What are Tax Saver Fixed Deposits?
Tax Saver Fixed Deposits are a type of fixed deposits in which the depositor can claim a tax deduction under Section 80C of the Indian Income Tax, 1961. These deposits can be made through two types of accounts, namely; Single holder Type Deposits and Joint holder Type Deposits. If you opt for a joint mode of holding, the tax benefit is only available to the first holder. The maturity period of the tax saver fixed deposit is 5 years. Deduction under section 80C is available to the Hindu Undivided Family (HUF) and individuals. Even senior citizens and NRIs can claim this tax deduction. It should be noted that the interest that you earn from this fixed deposit is not tax deductible and you cannot avail a loan against the same. The interest on tax saver fixed deposit can either be reinvested or is receivable on a monthly or quarterly basis.
You can choose either a public sector or a private sector bank to create your tax saver fixed deposit. But you cannot do so in rural or co-operative banks. The banks also generally provide a higher interest rate to senior citizens on the tax saver fixed deposits. The mutual funds which are tax saving are known as Equity Linked Saving Scheme.
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