What is a Tax-Saver FD?
A Tax-Saving Fixed Deposit is a type of FD scheme that helps you save income tax under Section 80C of the Income Tax Act, 1961. You can claim a deduction of up to ₹1.5 lakh on your total taxable income. Due to the tax benefits, these come with a mandatory 5-year lock-in.
Key Rules & Guidelines
- Strict Lock-in: Absolutely no premature withdrawal or sweep-in facilities are permitted before 5 years.
- No Loan Facility: You cannot pledge a tax-saver FD to get an overdraft or loan.
- Joint Accounts: In a joint tax-saver FD, the Section 80C benefit is only applicable to the primary account holder.
- Taxability of Interest: While the principal deposit gets a deduction, the interest earned is fully taxable according to your income tax slab.