Tax Saving Fixed Deposit u/s 80C

February 2, 2010

Fixed Deposit, Income Tax

In this article I will be writing about the tax savings fixed deposit. It is one of the popular component for the investors because of the guaranteed return amount. As of now the interest rates are not much attractive hence it losses the shine. This article presents the important facts about the tax savings fixed deposit. If you have any doubts, please post it in the comments section. Subscribe to our free newsletter.

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Tax Saving Fixed Deposit u/s 80C

Section 80C provides the fixed deposit option for the tax exemption. The following are the key points regarding the tax saving fixed deposit u/s section 80C:

  1. It has the lock-in period of 5 years. depositing under this scheme, you will not be able to take the money before five years.
  2. The interest rates for this scheme will be vary for each bank.
  3. Tax savings fixed deposit is available only through banks. You can not open it with company fixed deposit product.
  4. Minimum of Rs.100 is deposited.
  5. Maximum of Rs.100000 is exempted u/s 80c for one financial year.
  6. If you are depositing in this scheme, there will not be many other benefits which is allowed for the normal fixed deposit
    • No Partial/Premature withdrawal allowed.
    • Sweep-in not allowed.
    • No Over Draft facility allowed.
  7. If you have the joint account, the deductions u/s 80c will be allowed only for the first account holder.
  8. The interest income for this fixed deposit is taxable.

Summary

I hope this article will be useful for learning the basic ideas about the tax savings fixed deposit. Nowadays, the interest rates are not good, so it is not advisable in choosing the fixed deposit. If you have any doubts, please post it in the comments section.

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40 Responses to “Tax Saving Fixed Deposit u/s 80C”

  1. Babita Says:

    Dear Sir,

    How much amount of interest is taxable on an FD for a period of say 2 or 5 years?

    thanks

    Babita

    Reply

  2. arun Says:

    Hello Krishna,

    Is the matured amount taxable during withdrawal after five years or only the interest is taxable?

    Thanks.

    Reply

  3. Mohan Says:

    WHAT IS THE MAXIMUM INTEREST THAT CAN BE EARNED IN A
    FIXED DEPOSIT ACCOUNT ANNUALLY WITHOUT ATTRACTING ANY
    INCOME TAX?

    Reply

  4. amol Says:

    if i invest in pnb tax saver fixed deposit scheme and if i earn interest more than my exempt limit (1.4 lacs) den wat will happen according to tax…if i give 15 g form will bank deduct money from my interest….and is bank giving monthly interest under this scheme….

    Reply

    • nachiket gosavi Says:

      respected sir,
      according to rules of section 80c, only the principle is exumpt and the intreast is taxable. considering the flawed software programming in majority of the banks, submission of 15g/h would lead to no taxation, although according to the tds rules the bank ought ot cut 10% of the intreast.

      Reply

  5. pdave Says:

    Dear Sir,

    I have got some lumpsum amount of money in my mother’s account after my father and now I want to have some long term investment(atleast 10 years) in fully safe instruments (like FDs,PPF..I mean no risk although less return) for my mother.

    May you please guide me how should I go ahead.My mom is getting my father’s pension as well monthly.My mummy’s age is 50 and mine is 26.I am getting good salary so no need to keep this money currently on hand.

    Reply

  6. Sumit Tambekar Says:

    Hi,

    One small query; can amount be changed for next year ?

    For example: for first financial year I would like to invest 50,000 & from next year onwards 95,000.

    Is it possible in this kind of F.D ?

    Thanks,
    Sumit Dnyanesh Tambekar

    Reply

    • nachiket gosavi Says:

      under the section 80c the principle is exumpt and hence every year would be considered as a new investment so it is possible. the only restriction is that the ammount under this type deposit cannot exceed rs 1,00,000/- per year i.e tax exumption allowed upto a value of rs 20,000/-

      Reply

  7. Ashok Terawala Says:

    I am senior citizen want to invest in nationalised bank only 5 lac please mail me soon.Thx reds

    Reply

  8. Kishore Deokar Says:

    I have deposited 5 years FD with Co-operative credit society, Can I get benefit of u/s 80C for exemption of income tax.

