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THERE are questions for investors whether their situation would be different in terms of investments into fixed deposits if they are in the lowest tax slab or they in the highest tax slab. The amount of taxation under these areas are different, but what is also important is a clear manner of understanding of what is actually happening for investors in case they are investing in the fixed deposit and how the tax rate influences their investment decision.

Fixed deposits: Fixed deposits offered by banks are a major source of investments for a lot of people.

The safety of the instrument along with the other details ensure a simple way for investors to park their money and not worry too much at the end of the day. These are debt investments in existence for a specific time period and, hence, they will expire at the end of a specific period, wherein, the initial amount is returned to investors. The returns are in the form of interest that an investor earns, and this can be paid either at regular intervals, or as a lumpsum at the end of the term of the deposit.

Tax impact: The interest earned on fixed deposits is taxable in the hands of investors, and there is no amount that is actually available as a deduction.

This means that right from the first rupee earned on the deposit, the entire figure would be taxable in the hands of investors. The tax rate that is applicable for investors would be the rate that they would be paying on their income, because the figure is added to the taxable income and, hence, the applicable rate is in force.

This means that different investors could have different rates that they face on their investments based on different income-tax slabs. So a person with an annual income of Rs 3 lakh, earning fixed deposit interest, would be paying tax at 10 per cent, while someone with an income of Rs 14 lakh would be paying a tax rate of 30 per cent on the earnings.

This means there is a large difference in absolute terms of the tax that has to be paid, but what it also highlights is that individuals should be looking at undertaking the same kind of planning for the investment, as they would be doing if they were in the highest tax bracket.

Just because a person falls in the lower tax bracket does not mean that there is not much that they need to do. In reality, the opposite is actually true because for a given return, the net figure earned by someone in the lowest tax bracket is higher because of the lower amount of tax being paid.

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

1. ICICI Prudential Tax PlanInvest Online
2. HDFC TaxSaverInvest Online
3. DSP BlackRock Tax Saver FundInvest Online
4. Reliance Tax Saver (ELSS) FundInvest Online
5. Birla Sun Life Tax Relief '96 Invest Online
6. IDFC Tax Advantage (ELSS) FundInvest Online
7. SBI Magnum Tax Gain Scheme 1993Invest Online
8. Sundaram Tax SaverInvest Online
9. Edelweiss ELSS Invest Online