Fixed deposits (FDs) are an attractive mode of parking one's money safely. It offers security in terms of savings on one's income. A fixed deposit, which is provided by banks or non-banking finance companies, offers a rate of interest that is higher than that on a regular savings bank account. FDs mature on a particular date, which means that after one's FD matures, he/she can get the matured amount (that is inclusive of interest paid on a specific time period).
Do fixed deposits (FDs) help save on income tax?
FDs are of two types: some are normal FDs while others act as tax-saving instruments. However, income tax has to be paid on interest income accrued on both types of FDs.
Unlike other FDs, the lock-in period of tax saving fixed deposits is five years. Only individuals and HUFs (Hindu undivided family) can invest in the tax-saving FD scheme. One of the major differences between normal FDs and tax-saving FDs is that the former can be redeemed before maturity, while the latter can't be redeemed before five years.
Under the section 80C of the income tax (I-T) Act, you can claim deduction for investments up to Rs. 1.50 lakh on tax-saving FDs. The amount so invested is meant to be deducted from the gross total income to arrive at the taxable income.
Rate of interest
1 year to 389 days
Kotak Mahindra Bank
365 Days to 389 Days