With less than a month left for the financial year 2024-25 to end, you still have time to plan your tax-saving investments. If you want to save taxes while ensuring the safety of your money, a Tax-Saving Fixed Deposit (FD) for 5 years or a Post Office National Savings Time Deposit Account could be the right choice for you.
Post Office National Savings Time Deposit Offers Up to 7.5 per cent Interest
- This scheme is similar to an FD, offering guaranteed returns over a fixed tenure.
- Interest rates range from 6.9 per cent to 7.5 per cent for deposits between 1 to 5 years.
- A 5-year deposit qualifies for tax exemption under Section 80C of the Income Tax Act.
- You can open an account in a minor’s name or opt for a joint account with up to 3 adults.
- The minimum investment is Rs 1,000, with no upper limit on deposits.
5-Year Tax-Saving FD Provides Tax Benefits
- A tax-saving FD matures in 5 years, allowing you to claim deductions of up to Rs 1.5 lakh under Section 80C.
- This reduces your taxable income by Rs 1.5 lakh, helping you save taxes effectively.
4 Key Things to Keep in Mind Before Investing in FD
1. Avoid Putting All Your Money in a Single FD
If you are planning to invest Rs 10 lakh in an FD, consider splitting it across multiple FDs in different banks. For example, you can create nine FDs of Rs 1 lakh each and two FDs of Rs 50,000 each. This way, if you need funds in between, you can prematurely withdraw some FDs while keeping the others intact.
2. Interest Withdrawal Options
Banks offer quarterly, annual, and in some cases, monthly interest withdrawal options. Choose the one that best suits your needs.
3. Check Loan Interest Rates on FD
You can avail a loan against your FD, usually up to 90 per cent of its value. For example, if your FD is worth Rs 1.5 lakh, you can get a loan of Rs 1.35 lakh. However, the interest rate on the loan will be 1-2 per cent higher than the FD interest rate. If your FD earns 6 per cent interest, expect a loan interest rate of around 7-8 per cent.
4. Senior Citizens Get Higher Interest Rates
Most banks offer 0.50 per cent higher interest rates to senior citizens. If you have an elderly family member, investing in an FD under their name can help maximize returns.
(Disclaimer: Interest rates and tax benefits are subject to change as per government policies and bank regulations. Investors should consult with a financial advisor before making any investment decisions.)
