Tax savings FD (Fixed Deposit) under Section 80C deductions

What is a tax saving fixed deposit?

A tax saving fixed deposit is a term deposit that allows you to park your surplus funds for 5 years. When the FD matures, you receive the principal amount along with the acquired interest. Unlike a regular FD, a premature withdrawal is not allowed in the 80C fixed deposit.

Features of tax saving FD

To understand more about tax-saving fixed deposits, let us take a look at their key features:

• Tax saving FDs come with a fixed tenure. During these 5 years, a withdrawal cannot be made.
• Unlike regular FDs, where there is typically no maximum investment amount, a tax-saving FD can be for a maximum of ₹1.5 lakh, as the annual tax benefit under Section 80C, in the old tax regime, is allowed only up to this amount.
• The tax-efficient fixed deposit interest rates can vary across banks. However, at the beginning, you can predict the returns.
• Unlike regular FDs, an FD under 80C is available only with banks and not Non-Banking Financial Companies.
• The interest earned can either be paid out as per the investor's choice at a monthly or quarterly basis, or it can be compounded and paid at the time of maturity.
• The interest earned on tax saving FD is fully taxable and is subject to Tax Deduction at Source, TDS.
• The interest earned remains unchanged during the whole term.
• These types of FDs do not offer the option of auto-renewal.
• Tax saving FDs are available for individuals and members of the Hindu Undivided Families (HUF).
• While a tax saving FD can also be held jointly, only the primary account holder can receive the tax benefits.
• These FDs do not offer liquidity in the form of premature withdrawals, overdraft or loan against FD.
• To further enjoy the tax benefits, you have the option to renew the FD for another block of 5 years.
• FDs come with a nomination facility, so that in case the depositor passes away during the FD term, the appointed nominee can receive the maturity amount.

How does a fixed deposit under 80C work?

The way a tax saving FD works is similar to a regular FD. You make a lump-sum deposit for a period of 5 years. A maximum of ₹1.5 lakh can be invested in a financial year. The rate of interest is applied, regardless of any changes in it in the next 5 years.

Safe from market fluctuations, at the end of the lock-in period, you receive the guaranteed amount. You may or may not renew the investment as desired. If the interest earned is more than your threshold limit, tax will be deducted at source.

The new TDS rules under section 194A of the Income Tax Act are as follows:

• If the interest earned on the FD exceeds ₹50,000 a year, a 10% TDS will apply
• For seniors, TDS applies only if the interest exceeds ₹1 lakh a year
• In case your total taxable income is under the threshold limit, you can make a claim when you file your Income Tax Return
• Make sure your bank/ NBFC has your PAN details, else TDS will go up to 20%.

Tax saving FD interest rates

Tax saving fixed deposit interest rates are determined by banks and financial institutions based on factors such as RBI policy rates, tenure, and overall market conditions. While the tenure for such FDs is fixed at 5 years, interest rates may vary across providers.

In most cases, the current tax saving FD interest rate is around 7% to 8%. For senior citizens, slightly higher returns, ranging between 0.25% and 0.75% per annum, are available. In both cases, interest is usually compounded quarterly, which helps in growing the investment over time.

When you are considering an investment in a tax-saving FD, it is recommended that you compare different institutions offering tax-saving FD interest rates to maximise returns. Even a small difference in rates can significantly impact maturity value over a 5-year tenure.

Benefits of investing in 80C fixed deposit

Investing in an 80C fixed deposit offers the dual benefit of tax savings and assured returns through a tax saving fixed deposit. It is a low-risk option ideal for conservative investors, providing predictable returns unlike market-linked instruments.

Another one of the benefits of tax saving FD, is that the lock-in period encourages disciplined savings, while its simplicity makes it accessible and appealing to those prioritising stability and steady income.

Who should invest in tax saving FD?

In a world today where there is so much volatility in the economic landscape, safe and secure long-term investments have a crucial role to play. And while everyone can invest in a tax saving FD, they are particularly beneficial for the following:

• Salaried individuals looking to claim deductions under Section 80C
• Low-risk investors who prefer capital protection over market risk
• First-time taxpayers seeking simple and reliable tax-saving options
• Individuals who are seeking predictable and guaranteed returns
• Those avoiding volatility associated with equity, mutual funds and digital gold.

Simply put, an FD under 80C is ideal for anyone who values stability, tax efficiency, and ease of investment without exposure to market fluctuations.

How to invest in tax saving FD with JioFinance?

JioFinance is an all-in-one finance app. The marketplace allows you the ease of managing all your finances in just a few clicks. Here is what you need to do to invest in tax saving FD with JioFinance:

• Download the JioFinance app on your mobile phone, complete the registration by entering the OTP received on the same mobile number
• Click on Investments and then go to Fixed Deposits. The app allows you to explore a wide range of FDs. You can scroll through and check the rates of interest offered
• Take your time to compare tax-saver FDs by the most popular banks and NBFCs in the country
• Check the details by clicking on the institution. You will be able to see the details like minimum deposit, credit ratings and many other useful insights
• The app also allows you to know your expected returns with the particular investment, and answers the commonly asked questions
• When you choose the institution you wish to invest with, you proceed with the KYC and the payment
• You will soon receive confirmation on the deposit.

Conclusion

A tax saving fixed deposit is a dependable option for individuals looking to save taxes while earning stable returns. With benefits under Section 80C, investments in an FD under 80C not only reduce taxable income but also ensure capital safety.

If you are seeking a low-risk, structured investment for tax planning, exploring tax saving FD options through JioFinance can be a smart step toward financial security.