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This type of deposit commonly called tax saver deposit, tax saver deposit cannot be withdrawn before maturity , also banks will not allow any loans on such deposits.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