Is Pension Taxable?

A tax saving FD is a type of fixed deposit in which the individual can claim a tax deduction under Section 80C of the Indian Income Tax, 1961. These deposits can be made through two types of accounts- Single holder Type Deposits and Joint holder Type Deposits.

If you opt for a joint mode of holding, the tax benefit is only available to the first holder. The maturity period of the tax saver fixed deposit is 5 years. Deduction under section 80C is available to the Hindu Undivided Family (HUF) and individuals.

Here’s a basic overview of how a tax saving FD works: -

• · It is a financial provision offered by banks and NBFCs, where you deposit a lump sum of money for a fixed period or tenure.
• · The tenure for a tax saving fixed deposit is 5 years.
• · It offers a tax deduction under Section 80C of the Income Tax Act, 1961.
• · It has a lock-in period which means that you are not allowed to withdraw prematurely.
• · The interest earned on the deposits is taxable.
• · At the time of maturity of a tax saving FD, the maturity amount is credited to your savings account associated with the FD.

You can build adequate funds over time by investing in a tax saving FD. It not only offers good returns but also offers tax benefits. Here are some of the key features of a tax saving FD: -

A tax saving FD is a safe investment option that comes with extensive benefits. Here are some of the key benefits provided under this scheme: -

Here are the entities that can invest in a tax saving FD: -

• Individuals and Hindu Undivided Families (HUFs) can invest in a tax saving FD.
• You can invest in a tax saving FD through any public or private bank except cooperative and rural banks.
• An individual can hold ‘single’ or ‘Joint’ tax saving FD. Incase of ‘Joint’ mode, only the first holder can avail of tax benefits
• Time deposit in a post office for 5 years qualifies as a tax saving FD.

Here are a few ways you can follow to avoid TDS on FDs:

The following documents are needed to open a tax saving fixed deposit: -

With a tax saving FD, you can make a one-time lump sum deposit. It is a convenient feature if you have sizable surplus savings

• Government-recognized ID proof:
• Aadhaar Card
• Driving License
• Passport
• Ration Card
• Voter ID Card
• Government-recognized address proof
• Proof of age (for senior citizens)
• 2 recent colour passport-size photographs

If you wish to save tax, read along to know the taxation policy on Fixed deposit savings-

In the case of a simple fixed deposit, you can opt for the five year tax saving FD, and benefit from exemptions under section 80c of the income tax act.

However, when we focus on the tax saver fixed deposit, the key advantage it offers is that a Tax Saving FD is not market-linked. While Equity Linked Savings Scheme (ELSS) has a lower lock-in period of three years, the minimum investment required is Rs 500. Also, ELSS comes with some risk as it is market-linked. The minimum investment required in a Tax Saving Fixed Deposit is Rs 100. While you can open a PPF Account with an opening balance of Rs 100, the minimum investment has to be Rs 500. Also, a PPF comes with a lock-in period of 15 years.