Tax Saving FD: Meaning, Features And More


Each investment decision is primarily influenced by the rate of return and the level of risk. Those who prefer minimal risk over high returns typically choose minimum fd amount. They are among the safest bets but offer low returns. The interest earned on FD is taxable; however, you can claim a tax exemption as a shareholder. It is based on the amount stored in an FD under section 80C.

Tax saving FD

A Tax-Saving FD is a Fixed Deposit that allows an individual to demand a tax exemption. The exemption is under Section 80C of the IT Act 1961. These deposits can be made in two ways: single-holder type deposits and joint-holder type deposits.

The tax incentive is only accessible to the first person if it is a joint holding. It has a 5-year maturity period. Individuals and Hindu Undivided Families (HUFs) can claim a deduction under Section 80C.

Working of Tax Saving Fixed Deposits

  • It is a financing facility provided by banks and NBFCs where you make a payment for a set period.
  • It has a 5-year term.
  • It comes with a lock-in period, which means you cannot withdraw prematurely.
  • The rate of return on deposits is taxed.
  • When a Tax-Saving FD matures, the maturity amount is credited to the Savings Account linked with the FD.

Who should consider getting a Tax Saving FD?

Before making any financial decision, consider your age, risk tolerance, and investment horizon.

  • You have been nearing retirement age and have a limited risk tolerance

Tax Saving FD is a good option for you because it offers both fixed return and low risk. You can compare Tax Saving FD interest rates and select the best fitting your investment needs.

  • You need to save taxes

You can save taxes by claiming an FD income tax exemption under Section 80 C.

Advantages of a Tax Saving FD

The Tax-Saving FD is an excellent financial tool that ensures significant savings at a reasonable interest rate. It is monitored closely by the RBI; therefore, it is considered the safest investment with minimal risk. Fixed Deposits are easily repayable with interest when they reach maturity. Other advantages of FDs include:

  • FDs pay higher interest rates than standard Savings Accounts.
  • In FDs, there is just a one-time deposit.
  • The amount of the FD can be adjusted to suit the investor’s needs.
  • Except for cooperative and rural banks, investors may invest in these FDs through private or public sector banks.
  • Fixed Deposits at post offices can be transferred from one to another.
  • The nominee can be appointed either at the time of the investment or later.
  • Loans against tax-saving FDs are available at lower interest rates.
  • Users can make just one lump sum deposit into a Tax-Saving FD. It is a good feature when you have a sizable surplus of savings.
  • The minimum period of eligibility for tax advantages is five years. It can, however, be stretched for a longer period of time.

How much money should one put into the Tax Saving FD scheme?

It’s time to calculate the annualised interest rate on your investment. It is where a Tax Saving FD Calculator comes into play. It also assists you in determining how much money you will need to invest. A Tax Saving FD Calculator is accessible online and is provided by banks to their customers.

You can use it to compare interest rates and choose the one that gives the most guaranteed returns. However, manually trying to calculate the maturity amount of your FD can be time-consuming and complex. You will need to provide precise information to obtain an answer from a Tax Saving FD Calculator. This information will include the principal sum, the annual interest rate, and the tenure.

You may also read – what is the meaning of fixed deposit


If you’re looking for an investment that meets the requirements of safe assets, zero risk, and growth, a Fixed Deposit is a good way to go. Tax Saving FD is designed to assist you in claiming a Term Deposits tax exemption under IT Act.

It is applicable for financial assets of up to Rs 1.5 lakh. A Tax Saving Fixed Deposit has a five lock-in period and a Rs 10000 minimum investment requirement. You can research lending rates for a Tax Saving FD scheme and securely place your funds.

Kate Johnson is a content writer, who has worked for various websites and has a keen interest in Online Signals Report and Stock portfolio generator. She is also a college graduate who has a B.A in Journalism. Read More: Fin Scientists >> Read More: Stocks Signals Mobile App >> Read More: Crypto Signals >> Read More: Crypto Trade Signals App >> Read More: Trade Signal Buy and Sell

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