Investing in Tax Saver Fixed Deposits you can save upto 30,900 on Income Tax (assuming 30% tax slab).
Tax-Saver Fixed Deposit enables you to save tax and earn high returns. A dual benefit option structured to maximize your advantage. Tax Saving FD is the perfect solution for your short term investment needs.
About Tax Saving FDs
As per the Term deposit (FD) scheme, 2006, issued by the Central Government of India, following are the features of tax savings FD.
| Maturity | 5 years |
|---|---|
| Minimum Investment | Rs. 100 and in multiple thereof |
| Maximum Investment | Rs. 1,00,000 |
| Deduction available to | Individual, HUF |
| Premature Withdrawal/Encashment | Not Available |
| Loan against this FD | Not Available |
| Interest Rate | As offered by the Bank from time to time |
| Tax on Interest earned | As per tax slab, TDS on Interest @ 10% |
Point to be noted here is that Tax saving Fixed Deposit scheme will not have the following facilities: Premature withdrawal, Loan against Fixed Deposit and Auto-renewal facility.
It is always suggested to bought such Fixed deposit from the bank where you already have savings account. opening a FD account in a bank paying higher rate of interest, where you don’t have savings account.
Other important points:
Bank shall issue a term deposit receipt to a depositor on receipt of payment.
The term deposit receipt shall bear the name, address, Permanent Account Number and signature of the assessee, along with any other particulars which the scheduled bank may specify.
Transfer from one branch of the scheduled bank to another
A term deposit may be transferred from one branch of the scheduled bank from which it has been issued, to any other branch of the said bank, on the assessee making an application, at either of the two branches:
Provided that no term deposit shall be transferred from one scheduled bank to another scheduled bank.
Every such application shall be signed by the holder of the term deposit receipt:
Provided that in the case of joint holder type deposit, the application may be signed by one of the joint holders if the other is dead.
Pleading of term deposit
The fixed deposit shall not be pledged to secure loan or as security to any other asset.
Replacement of lost or destroyed term deposit receipts
If tax saving FDs receipt is lost, stolen, destroyed, mutilated or defaced, the person entitled thereto may apply for the issue of a duplicate receipt to the branch of the scheduled bank from where the receipt was issued.
Every such application shall be accompanied by a statement showing particulars, such as number, amount and date of the receipt, and the circumstance attending such loss, theft, destruction, mutilation or defacement.
If the officer in charge of the bank is satisfied of the loss, theft, destruction, mutilation or defacement of the certificate, he shall issue a duplicate receipt on the applicant furnishing an indemnity bond in the prescribed form with one or more approved sureties or with a bank guarantee:
Provided that where the face value or the aggregate face value of the certificate or certificates lost, stolen, destroyed, mutilated or defaced is five hundred rupees or loss, a duplicate receipt or receipts may be issued on the applicant furnishing an indemnity bond without any such surety or guarantee:
Provided further that where such application is made with respect to a receipt mutilated or defaced, of whatever face value, a duplicate receipt may be issued without any such indemnity bond, surety or guarantee, if the receipt mutilated or defaced is surrendered and the receipt is capable of being identified as the one originally issued.
A duplicate receipt issued shall be treated as equivalent to the original receipt for all the purposes of this scheme except that it shall not be encashable at a branch of the bank other than the branch at which such receipt is issued without previous verification.
Encashment on maturity
The maturity period of a term deposit receipt of any denomination shall be five years commencing from the date of the receipt.
No term deposit shall be encashed before the expiry of five years from the date of its receipt.
Rate of interest
The rate of interest on the term deposit shall be in accordance with the rate fixed by the scheduled bank from time to time.
The interest may be paid either in lump sum at the time of maturity or it may be paid every quarter or every month in accordance with the regulatory guidelines for payment of interest on the term deposit.
Where the interest is paid by the scheduled bank in lump sum at the time of maturity, the term deposit receipt shall bear the yearly rate of interest on the term deposit.
Income-tax
Interest on these term deposits shall be liable to tax under the Act, on the basis of annual accrual or receipt, depending upon the method of accounting followed by the assessee.
The tax on such interest shall be deducted in accordance with the provisions of section 194A or section 195 of the Act.