In this blog I will be writing about the one of the way for Tax Savings under the section 80c. This is the time where people are busy for filling the Income Tax Returns. Most of us not aware of the plans available and the benefits of each plan. As in the earlier blog I have written about the difference between insurance and investments. Investing in the Term Deposit or Fixed Deposit is the one good option for saving the taxes. I will explain this option in detail in this blog. The following are the list of points you should consider while depositing in this scheme.
Fixed Deposit for Above 5 Years
The one restriction on chossing term deposit is, it should be minimum of five years. According to the section 80c
“The maturity period of a term deposit receipt of any denomination shall be five years commencing from the date of the receipt”.
Deposit in Scheduled Banks
The deposit should be made in the RBI mentioned Scheduled Banks. If you are depositing in any other banks, then it is not possible to show in the tax savings. According to the act,
“scheduled bank” means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), or a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), or a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank, being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934);
Interest is Taxable
Apart from investing in the fixed deposit, the interest for the amount deposited is taxed. So, this is one drawback on this scheme. Unlike Post Office Savings are tax free, this is taxable income and you have to pay the tax for it.
Under section 80c, the maximum amount can deposited is Rs. 100000. As we know, the amount includes all other tax saving components like PF, PPF, Home Loans.
This blog shortly explains the benefits on using the Fixed Deposit as the Tax Savings scheme. This can be benefited for few if you have taxable income as less than five lacs. Because, the interest income on this component also taxable under section 80c.