    Reply

  9. jagjeet Says:

    I buy a tax saver fd in feb 2011 . due to some emergency now i want to break that fd, Please tell me about that, how it can be possible.

    Reply

  10. madhur Says:

    Dear sir

    There is a rule for FD tax benefit that it is to take into considertion after 5 years.
    But if any person having FD in his/her name died before 5 yrs then what is the rule for the nominee

    please revert back as soon as possible.

    Regards

    Madhur

    Reply

    • nachiket gosavi Says:

      sir,
      in case the fixed deposit has a nomination, the said f.d.r can be liquidated and teh sum can be transfered to the individual. in case the f.d.r has a joint holder the ownership would be transfered to the second holder, but the 80c exumption can’t be booked against the second holder’s name as the same would have been booked by the first holder during the making of the tdr/fdr.
      in case of the intreast computation, no premature withdrawal charges would be taken and the intreast would have to be computed as if the contract existed till the date of maturity (same intreast rate for the period and not the same intreast sum).

      Reply

  11. madhur Says:

    Dear sir
    There is a rule for FD tax benefit that it is to take into considertion after 5 years.
    But if any person having FD in his/her name died before 5 yrs then what is the rule for the nominee
    please revert back as soon as possible.
    Regards
    Madhur

    Reply

  12. Mano Says:

    Hi Krishna,

    Can we take Tax saving fixed deposit under 80c in our dependent name like spouse or kid to avail the 80c facility? or FD should be present in our name to avail 80c?

    Thanks,
    Mano

    Reply

  13. KK Says:

    Hi,
    Lets say, I deposit 10,000 in ICICI Fixed deposit and shown the receipt towards tax exemption, offering 9% p.a.

    1) What is the taxability of the interest earned about 900 each year
    Is it taxable ? or not ?
    2) I requested ICICI Bank for the pre-mature withdrawal of the principal amount, after completion of 2 years.
    a) How an ICICI Executive know that I have shown the FD receipt towards Tax exemption 2 years before.?
    b) At any cost, If I want to withdraw, what are the charges and taxes applicable at this point of time?

    Reply

  14. SC Says:

    Hi KK,
    I think following ans’s will be helpful
    1) What is the taxability of the interest earned about 900 each year
    Is it taxable ? or not ?
    —————
    It is taxable as per the category you fall that is 10%,20% or 30% according to your income
    —————
    2) I requested ICICI Bank for the pre-mature withdrawal of the principal amount, after completion of 2 years.
    a) How an ICICI Executive know that I have shown the FD receipt towards Tax exemption 2 years before.?
    —————
    ICICI executive is not bothered whether you are availing tax exemption or not but IT executives will definitely keep track of it whether you have really done the investment and when you withdraw the amount, etc
    —————
    b) At any cost, If I want to withdraw, what are the charges and taxes applicable at this point of time?
    —————
    If you withdraw amt before maturity period, both Principle and interest are taxable as per the category you fall that is 10%,20% or 30%
    —————

    Reply

  15. jayesh Says:

    what do banks do with the money generated through tax saving fd

    Reply

    • nachiket gosavi Says:

      sir,
      the tax saver f.d.r. are a par to the government funds and the bank do not have any claim on them, they are mere custodians of the same

      Reply

  16. Suneedh Says:

    I have a taxsaver Fd for Rs. 100,000/- made inthe year 2008. I havent claimed for the same till date and neither do i intend to.
    Please let me know know the procedure to break this Fixed Deposit.

