Tax Savings on Term Deposit under Section 80c

January 28, 2009

Banking, Income Tax, Investments

Introduction

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.

Summary

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.


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36 Responses to “Tax Savings on Term Deposit under Section 80c”

  1. Neha Says:

    Padriwale decision boards provides an comparative tables of all banks where you can easily take

    decision to invest your money for fixed deposit. It is really helpful to you for choosing best interest rate of fixed deposit in any

    indian bank. So choose your best fixed deposit interest rate by this url http://www.padriwale.com/decisionboard/fixed_deposit.aspx

    Reply

  2. Bijoy Says:

    I didn’t understood the utility of this Fixed term deposit.
    If the interest is taxable then where is the tax savings?

    Taxes are never deducted on the principle amount, its always calculated based on the interest earned. How is this different than a regular FD when the rates are same.

    Reply

  3. krishnas Says:

    Yes Bijoy,

    That is one drawback in the scheme. TDS will be deducted when interest payable or reinvested per customer, per branch, exceeds Rs 10,000 in a financial year. So, for one lac it won’t cross Rs.10000 per year in the current interest rates.

    Thanks,
    Krishna

    Reply

  4. Prashant Tripathi Says:

    Dear krishna
    what is the treatment of matured F.D amount , it will be taxable or not?
    On whose name F.D could be taken by Assessee?

    Reply

  5. MAHENDR PAL Says:

    FD TAX SAVING PLAN PROCEDURE

    Reply

  6. UMESH Says:

    difference between tax saving FD AND post office NSC.

    Reply

  7. pratik Says:

    Dear,

    My Dad has own the bank shares,and he is exempted from any TDS on FD of higher amount also.
    How is this possible.please explain in detail?

    Regards,
    Pratik Agrawal

    Reply

  8. Pious T Says:

    if my interest income from fixed deposit exceeds Rs.50000.00, can I file 15G and get exception from TDS

    Reply

  9. shyamalakrishnan Says:

    how to save my taxable income. it is coming 10500

    Reply

  10. George Varughese Says:

    Dear Krishna,

    In your FD article you have mentioned if the total interesrt is more than ten thousand rupees , TDS will be deducted. You have suggested to split the amount and invest in differnet banks.

    Does this mean for example i can depost Rs.1Lac each in four banks then the TDS will not be deducted?

    Regards
    George

    Reply

  11. KAVITHA Says:

    I WANT TO KNOW HOW TO FILLUP THE 15G FORM I ALSO HAVE FIXED DEPOSIT A\C AND I WILL GET A INTEREST ABOVE 10000 THOUSAND

    Reply

  12. KAVITHA Says:

    AND I WANT TO KNOW IF WE SUBMIT FORM 15G TO BANK THEN THEY WILL NOT DEDUCT THE TAX FOR NOW AND FOR FUTURE ALSO WHEN I GET MORE INTEREST OF FD

    Reply

  13. Satish Kumar Koul Says:

    Dear Madam/Sir,

    My question is if you have made installment of your policy in March’2010 and you have not taken benefit under 80C in the same financial year i.e. 2009 to 2010, is it possible that you could avail benefit in the current financial year i.e. 2010 to 2011. Please reply.

    With regards,

    Reply

  14. jignesh desai Says:

    If a person invests in a 5 year Tax Saving F.D. or in an E.L.S.S. scheme in the name of his spouse or children , can he claim this amount as deduction from his Gross Taxable Income under Section 80 C in his Income Tax Return ?

    Reply

  15. jignesh desai Says:

    If a person invests in a 5 year Tax Saving F.D. or in an E.L.S.S. scheme in the name of his spouse or children , can he claim this amount as deduction from his Gross Taxable Income under Section 80 C in his Income Tax Return ?

    Reply

  16. Ramesh Says:

    If i invest 10000 in SBI fixed deposit scheme for five years then i get exemption under section 80C and withdrawn after six months then what is my obligation?

    Reply

  17. Vishal Says:

    Thanks for providing the info in such a crispy manner.

    Reply

  18. Jayaraj Says:

    If I invest Rs 50000 in sbi tax saver fd for 5 years, I know i wll get excemption for 50000 under 80c.What about interest I gain, is it taxable?.I need to pay tax for each year for my annual interest gain or only after 5 years?

    Reply

  19. jigneshdesai Says:

    Jayaraj ,The interest that you gain will be taxable & you need to pay tax every year on the interest accrued .

    Reply

  20. indu Says:

    How Mutual fund is for saving tax in comparison to other schemes?

    Reply

  21. shivam kumar Says:

    sir,
    my father is invest in S.B.I in 2001 by fixdepost Rs 40,000. The fixdeposi matured in 2011 by 3 times renew. totel amount on paperRs 86,000 and bank sent me only 60,000 then bank maneger said the rest amont deducted by incometax .

    so, kindly helpme sir how refound my rest money

    Reply

  22. Sanket Doshi Says:

    Hi,

    If I’ve made a fixed deposit for five years, then in that case, can I declare that fixed deposit as an investment for the next 5 years ?? or that fixed deposit can be declared as an investment only for the year in which it has been created ??

    Can anyone please help me out to get an answer for this ??

