Tax Saver Term Deposits: All You Need To Know

Wednesday, March 29th, 2017 Amritesh 2 responses 3040 Views

Tax Saver Fixed Deposits is the Term Deposit Scheme which is eligible for Tax Deductions Under Section 80C up to maximum limit of Rs 1,50,000/- . The minimum lock in period for the investment is 5 years. The e-Term Deposits makes it possible for the investors to make online investment, thus any individual using internet banking can make the investment from the comforts of his/her home.

Features of the Tax Saver Fixed Deposits

Maturity period for the Investment is 5 years.

Maximum Tax Deduction available is Rs 1,50,000/- which is inclusive of all other investments U/S 80C.

Return on Term Deposit is not tax free, implying that investment in scheme is eligible for Deduction, but the interest earned on the investment is not tax free and Tax Deducted At Source (TDS) is applicable.

The interest rates may vary marginally from Bank to Bank as decided by the respective Banks.

The Deposit account maybe created singly or jointly. However, in a joint account the Tax Benefit will available to the first account holder.

Any Resident Individual, Non Resident Indian is eligible to open the Term Deposit Account.

Premature Withdrawals and Loan against the Deposit is not available.

Nomination Facility is also available for the Deposit.

Benefits of Investing in Tax Saver Fixed Deposits

Ease of Investment, as Individuals can easily open and monitor the investment through online banking. All Leading Banks offer Online Term Deposit option.

Guaranteed Return on Investment, the interest rate is fixed so investment is secured from market downtrends and fluctuations.

Higher Interest is offered to Senior Citizens.

The interest rate on the investment ranges from 7% to 8% which is at par with the return offered by other fixed return investment schemes.

Flexible interest payment plans, Deposits offer Individuals with the option to receive interest on monthly, quarterly basis or reinvest the interest along with principal and receive the lumpsum on completion of tenure.

Shortcomings of Investing in Tax Saver Fixed Deposits

Return on investment may not be sufficient to negate the impact of inflationary trends leading to very poor returns in reality.

Tax on Interest earned also negatively impacts the return.

Better investment alternatives available in the market.

Premature Withdrawal and Loan on Deposit option is not available, thus the investment is locked for 5 years.

Investment Advice

Individuals should explore other Investment option before investing in Tax Saver Term deposits as the rate of return is mediocre and interest earned is taxable. Also the restriction on premature withdrawal and no loan facility makes the Scheme rigid.

Some of the other investment options:

National Savings Certificate

Equity Linked Savings Scheme

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Amritesh is an experienced professional in the field of HR, Finance and Compliance. He is currently working in the IT Industry with an US based firm. He took up Blogging as a hobby which eventually turned into passion. He primarily focuses on topics related to Personal Finance, HR, Compliance and Technology.

All the opinions/suggestions/views expressed on this blog are just for sharing information. Readers are requested to consult their respective financial advisers and experts before taking any decision. Views shared through post or comments are personal opinion meant for reference of the readers. These should not be considered as Investment Advice or Legal Opinion. The Blog or the Author does not take any responsibility regarding any such action taken by any Individual.
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[…] Tax Saver Fixed Deposits (FD) […]


[…] Post Office Schemes: Rates have been revised on Post Office Term Deposits of 1 year and 3 years to 7%, from 6.9% and 7.2% respectively. However, Term Deposits of 2 years and 5 years will continue to fetch returns at 7% and 7.8% respectively. Monthly Income Scheme (MIS) will draw an interest of 7.7% on deposits. Savings deposit will continue to earn returns at the rate of 4%. […]