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2 mins Read | 1 Year Ago

How can You Save Rs 46,800 with a Tax Saver FD?

How can you save Rs 46,800 with a Tax Saver FD?


Did you know that you can save up to Rs 46,800 in taxes by investing in a Tax Saver Fixed Deposit? This is especially important for individuals whose annual gross income is Rs 10 lakh and above and who are looking to save more taxes through an FD. Here’s how you can get the maximum tax benefit of Rs 46,800 in a financial year.

Every year taxpayers lookout for various investment options that could help them save maximum taxes. Investment avenues like Life Insurance, Health Insurance and Home Loans allow you to claim tax deductions. However, you can save the maximum out of your taxable income if you invest Rs 1,50,000 in Tax Saver FDs. These type of Fixed Deposits allows an investor to claim tax deductions of up to Rs 1,50,000 under section 80C of the Income Tax Act, 1961.

Features of a Tax Saver FD:

  • Typically has a 5 year lock-in period

  • The interest rate is 5.6% and it varies for Indian citizens, HUFs and NRIs. Senior citizens are offered a higher interest rate

  • The yearly deposit amount can range between Rs 10,000 to Rs 1,50,000

  • The proceeds can be withdrawn from the FD Account only when the term deposit matures

  • Interest earned from this Fixed Deposit is not tax deductible. The interest can either be reinvested or received quarterly.

The tax savings availed by an individual depends on the tax slab rates as defined by the Government.

How can you save tax with a Tax Saving FD Account?

Suppose you are a working professional whose annual income is Rs 12,00,000. You would fall under the 30% tax slab as per the old tax regime, which is also one of the highest tax slabs. Assuming that you have invested Rs 1,50,000 in a Tax Saving FD in a financial year, your tax savings calculation would be as follows:

Tax rate at 30% on Rs 1,50,000 is Rs 45,000. Plus the Education Cess is 4% i.e. 4% of Rs 45,000 is Rs 1,800. This way you can claim a total tax deduction of Rs 46,800 in a year.

The only condition here is that you need to follow the old tax regime as per the financial year 2019-20. Exemptions that are claimed under section 80C are unavailable to individuals following the new tax regime, that was introduced in the Union Budget in FY 2020-21.

T&C apply.

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