    Reply

  23. srinivas.J Says:

    If a person invests in a 5 year Tax Saving F.D. or in an E.L.S.S. scheme in the name of his spouse or children , can he claim this amount as deduction from his Gross Taxable Income under Section 80 C in his Income Tax Return ?

    Reply

  24. Debesh Says:

    If say, 30000/- is invested in Tax saving F.D.( 5 yrs) will it benifit me as a tax saver @30,000 for only a yr(yr of investment) or for all 5 yrs @ 30000/- yr pls explain.

    Reply

  25. Abhi Says:

    Hi Krishna

    I want to know what is the difference between a Fixed deposit and a term deposit….
    I was lot confused between these 2 things.
    i have read few blogs one said…… In fixed deposit, you invest a lump-sum amount for a specific period of time. And in term deposit, you invest some fixed amount every month for a specific period of term. This is also called RD.
    Is this correct.. so how can i declare as iam a sw eng wrking in MNC.
    As you know if we declare earlier then we are able to save TDS.
    Then where should i declare this under 80c.
    Below are few things where i have to declare earlier to avoid TDS in my company.
    So at what position i have to Declare if i take a fixed deposit(This situation comes to me when Fixed deposit is different from Term deposit)

    Thanx in advance

    INVESTMENTS UNDER SECTION 80C, 80CCC AND 80CCF
    3 Life Insurance Premium Paid
    a. All Payment proofs to be submitted for tax exemption
    b. All the Receipts should be dated in between 1/Apr/2011 to 31/Mar/2012
    c. The policy should be in the name of Self, Spouse and Children
    4 Contributions/Deposits in Public Provident Fund A/c
    a. Do not add the Pf deducted through salary or Employer contribution.
    b. The Contribution should be in the name of Self, Spouse and Children
    c. Proof of Investment should be submitted.
    5 Investments in NSC VIII issue
    a. Investment Proof to be submitted.
    6 Interest on NSC VI and VIII issue
    (Purchased prior to 1/Apr/2011 Give details based on the table
    given in Annex: 6)
    7 Contribution made to Unit linked Insurance plan of UTI/LIC
    Investment proofs to be submitted.
    8 Contribution made to Equity Linked Saving Scheme of Mutual
    Fund/UTI
    Investment proofs to be submitted.
    9 Contribution made to notified pension funds/Contributions made to
    Home loan Account scheme of NHB
    10 Amount spent on Children Education towards tuition fee only
    (maximum of 2 Children)
    Payment proofs to be submitted.
    11 Annual repayment of Housing loan Necessary proofs to be
    submitted.
    12 Deposits in NSS
    13 Investments in Infrastructure Companies(U/S 80 CCF)
    14 Premium Paid towards Jeevan Suraksha(U/S 80 CCC)
    15 Term Deposit
    A) For a fixed period of not less than 5 years with a scheduled bank
    B) Which is in accordance with a scheme framed and notified, by the Central Government,
    in the Official Gazette for the purpose of this clause.
    Proof of Investment should be submitted.

    Regards
    Abhiram Y

    Reply

  26. Shridhar Says:

    Nice article thank you.

    Reply

  27. parmeshwaran Says:

    i am a senior citizen 73 years of age. I have absolutely no other income other than interest from banks on fixed deposits. How much money I can invest in bank FDs in different banks/branches to avoid paying tds. Being a sr.citizen i am exempted from tax upto rs.2,50,000/-, I believe. Can i have this amount only through bank FD interest if i furnish 15H form with each bank where interest exceeds Rs.10000/- and if i furnish 15H from what is the maximum amount i can invest in a branch.

    Please advise.

    Thanks

    Reply

  28. pooja shah Says:

    I want to know that can we claim the deduction for FD only for 1 year or we can claim it for five years???

    Reply

  29. krishnas Says:

    Hello Pooja,

    The tax saving FD is only for the 5 years. It is special kind of FD created for the tax exemption purposes. You can not open any fixed deposit and then claim for the tax purposes.

    I hope this clears your doubts.

    Thanks,
    Krishna

    Reply

  30. Tanya Says:

    Hi Krishna,

    I have invested in tax saving fixed deposit for this financial year. I have been informed by my company to submit xerox copy of the receipt advice. Since CUSTOMER ID is mentioned in the receipt advice, is it safe to submit as it is or should I strike through CUSTOMER ID??

    Reply

  31. angel Says:

    Hi Krishna
    i am a centrl govt employee.I recently opened a FD of Rs 100000 at SBH as it had an interest rate of 10.2%,will iy be useful for a tax exemptiom
    angel

    Reply

  32. Saurabh Kumar Says:

    I have two questions -

    1) If I have an FD for five years, so whether I can declare that FD for each and every year till 5th year or the only year when I had made it first ?

    2) If I have an FD for 5 years and I want to break that FD after 8-9 months, is it possible. what would be the impact?

    Please reply the same at the ID defined.

    Reply

    • oswald vaz Says:

      FD CAN BE DECLARED ONLY FOR ONE YEAR.BUT, EVERY YEAR YOU CAN HAVE A NEW ONE.ONLY ON INTEREST TDS IS DEDUCTED AT SOURCE.THEN YOU HAVE TO CLAIM REFUND.
      YOU CAN’T BREAK IT LIKE THAT IT IS FOR 5 YEARS.

      Reply

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