IDBI Bank Tax Saving Fixed Deposit
Updated 30 Aug 2023
Navigating the vast realm of investment options can be challenging, especially when balancing returns and tax benefits. Tax-saving Fixed Deposits (FDs) have always stood out as a robust and reliable instrument in this context. IDBI Bank, a major banking institution in India, offers such tax-saving FDs that have gained popularity among investors.
These FDs not only allow individuals to save tax under Section 80C of the Income Tax Act but also ensure the safety of the principal amount. Dive into this blog to explore IDBI Bank's Tax-Saving FDs' features, benefits, and nuances and understand why it might fit your financial puzzle.
Features of Tax-Saving FDs
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.
Eligibility Criteria and Documents Required
- 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-
- Aadhar Card
- Drivers License
- Gas Bills
- Utility Bills
- Bank Statement
- Or a Cancelled Bank Cheque
Can I open a joint account for this FD?
Yes, you can open a joint account. However, the tax benefit is applicable only to the first account holder.
Is TDS applicable on the interest earned?
Yes, if the interest earned exceeds the threshold limit specified by the government, TDS (Tax Deducted at Source) will be applicable.
Can I avail of a loan against this FD during the lock-in period?
Typically, loans against Tax Saving FDs during the lock-in period are not provided by the bank.
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