Looking to make some tax-saving investments? Well, a tax-saving fixed deposit makes for a great option. This instrument lets you save tax under the Section 80C of the Income Tax Act. What makes this form of investment common among investors is that it carries an almost no-risk on investment. At the end of the investment tenure, you are assured the principal and interest amount. Returns are contractually guaranteed by the lender. Also, the interest payout is a fixed sum for the entire term of the fixed deposit.
The interest payout on tax-saving fixed deposits will vary from one bank to another. However, it is typically above 6 percent. Senior citizens may be offered a much higher rate of interest. This debt investment is one with the smallest lock in period while offering a periodic interest payout. It is essentially a very easy-to-use and safe investment option.
Here are some factors that you must note when investing in a tax savings fixed deposit in 2020:
- Any Indian citizen and Hindu Undivided Families (HUF) can make an investment through a tax saving fixed deposit scheme.
- Tax-saving fixed deposits have a lock-in period of a minimum of 5 years.
- You can choose to deposit any amount of money in the form of a fixed deposit. However, banks typically have a set minimum amount of FD amount. The amount will vary from one bank to another.
- Tax-saving fixed deposits have a lock-in period of 5 years. This essentially means that you cannot withdraw your fixed deposit before then completion of this tenure.
- The type of fixed deposit cannot be used as collateral when seeking a loan.
- A tax-saving fixed deposit can be held in a ‘Single’ or ‘Joint’ bank account. However, if the same is held in a ‘Joint’ account, then the tax benefit under Section 80C of the Income Tax Act can only be availed by the primary holder.
- The interest earned through fixed deposit is payable either monthly/quarterly or at the end of the tenure.
Now that you know the benefits and factors involved when investing in tax savings fixed deposits, it is the right time to make your investment. Opening a fixed deposit is extremely easy, you can do it through the official website of the bank or visit its physical branch.