Fixed Deposits are a very good investment tool that can be used to save tax under Section 80C of the Income Tax Act, 1961, and help protect up to ₹1.5 lakh per annum. These deposits provide a risk-free method of growing the money while at the same time reducing the tax liability.
The RBI cut the repo rate to 6.25% in February 2025, and it is expected that banks will bring down the FD interest rates soon. This makes the present moment a good time to get high FD rates, especially for senior citizens and conservative investors.
What Are Tax-Saving Fixed Deposits?
A Tax-Saver FD is a kind of fixed deposit that has a maturity period of 5 years. Unlike normal FDs there is no provision for early withdrawal of the principal or interest and borrowing against the deposit. The interest received is taxable but the returns are steady. These FDs are available for resident individuals and Hindu Undivided Families (HUFs) but not for corporates or trusts.
Who Should Invest in Tax-Saving FDs?
For the New Tax Regime, it is suitable for salaried persons.
For stable returns, senior citizens or retirees.
For low risk taking preference.
How to Invest?
Tax Saving FDs can be opened online through the net banking or mobile banking facilities of the bank. The documents required to apply offline are identity proof, address proof, and photographs at the bank branch.
Tax Implications
Interest received is treated as income from other sources and taxed accordingly. Interest greater than Rs. 40,000 (Rs. 50,000 for Sr. Citizens) attracts TDS. To prevent deduction of tax, investors can furnish Form 15G/15H with the bank.
