Benefits of Tax Savings on Fixed Deposit Under Section 80c Deduction

Benefits of Tax Savings on Fixed Deposit Under Section 80c Deduction

Fixed deposit accounts have many Benefits for both people and companies. 

You can change the main FD account period to suit your needs. Various banks provide a five-year FD plan for tax advantages in addition to traditional FD accounts.

You can deduct taxes under Section 80C FD of the Income Tax Act of 1961 by investing in a five-year FD scheme. 

This type of account might have unique characteristics, benefits, and conditions compared to traditional FD accounts. 

To take advantage of such FD accounts, you need to be aware of a few factors.

What is a Tax-Saving FD?

Under Section 80C FD of the Income Tax Act of 1961, some fixed deposit types, including tax-saving fixed deposit (FD) accounts, are eligible for a tax deduction. 

The maximum annual deduction for investors who open tax-saving fixed deposit accounts is Rs. 1.5 lakh. It has the following features:

  1. A five-year contract
  2. Interest earned is taxed.
  3. The interest rate range is 5.5% to 7.75%.

Saving money is simple and practical with fixed deposits. By making a one-time investment and choosing a timeframe that works for you, you can access them immediately. 

Your money is earning interest during this time, enabling you to increase your wealth and safeguard your future.

Fixed deposits can be used for short-term financial goals as well. In addition to tax advantages, they offer fast benefits. 

What benefits can tax-deferred fixed deposits offer?

Benefits of fixed deposits that reduce taxes

The general public has always maintained unflinching faith in fixed deposit accounts regarding savings. 

Investors may feel confident and at peace knowing it is low-risk because it is a bank-based investment product that the RBI continually reviews. 

Additionally, the deposit is simply redeemable with interest upon maturity. The following are a few benefits of FDs:

Customers using FDs are more likely to earn interest than those using savings accounts. For FDs, a single lump sum deposit is allowed.

The interest generated on fixed deposits is subject to TDS. Only after five years of employment are tax benefits accessible. It might,however, be delayed for a longer time.

To suit the needs of investors, the size of FD deposits can be altered. Under Section 80C of the Income Tax Act of 1961, investors are eligible for income tax deductions of up to Rs. 1,50,000 each year. Leaving early won't be possible.

Use a tax-free FD calculator to determine your investment's annualized interest rate after learning everything there is to know about tax-free FDs and their interest rates. 

The quantity of money you will need to invest can also be determined using this information. 

Bank customers have internet access to a tax-saving FD calculator. Choose the interest rate that offers the best-guaranteed returns by comparing the available options. 

Calculating the maturity amount of your FD by hand can take a lot of time and effort.

FD Tax exemption

Investing in the best-fixed deposit plan India has to offer would help you save money on taxes or save FD Tax exemption, not understanding how fixed deposit taxes are calculated. 

One of the best FD programs in India, Shriram's corporate fixed deposit offers a variety of tax-saving options.

Additionally, you can earn a sizeable amount in interest while avoiding taxes, thanks to Shriram having one of the highest interest rates in India—up to 8.90%* annually. 

To begin the process of tax savings, book an FD with Shriram as soon as you can.

Depositors are not taxed on FD interest earned on FCNR and NRE accounts. 

However, investing in a tax-saving fixed deposit plan provided by several banks can result in a tax benefit. 

Tax deductions or FD tax exemptions under Section 80C FD are available for the majority of Tax Saver FDs up to Rs 1.5 lakhs each fiscal year. 

On the other hand, the interest on a Tax Saver FD would be taxed according to the tax bracket of the depositor and would be taxed by the tax bracket of the depositor.

Section 80C FD of the Internal Revenue Code permits deductions for fixed deposits.

Tax-saving FD plans have a 5-year lock-in term and can deduct up to Rs 1.5 lakh in deposits made each fiscal year thanks to Section 80C of the Income Tax Act. 

The same deduction or FD tax exemption is available for both 5-year Post Office Fixed Deposits and National Savings Time Deposit Accounts.

How Do Fixed Deposits Operate, and What Are They?

You must pay a sizable deposit for the duration that best suits your demands. 

Your investment will continue to earn the set interest rate regardless of future interest rate fluctuations.

Since they are unaffected by market volatility, fixed deposits are regarded as safe investments. 

You can renew the fixed deposit if no withdrawals are made before it matures.

Because fixed deposits offer more returns on your amount than traditional savings accounts, they are favoured. 

What follows? Seniors have access to customized Fixed Deposit plans, which come with higher interest rates than regular Fixed Deposit plans, offered by banks and Non-Banking Financial Companies.

The Indian government offers several tax breaks to encourage investment and specialized economic activities. 

Agriculture income, pensions, allowances, and other sources of income are not taxable in India. 

For instance, tax-free insurance premiums are available in India to promote the purchase of life insurance. Another choice is the source tax exemption FD.

The Union Budget for 2022 has extended the deadline for small business owners to apply for tax breaks and exemptions from capital gains tax.

According to Finance Minister Nirmala Sitharaman, the tax holiday and exemption from capital gains taxes for investors in startups would be extended by one year till March 2022. 

The goal is to assist India's startup community. Instead of the previous due date of March 31, 2021, an LLP or corporation operating a qualified business that was created on or before March 31, 2022, is now eligible for a tax rebate of 100% of its profits. 

Hindu Undivided Families (HUFs) will now join individuals in 2022 when the capital gains tax exemption FD is expanded.

Tax saver FD maximum amount

Only Rs. 1.5 lakh may be deposited into a tax saver FD maximum amount in a single fiscal year. 

To open a tax-saving fixed deposit, either a joint account or an individual account can be used. 

The tax benefit will only be available to the principal account holder if you have a combined tax-saving FD account.

Equity-linked savings systems (ELSS) and Public Provident Funds are the two most popular ways to claim an income tax exemption under Section 80C. (PPF). 

A Tax Saving FD provides an advantage over an ELSS because it is not market-linked. 

Even though ELSS has a shorter lock-in period (three years), a Rs. 500 minimum deposit is still necessary. 

ELSS carries some risk as well because it is market-linked. The minimal investment for a fixed deposit with tax advantages is Rs 100. 

Although you can start a PPF Account with just $100, you need to put at least Rs 500 into it. A PPF also has a lock-in period of 15 years.

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A fixed deposit should be your first option if you want an investing strategy that ensures growth, guaranteed returns, and zero risk. 

You can use Section 80 C of the Income Tax Act to claim a Fixed Deposit Income Tax Exemption for deposits up to Rs. 1.5 lakh, which is the Tax saver FD maximum amount. 

A minimum investment of Rs 100 and a five-year lock-in term are needed to open a tax exemption FD. 

You can use your money to make risk-free investments by looking at the interest rates on Tax Saving FDs.

FAQ’s Related to Benefits Of Tax Savings Fixed Deposit Under Section 80c Deduction

1. What is the main benefit of tax saver FD?

The main benefit of a tax-saving FD is that you get a tax of up to Rs. 1.5 lakh per annum.

2. Which is better normal FD or tax Saver?

Even though a regular fixed deposit has more flexibility, a tax-saving FD still has a number of advantages. To achieve your financial goals, you can invest in an FD plan. Shriram FDs are offered with interest rates as high as 8.90%* annually and terms ranging from 12 to 60 months.

3. Do we get tax on the income from tax saver FD?

Yes, the interest income from a tax-saving FD is taxable. After adding the interest to your total income, taxes will be calculated based on the tax bracket you are now in.

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