10 Things You Should Know About Tax Saving FD

Tax Saving FD

Fixed Deposits (FDs) are an excellent way to invest your money as these schemes offer fixed and guaranteed returns. Plus, you can select the amount and tenure as per your requirements. With the provided liquidity, the funds can also be used prior to the maturity date. There are several such benefits associated with FD schemes that you may already be aware of.

But do you know that the plan also makes you eligible for a tax deduction? Yes, you can avail of up to 1.5 lakhs tax rebate under Section 80 C of the IT Act for tax-saving FDs. A few factors you should know about the benefit are:-

#1 Not Everyone Can Get It

The tax deductions for FDs are limited to individuals or Hindu Undivided Families (HUFs). In case your FD account doesn’t fall into these categories, you won’t be able to get the advantage. Additionally, you must be a resident of India to avail of the deduction.

#2 There Is A Lock-In Period

The lock-in period refers to the duration when you can’t take out any funds from your Fixed Deposit. The only condition where banks allow premature withdrawals is when the investor themselves die. In the case of tax-saving FDs, there is an obligatory five-year lock-in period. You won’t get any benefits if you drain the funds out during this time.

#3 There Are Limits

Both minimum and maximum limits are set for the tax-saving FDs. While the minimum limit can differ from one bank to another, the maximum limit is fixed to 1.5 lakhs in the financial year when you want to get tax deductions. Usually, government banks have lower minimum limits as compared to private banks.

#4 Minor Accounts Can Also Be Used

In case you have a minor’s FD account and want to get a tax deduction, you need to ensure that the account is opened jointly with an eligible adult. This means the first holder of the FD must fall under the eligibility criteria. The same rule applies to any joint tax-saving holdings.

#5 Senior Citizens Get Better Benefits

FD interest rates are generally higher for senior citizens as compared to all other investors. So you will be able to get better returns if you fall into this category.

#6 Not Every Bank Can Offer Tax-Saving FDs

According to the current regulations, only private and government (public) banks can offer this scheme. You can’t get a tax deduction from FDs in rural or co-operative banks.

#7 You Can Also Invest In Post Office

The post office of India provides citizens with various investment options based on their income and age. So if you don’t want to go for standard bank FDs, you can opt for its alternative offered by the post office. The scheme is called the Post Office Time Deposit (POTD). The good news here is that even this plan is eligible for tax deduction under Section 80 C. So you can get the same benefit.

#8 Post Offices Can Be Switched

Another benefit of opening an account for FD in the post office is that you can transfer your POTD account from one post office to another. This can be done for any office across India. Therefore, you won’t have to visit the same place even when you move to another city or state.

#9 You Can Add Nominees

Tax-saving FDs have the facility of nomination. Thus, you can nominate any person you trust to take responsibility for your account if something happens to you.

#10 You Will Still Have To Pay Tax

Even though the invested amount gets deducted from the tax, the earned interest remains under the umbrella of taxes. The bank may apply TDS if your overall earned interest crosses the limit of 40,000 rupees in a year. Therefore, you should check the FD interest rates before proceeding. You can also submit Form 15G (for individuals and HUFs) or 15H (for senior citizens) to avoid this. People above the age of 60 can claim up to 50,000 rupees tax deduction on their interest.


Apart from these pointers, you should also know that you can get your money back once your account matures as per the predetermined tenure. For the renewal of the scheme, you need to talk to your bank, whether they offer it or not.

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