A Fixed Deposit(FD) is a type of deposit account of any individual with the bank, wherein, the amount deposited by the customer is kept for a fixed tenure or period and the bank pays a fixed interest rate on the sum deposited. Fixed Deposit can not only provide you good returns but can also come to your rescue for saving taxes.
Fixed Deposits were included under exemption under Section 80 C of Income Tax 1963 in 2006. To avail FD as a tax saving option the individual is required to deposit a lump-sum amount for a particular duration. These deposits can be of two types – Single holder Deposits and Joint holder Deposits. However, the tax benefits are available for the first account holder only.
The FD that can be claimed as tax deduction under section 80C of Income tax Act shall fall under the prescribed category stated by the government. The features of such deposits are:
A tax saving can be used as a tool of tax deduction under Section 80C of the Income Tax Act, 1961. Any individual can claim a deduction of a maximum of Rs.1.5 lakh per annum by investing in a tax-saving fixed deposit account.
The deduction of Tax saving FDs under section 80C can be availed by individual assesses and the Hindu Undivided Family (HUF).