As the name says it all, these are FDs which offer Tax Savings. As per Section 80C of Income Tax Act, investment up to Rs. 1,50,000/- qualify for tax deduction. Tax Saver FD offers dual benefit of tax savings plus guaranteed return. Keys features are listed below :
- Only individuals & HUF are permitted to invest in these & take tax exemption.
- Can be opened in single or in joint capacity.
- Nomination facility is available, only one nominee is permitted.
- While the minimum amount of investment in Tax FD vary from bank to bank (starts as low as Rs. 100/-), maximum of Rs. 1,50,000/- is permitted per person.
- These FDs have lock-in period of minimum 5 years, during this period no premature or partial withdrawals are permitted.
- Like regular FDs, banks offer fixed/assured interest on Tax Saver FDs. Due to 5 year lock-in some banks offer higher interest rate than regular FDs.
- Tax FDs offer various interest payout options to select from:
- monthly interest payout
- quarterly interest payout
- cumulative interest payout at time of maturity along with principal
- Auto-renewal is not permitted in these FDs.
- Interest earned from Tax Saver FD are taxable.
- Only schedule commercial banks are permitted to offer Tax Saver FDs.
- No additional documentation required for booking such FD. It can be booked online or physically if you are already having savings account. For new customers, same KYC documentation will be required as that of FD/Savings Account.
- PAN is mandatory for booking Tax Saver FD and has to be mentioned in application form. PAN is printed on the TAX FD Receipt for producing it as a proof of investment and claiming tax.
- While Tax Saver FDs have lick-in period of 5 years, in case of death of depositor before maturity the proceeds can be claimed by the nominee.