Budget 2018 May Relax Income Tax Rules On Tax-Saving Bank Fixed Deposits

Some tax experts have suggested that the government reduce the tenure of tax-exempted fixed deposits (FDs) to a minimum of three years, from the current five years.

 Share
EMAIL
PRINT
COMMENTS
Budget 2018 May Relax Income Tax Rules On Tax-Saving Bank Fixed Deposits
Tax-saving fixed deposits or FDs are a special category of bank fixed deposits that can help you claim deductions under Section 80C of the Income Tax Act. But interest earned on these income-tax saving deposits is taxable. These tax-saving bank fixed deposits have a minimum lock-in period of five years. Some tax experts have suggested that the government reduce the tenure of tax-exempted fixed deposits to a minimum of three years, from the current five years. Others have also suggested that the interest accrued up to a certain threshold be also exempted from tax.

"The amount invested in a fixed deposit (FD) with a maturity of five years or more qualifies for deduction under Section 80C. Interest received on such FDs is charged to tax in the hands of the investor. Since many banks have substantially reduced the rates of interest on FDs, the net return on investment after taxes is inadequate. Therefore, interest accruing on FDs up to reasonable threshold limit should be exempted from income tax," said Naveen Wadhwa, DGM at Taxmann.

India's biggest bank, SBI, for example pays an interest rate of 6 per cent on five-year tax saving bank fixed deposits. Senior citizens get higher 6.5 per cent interest rate. Interest earned in income-tax saving FDs is taxable according to the investor's tax bracket.

TDS or tax deducted at source norms are applicable on the interest earned in tax-saving bank fixed deposits. This means that TDS becomes applicable when interest payable or reinvested on fixed deposits across all branches, per customer, exceed Rs 10,000 in a financial year.

Tax-saving fixed deposits have a lock-in period of five years. No premature withdrawals or loans are allowed. Interest on income tax-saving deposits is payable on a monthly or quarterly basis. The interest amount earned can be also reinvested, if the investor wants so.


For the latest News & Live Updates on Election Results from each assembly constituency in Madhya Pradesh, Rajasthan, Mizoram, Chhattisgarh, Telangana, like us on Facebook or follow us on Twitter for updates.

NDTV Beeps - your daily newsletter

................................ Advertisement ................................

................................ Advertisement ................................

................................ Advertisement ................................