Everyone needs to save their money in different possible ways. Fortunately, today there are plenty of options available that help individuals save their money and use it for purposeful matters. When it comes to saving, tax saving is also a crucial aspect that needs to be covered. Yes, you need to think from the tax-saving perspective if you want to save some bucks off your tax. Tax saving FD is one of the best tax-saving instruments that people have been using for years. It is an investment that leads to saving tax under section 80C of the Income Tax Act.
You can start your tax-saving FD; make sure to ascertain the FD interests’ rates before you opt for any policy. Being a debt investment, tax saving FD is much safer than the equity-based tax saving instruments. When you reach a bank, ensure the minimum amount for FD that they have set before proceeding. It is always better to top open FD in the same bank branch in which you have your account.
If you are new to this tax-saving method, here are 1o facts that you must know about it-:
#1 The person investing in tax saving FD can be an individual of Hindi Undivided Family. The person should be an Indian resident. If a minor is looking to open an account, he/she could join an Indian adult.
#2 The account can be held either in single or joint mode. The primary holder will be eligible for the tax benefits and not the secondary.
#3 These tax-saving instruments have a lock-in period of 5 years before that you cannot withdraw. The amount cannot be redeemed unless the investor passes away.
#4 Though the amount you invest is completely exempted from taxes; you need to pay taxes for interest earned from that investment. If the interest accrued in a year is more than ₹40,000, banks will deduct the TDS.
#5 1.5 Lakhs is the maximum amount that you can invest in tax saving FD. The banks will decide the minimum amount for FD.
#6 You can invest via both private and government banks, except rural banks and co-operative banks.
#7 Except when the account is held by a minor, individuals are eligible to make a nomination to the account. Make sure the nominee is also an Indian resident.
#8 The investment made via Post Office Time Deposit is also categorized under tax saving FD, and you can use them accordingly.
#9 All the FDS in Post Offices are eligible to transfer from their actual destinations to any Post Office across India, allowing them the right flexibility.
#10 Senior citizens can enjoy higher interest compared to the FD interest rates provided to others. Also, they can claim tax deductions up to 50,000 in a year.
Tax saving FDs are the best saving instrument from the tax perspective. It is essential to know all the nitty-gritty of these FDs to make the most of it. The above mentioned were some of the important facts you need to know about it.