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·         Date of issue

·         Due date

·         Amount

·         Rate of interest

·         Period of deposit

·         Amount at maturity

 

Tips to remember while going for a Fixed deposit

Following are the things to keep in mind while opting a Fixed Deposit.

·         Decide in advance, the period for which you are going to invest.

·         Shop around for the best rate of interest available.

·         Avoid Banks which do not have a long history

·         If you need a part of the money before your deposit matures, seek your banker's advice whether taking an overdraft will be beneficial

·         You need to be very careful while entrusting your money to finance companies which promise high rates of interest.

 

Popularity of fixed deposits is diminishing due to constant decrease in fixed deposit interest rates. It got a boost when the Indian government announced in 2006 that, bank fixed deposits by an individual/HUF for 5 years and up to Rs. 100000/- will be eligible for exemption. This exemption would be under section 80C of the income tax act 1961, provided the investor makes necessary declarations. This is the same section where we get exemption for life insurance policies, Mutual Funds, etc.

The fixed deposits which were giving interest rates up to 14% or more a decade back have recently slump to around 7%. However, as soon as the announcement from income tax department came, fixed deposit again started attracting more and more investments.

 

Tax Saving Fixed Deposit u/s 80C

Fixed Deposits also offer Tax benefit under Section 80C. The following are the key points regarding the tax saving fixed deposit under section 80C:

·         Tax saving fixed deposit has the lock-in period of 5 years. You will not be able to take the money before five years.

·         The interest rates for this scheme will differ from bank to bank.

·         Only banks are providing Tax savings fixed deposits. You cannot open it with company fixed deposit product.

·         Minimum deposit should be Rs.100.

·         Maximum of Rs.100000 is exempted u/s 80c for one financial year

·         Nomination Facility available.

·         In this scheme you will not be getting many other benefits which is available in normal fixed deposit, Such as;
- Partial/Premature withdrawal
- Sweep-in
- Over Draft facility

·         In case of joint account, the deductions u/s 80c will be allowed only for the first account holder.

·         Interest income from this is taxable.

 

Features of Tax Saver Fixed Deposits

Tax Saving Fixed Deposits can be purchased for a minimum amount of Rs. 100, and then in multiples of Rs. 100. The maximum amount eligible for tax deduction is Rs. 100,000 for a financial year. One of the major drawbacks of tax saving Fixed Deposit is that your amount will be locked for 5 year period.

Investment made in Tax Saving FDs cannot be withdrawn nor can it be pledged for any reason during the tenure. Though the interest rates are varying very frequently and can change in the future, the currently prevailing interest rates on a tax saver fixed deposit is around 8% to 8.75%.

This fixed deposit cannot be linked to a savings account and the surplus funds available under the savings account cannot be automatically invested in this fixed deposit. More over there is no overdraft facility available on the tax saver fixed deposit. As this instrument of saving money is special due to its tax saving status, normally banks do not extend relationship benefits on the tax saver fixed deposit.

 

Anyone who is an Indian resident or Hindu undivided families (HUF) can apply for a 5 year tax saving fixed deposit.

 

Joint Investment in Tax Saver Fixed Deposit?

In case two people invest in a tax saver fixed deposit, and become joint holders of the same, the tax benefits under section 80C of income tax act will be available only to the 1st holder. The second holder won't be able to enjoy any tax benefits on such a jointly held tax saver fixed deposit.

 

Other alternatives

Like life insurance and mutual funds (ELSS), this exemption comes under Section 80 C of the Income Tax Act, 1961. However, what you need to know is whether it is a better option to choose Tax Saver FD as an investment option, Fixed Deposits offer tax benefits when you invest in them. Some experts say that five-year tax-saver FDs could be better than PPF.

In PPF, your money will be locked for a period of 15 years but you can avail loans against the PPF account after the completion of one year from the end of the financial year of opening of the account and before completion of the fifth year. You can withdraw money after completion of 5 years from the end of the year of opening the account. In this case, a five-year fixed deposit can score over the PPF due to higher lock-in period.

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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 Plan Invest Online
2. HDFC TaxSaver Invest Online
3. DSP BlackRock Tax Saver Fund Invest Online
4. Reliance Tax Saver (ELSS) Fund Invest Online
5. Birla Sun Life Tax Relief '96 Invest Online
6. IDFC Tax Advantage (ELSS) Fund Invest Online
7. SBI Magnum Tax Gain Scheme 1993 Invest Online
8. Sundaram Tax Saver Invest Online
9. Edelweiss ELSS Invest Online