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Fixed deposit and Income tax deduction under section 80C

Fixed deposit and Income tax deduction under section 80C
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In order to promote savings habits of people, Finance Ministry has introduced Tax benefit on fixed deposit up to 150000 ( previously 100000) under section 80 C of Income Tax act.

You can avail Tax saving fixed deposit banking institution offering Tax saver FD

The tenure of deposit should be minimum 5 years , and minimum amount required to avail the benefit is Rs 100 for an interest rate allowed by bank/Institution  time to time.This deduction is available only for individuals and HUF.

This type of deposit commonly called tax saver deposit, tax saver deposit cannot be withdrawn before maturity , also banks will not allow any loans on such deposits.

TDS and tax is applicable on interest as per income tax rules.

Method of tax saving calculation for FD

Mr.A has a taxable Income of  350000 and he has a tax saver deposit of 25000 his tax is calculated as follows

Exempted Income               250000

Taxable Income                                         100000

Less FD Under section 80C                      25000

Tax to be calculated on                              75000            Tax to be paid  @ 10%           7500

Tax Savings                                              2500

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