No matter what Fixed Deposit scheme you have, Tax-saver FDs are one great option to take advantage of the exemptions offered under Section 80C, especially if you have a high FD interest.
A Fixed Deposit scheme can provide you with interest earnings while ensuring the safety of your deposit and providing assurance of interest payments. You can find attractive FD schemes including the Tax-Saving Fixed Deposit. Search around for banks or NBFCs providing higher FD interest rates on these schemes and save on taxes too.
Before you open a tax-saver FD, you should be familiar with the features of these schemes.
Features of Tax-Saving Fixed Deposits
- The main point to note is what makes this a tax saving option. The principal amount that you invest is eligible for deduction under the provisions of Section 80C of the IT ACT
- The minimum amount you can deposit is Rs. 100, the maximum Rs. 1.5 lakhs
- The amount is locked down for 5 years
- You cannot withdraw the amount before maturity
- Unlike most other FDs, this Fixed Deposit scheme does not allow you to take a loan against the deposit
- The interest accrued is taxable according to your tax margin
- If your total earnings for the financial year including interest earnings does not exceed the tax-free slab amount, you can submit Form 15H to avoid TDS if you are a senior citizen. Submit Form 15G if you are below 60 years of age
How to Utilize the FD interest
- If you need the money, you can choose to have the bank pay out the interest quarterly to help you meet regular expenses
- If you do not need regular interest payouts, choose to compound the interest quarterly
- This reinvestment keeps adding to the principal amount and thus lets your earn more on the deposit at the time of maturity
Corporate Fixed Deposits
Many companies offer Fixed Deposit schemes to the public in order to raise funds for their operations. Since these deposits are not as safe as bank deposits, they offer higher interest rates. You can find out the best company that provides high Fixed Deposit interest rates in India and choose a safe option. Even though company FDs are not governed by RBI regulations, credit rating institutions like CRISIL and ICRA provide ratings on the trustworthiness of the company and the safety of the schemes they offer to the public. So, if the company has an AAA rating, it is a safe bet and you can open an FD with them.
Whether bank deposits or corporate FDs, do some research on the Internet before you choose the bank or company to make the deposit with. Many online financial marketplaces list various FD schemes offered by banks and corporates and the interest rates on them.
You can do a feature comparison of the schemes to choose the best one. Use the FD maturity amount calculator tools sites to find out the exact amount you would get at the time of maturity if you do not draw out the interest. You can also find out how much you would get if you have the interest compounded. Fixed Deposits are safe and secure and a good way to put aside a good chunk of your savings for the future, while you invest the remainder of your spare funds in risky but high growth schemes.