Last Update: February 24, 2023, 12:45 IST
Here are some of the features of Tax Saving Deposit.
Apart from FDs, Sukanya, PPF and ELSS can be used for mutual funds if an investor needs to engage solely to reduce their tax liability and their 80C quota is filled.
One of the most reliable investment options, which is exempted under Section 80C, is the tax-saving Fixed Deposit (FD). Compared to other equity investment options, these are considered to be less risky. Investors have the option of opening tax-saving deposits with all major lenders including State Bank of India (SBI), HDFC Bank, Axis Bank and ICICI Bank.
Tax Saving Deposit:
Fixed Deposits that help you save tax not only provide set returns but do so by allowing you to take advantage of the exemption provided by Section 80C of the Income Tax Act 1961. Here are some of the features of Tax Saving Deposit-
1) A tax-saving fixed account can be opened from Rs 100 to Rs 1.5 lakh.
2) The deposit has a lock-in period of five years.
3) Tax-saving deposit offers monthly or quarterly interest payments.
4) However, the income on FD is taxable.
5) Tax Saving Fixed Deposit has a lock-in term of five years.
6) Tax-saving FDs do not allow early exit or borrowing against them.
7) The interest rate is fixed for five years.
8) Joint accounts are an option in most tax-saving FD schemes.
Following the recent repo rate hike by the Reserve Bank of India (RBI), several banks have announced a hike in their deposit rates.
If you as an investor want to save money on taxes, there are other options apart from FDs that can be explored. This category of Equity Linked Savings Scheme (ELSS) mutual funds offers tax relief on investments up to Rs. 1.5 lakh per annum. Also, the income from these is tax-free. While buying ELSS, you can get tax benefits only after three years, unlike FDs where a lock-in of five years is required to save money on taxes. When considering the interest, IDFC Tax Advantage (ELSS) Fund has produced a staggering yield of 20.8% in just three years. Additionally, it has an average yield of between 10% to 12%. Additionally, it has an average yield of between 10% to 12%. The typical return on a 3-year bank FD is between 6 to 7 per cent.
Apart from FDs, Sukanya, PPF and ELSS can be used for mutual funds if an investor needs to engage solely to reduce their tax liability and their 80C quota is filled. In some post office programs, senior citizens can get higher returns from FDs. Money will be as safe as FD here. Though the returns may be slightly less in this situation, still a 5 year FD can be helpful.
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