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Updated 30 Aug 2023
Every individual wants to save on paying taxes, especially those in the investment arena. Imagine painfully waiting for years after investing in something, only for a significant chunk of those investments to fall prey to taxes.
That being said, there are certain ways to save on paying significant investment taxes. With FDs being the most sought option of investment for low-risk and constant income, Tax-saving FDs have been a game changer in the investment arena.
Duration: Tax Saving FDs usually come with a 5-year lock-in period, prohibiting any withdrawals during this time.
Interest Offerings: Competitive interest rates are a highlight, and institutions like Federal Bank often provide an additional rate increment for senior citizens.
Borrowing against FD: Given their fixed tenure, these FDs typically can't be used as loan collateral.
Interest Disbursement: Different payout options, such as monthly, quarterly, or annual intervals, might be available. Some banks also provide reinvestment of the earned interest.
Renewal Policy: Unless instructed otherwise, these FDs can be automatically renewed upon maturity for an equivalent period at the current interest rate.
Early Withdrawal Charges: Withdrawals before the end of the lock-in period aren't permissible. Withdrawing after the lock-in but before FD maturity might invite penalties.
Investment Limits: While there's a minimum deposit requirement to start a tax-saving FD, the upper limit typically remains INR 1.5 lakh annually, aligning with the 80C guidelines.
Tax Deduction at Source (TDS): TDS might be deducted if the interest income surpasses a specified limit.
Both individuals and Hindu Undivided Families (HUFs) are qualified to invest in these tax-saving FD schemes.
For the purpose of tax savings, one can opt for fixed deposits in either public or private sector banks. However, cooperative and rural banks don't qualify.
A 5-year term deposit in a post office is also recognized as a tax-saving instrument.
Deposits can be made individually or as a joint account. However, only the first account holder is entitled to the associated tax advantages.
Regarding the documents required-
Identity Proofs
Address proofs
Can I avail of a loan against HDFC Tax Saving FD?
No, loans cannot be availed against Tax Saving FDs as per the Income Tax Act.
What is the rate of interest offered on HDFC Tax Saving FD?
The rate of interest varies and is subject to change. Please check the HDFC website or contact the bank for the current rates.
Is a nomination facility available for HDFC Tax Saving FD?
Yes, HDFC provides a nomination facility for Tax Saving FDs.
Are joint accounts allowed in HDFC Tax Saving FDs?
Yes, joint accounts are allowed. However, the tax benefit under section 80C is only available to the first holder.
Can I renew my HDFC Tax Saving FD upon maturity?
Upon maturity, you can reinvest in a new Tax Saving FD. However, it will not be automatically renewed.
Disclaimer: Wint Wealth makes no guarantee or warranty on the accuracy of the data provided on this site, the information displayed is subject to change and are provided on an as-is basis. Nothing contained herein is intended to or shall be deemed to be investment advice, implied or otherwise. You are advised to make your own enquiries, consult a professional advisor and verify the information prior to taking any investment decisions. We accept no liability for any loss arising from the use of information contained on this website.
