choice, offering numerous benefits that might not be widely recognized. This article aims to highlight lesser-known advantages of investing in tax-saving fixed deposits, presenting it as an appealing avenue for individuals seeking tax savings and wealth growth.

Tax-saving FDs operate under section 80C of the Indian Income Tax Act, 1961, providing investors with a deduction of up to Rs 1.5 lakh on the investment amount. Despite their distinctive tax-saving feature, these FDs function similarly to regular fixed deposits, with the maturity amount credited directly to your bank account.

Key Features of Tax-Saving Fixed Deposits:

1. Tax Benefits:

Enjoying tax exemption under Section 80C, investments in tax-saving fixed deposits offer a deduction of up to Rs. 1.5 lakh from taxable income, ensuring significant savings. This risk-free avenue provides stable returns alongside tax advantages.

2. Fixed Returns:

With a fixed rate of interest throughout the investment tenure, tax-saving fixed deposits assure predictable earnings, making them an attractive option for risk-averse investors compared to market-dependent options.

3. Low Minimum Deposits:

Start your investment with a minimum deposit as low as ₹1000, while the maximum deposit allowed in a financial year is ₹1,50,000.

4. Tenure:

These deposits come with a lock-in period of 5 years, aligning your investment strategy with financial goals like education savings or retirement planning.

5. Nomination Facility:

Tax-saving fixed deposits offer a nomination facility, providing financial protection to your loved ones in case of unforeseen circumstances.

6. Easy Application Process:

Hassle-free investment is facilitated by online application options provided by most banks and financial institutions, requiring minimal documentation for proof of identity, address, and PAN card.

Considerations When Investing in Tax-Saving FDs:

• Eligibility extends to resident individuals above 18, HUFs, and minors investing jointly with an adult.
• The minimum deposit varies among banks, with a fixed maximum limit of ₹1.5 lakh per financial year under Section 80C.
• The lock-in period is 5 years, with no premature withdrawal or loan facility available.
• Choose a reputable bank for investment, considering interest rate variations.
• TDS is applicable based on the investor's tax bracket, and submitting Form 15G (or Form 15H for senior citizens) can help avoid it.
• Nomination facilities are available, excluding deposits held for or on behalf of a minor.

Documents Required:

Identity and address proof are essential, and you can submit documents like Aadhar Card, Passport, PAN Card, or others, as per the bank's terms and conditions. Original documents are necessary for verification.

To simplify the application process, consider using INDIE by IndusInd Bank, an online platform offering quick account opening and tax saver FD booking with attractive interest rates of up to 7.5% p.a. Start earning returns while saving on taxes with INDIE by IndusInd Bank.