A Simple Guide to Fixed Deposit (FD) Tax Saving Scheme

Every year we plan our tax as per the income tax slab and deductions of that particular assessment years. But we always have some confusion, which investment is good to get deduction under section 80C. Here, we’ll talk about one of the most popular investment about fixed deposits comes under section 80C. You can get the complete detail like maturity period, interest, pre & post-tax return and overall overview.The concept is very simple and clear that invest in “Fixed Deposit” for five years and get deduction from Gross Total Income up to Rs.1,50,000  (AY.2015-16), Rs. 1,00,000 (A.Y.2014-15) along with PPF/LIC/NSC/ULIP.

Any individual/HUF can open an account of Fixed Deposit in any schedule bank, in his own or Karta’s name single or jointly with another adult/minor individual (joint holder type) on either or survivor basis.

Maturity Period

The deposit should not be less than 5 years. Suppose if the maturity period is less than 5 years then you can not claim deduction under section 80C. The premature encashment is not permitted. However, in the event of death of the first holder, the other joint holder may encash the deposit before its maturity.

Account Holders

You should have no confusion about the account holders name. As there is no restriction to hold account as single or joint. You can also have the nominee for the same account. The transfer of fixed deposits/term deposits between branches is also eligible except from one bank to another bank.

Interest

The interest will be added in your gross income and taxable as per the income tax slab of that assessment year when it credited or paid. The bank will also deduct TDS if your income is taxable and it will be deductible and refundable as per the income tax rules. The interest shall be payable monthly/quarterly, or in lumpsum on maturity.

Pre & Post Tax Return

As you know the interest on FD will be taxable so you have to know the post tax return on Fixed Deposit. If you are getting interest on FD is 8% and you come under highest tax bracket i.e. 30.9% then the actual post tax return is 5.528%. In India, we’ll talk much about post-tax return. So you must consider this aspect also while investing in fixed deposit to get deduction under section 80C.

Overall Overview

So you can say that it is good tool to get deduction under section 80C up to Rs.1,50,000/-  (A.Y.2015-16) along with PPF/LIC/ULIP/NSC from your gross total income. The interest on fixed deposit is taxable. So, you must keep in mind post tax return also.