In the Finance Act 2006, Section 80C of Income Tax Act 1961 was amended to include deposits placed with a scheduled bank to qualify for deduction under 80C. The amount of investment up to Rs.1,00,000 under the notified deposit scheme will be eligible for deduction under Section 80 C of Income Tax Act for individuals / Hindu Undivided Families. In terms of the amendment a deposit scheme has been introduced with certain value added features for the benefit of customers.
We are giving below the feature of Tax Saver Scheme announced by the Indian Overseas Bank (IOB).
1. Who can deposit: The deposit scheme is open to individuals. The Karta of a Hindu Undivided Family (HUF) can open in his capacity as Karta. The deposit can be in the single name of the depositor or in joint names of two adults or jointly in the name of an adult with a minor (only two joint account holders are permitted) payable to either or survivor. In the case of deposits in the joint names, the tax benefit can be claimed by the first named depositor.
2. How much deposit can be accepted: A maximum of Rs. 1,00,000 is accepted under the scheme from one individual / under one deposit account in year (Year means one year from 1st April to 31st March). The minimum amount that can be accepted is Rs.10,000.
3. Period for which deposit can be accepted: The deposit is accepted for any period from 5 years to 10 years.
4. Types of deposit that can be accepted: The deposit can be accepted in the form of reinvestment deposit (RDP) or Fixed Deposit or Special Fixed Deposit (SFD) and interest can be payable half-yearly or quarterly or monthly.
5. Branches where the deposit can be opened: The deposit can be accepted by all branches of the Bank.
6. Transfer of deposit: While transfer of deposit between branches of IOB is permitted, transfer between banks is not permitted. Branches, therefore, should not accept deposits transferred from another bank.
7. Special conditions for issue of deposit receipt: The PAN number of the depositor and his signature will appear on the deposit receipt.
8. Loan against deposit / accepting the deposit as collateral security: Loan can not be granted against the deposit nor can the deposit be accepted as collateral security.
9. Repayment of deposit: Deposit is repayable on or after maturity date in the normal course. Premature closure is not permitted till the deposit completes 5 years from date of deposit.
10. Rate of Interest: Special rate of interest is offered for the deposits.
11. Special rate for deposits of Rs.10,000 to Rs.1 lac: 9.00%
Senior Citizen deposits: 0.75% over and above the above rates.
12. Nomination: Nomination can be made for the deposits as per the existing rules for nomination. No nomination, however, can be accepted in the case of deposits held for and held by or on behalf of a minor.
13. Replacement of lost/destroyed deposit receipt: In case of deposit receipt lost or destroyed, duplicate receipt can be issued by furnishing an indemnity.
14. Death of depositor: In case of death of depositor, the nominee is entitled to claim the deposit amount before or after the maturity date. The claim from nominee will be settled as per the current guidelines in force for settlement of claim on death of depositors. In case of deposits where the depositor died without giving nomination, the deposit amount can be settled to the legal heirs.
15. Tax liability on interest on the deposit: Interest on the term deposit is liable to tax under the Income Tax Act. The tax on such deposit shall be deducted at source in accordance with the provisions of the Income Tax Act.
16. Tax benefit: The single depositor or the first holder of joint deposit can claim exemption from Income Tax under section 80C for amount invested in the deposit along with all other approved investments under section 80C with a maximum of Rs.1 lac.