Tax Saving FD(Fixed Deposit): Features and Eligibility

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Hiral Vakil

Fixed Deposit
HUF
Section 80C

Tax saving FD (Fixed Deposit) a.k.a Tax saving Term Deposit are Fixed deposits with different maturity periods. To qualify for tax benefits, the lock-in period is 5 years.

The investment objective of term deposits is to provide tax benefits under section 80C of the Income-tax Act. It aims at motivating individuals to save since it has the dual benefit of investment and tax saving.

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Features of Tax Saving Fixed Deposit: 

Who can invest in Tax Saving Fixed Deposit?

All Resident individuals and Hindu Undivided Families are eligible to invest under Tax Saving Term deposits. Term deposit shall be of following types, namely:-

No nomination shall be made in respect of a term deposit applied for and held by or on behalf of a minor. In the case of joint holder type deposit, the deduction from income under section 80C of the Act shall be available only to the first holder of the deposit. The interest earned is subject to tax deduction at source as per tax laws.

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FAQs 

Is interest on FD taxable?

Yes. Interest earned on any kind of Fixed Deposit is taxable. TDS will be deducted @ 10% in case the total interest income from such deposits exceeds Rs. 10,000 in a year.

Can I withdraw from FD before maturity? 

No. As per Government notification, no premature withdrawal is allowed for the Tax-Saving FD

Is there a lock-in period for a tax saving FD?

Yes, the lock-in period is a minimum of 5 years.

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