    Reply

    • nachiket gosavi Says:

      sir/madam,
      as the banks don’t know wether you have claimed for these funds or not, ther is no specific proccedure towards liquidation of these f.d.r’s the only thing is to wait till 2013 for the same ot mature

      Reply

  17. Kranthi Says:

    Hi Suneedh,

    Tax saving Bank FD’s have a locking period of 5 years. Since you have invested in year 2008, you have to wait till 2013 to redeem them.

    For more information on Tax saving Bank Fixed deposits, Read
    http://www.indiastudychannel.com/resources/147599-Save-tax-with-Bank-Fixed-Deposts.aspx?ref=kktheindian

    Reply

  18. Sriram Says:

    For 2011, i had submitted a 5 Year Tax saving FD…. but out of the whole amount only 10% was considered….is this correct??

    Reply

  19. Vickey Says:

    Hi,

    I want to know whether interest earned from the principal amount is taxable or not. I have read somewhere TDS is deducted by bank only if yearly interest earned in more than 10K.

    i want to invest 50k so my interset will be around 5k so whether it will be taxable or not.

    Reply

  20. vinod Says:

    i)whether principal amount deposited under Bank’s 5yrs tax saving fixed deposit scheme on maturity is taxable? I am already showing yearly interest earned in my annual income tax return.

    ii)Whether Principal amount of matured NSc is taxable if not reinvested?

    Reply

  21. Vickey Says:

    Vinod,

    1) principal amount is not taxable.

    2) principle amount is not taxabale in NSC whether you invest or not. Only last year interest is taxable in NSC as it doesn’t get re-invested.

    Reply

  22. vinod Says:

    Sir,
    In case of tax saving fixed deposits,there is a rule that the beneficiary can get the money on completion of 5years period. But if the beneficiary dies before 5 year term, how the money is disposed of?

    Reply

    • nachiket gosavi Says:

      sir,
      the rule does exist in this matter. in case the deposit is coheld i.e. jointly held the funds would be transfered to the second/joint holder. in case the f.d.r. has a nomination, these funds would be given to the nomination on the date of maturity. in some exceptional cases, the ownership of the f.d.r is transfered to the second holder as institutes are not supposed to book intreast against people which seize to exist (ideal condition).

      Reply

  23. dialabank4 Says:

    May be this can help you in a better way… If you are looking for some tax saving schemes or plans You should visit http://bit.ly/yU0S2Q or Call India’s 1st financial helpline at 60011600..

    Reply

  24. Gerard Opsahl Says:

    Today, my mom informed me that she doesn’t wash my clothes anymore. Instead, she sprays them with Febreze to “save money”. JK

    Reply

  25. arun Says:

    Sir,

    I make 3 to 4 lacks fd in last 2011-12 for five years can i take rebate under 80 C

    Pl give guide line

    Reply

  26. Jain Says:

    I wonder depositing 1 lac rupees for 5 yrs in FD would fetch me 80C benefits for all the 5 yrs?

    Reply

  27. Pappu Says:

    If someone has a five year Tax Saving FD and he just expired then the deduction on that FD is given or not. Please reply soon…

    Reply

    • krishnas Says:

      Hello Pappu,

      In case of death of depositor, the nominee is entitled to claim the deposit amount before or after the maturity date.

      In that case, tax savings will not be applicable.

      Thanks,
      Krishna

      Reply

  28. sree Says:

    Can i avail tax exemption for all the five years or is it just onetime

    Reply

  29. kumar Says:

    Hi Krishna,other than this do you suggest any other thing which will avoid paying tax on intrested income ? i know about senior citizens etc., do you suggest any

    Reply

  30. shankar Says:

    Good Morning,

    If I will take 1 Lakh FD in my Spouse Name for 5 years. Can i get Tax exemption for that one Lakh under 80C.

    Reply

  31. Dibakar Says:

    Hi,

    I have a query on pre mature liquiadtion of tax saving FD. In case I liquiadte it before 5 years, besides paying penalty, will i laso have to pay the tax that I had saved earlier?

    Thanks

    Reply

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