How to Open Tax-Saver FD Online

October 16, 2024

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If you're looking for a safe and secure way to save on taxes while growing your wealth, opening a Tax-Saver Fixed Deposit (FD) online could be a viable option. With Tax Saver FDs, you can enjoy both - high interest rates and tax deductions of up to ₹1.5 lakh under section 80C of the Income Tax Act, 1961.

In this article, we will guide you through the process of opening an Tax-saver FD online. We'll explain the key features, eligibility criteria, interest payment options, and the necessary steps to open an account.

Understanding Tax-Saver FDs

Tax-saver FDs are special fixed deposit accounts that offer dual benefits – they help you save on taxes and provide an opportunity for wealth growth. These FDs come with a lock-in period of five years, during which you cannot withdraw your deposit.

Here are some key features of Tax-Saver FDs:

Tax Saving on Investment

You can save on your tax outgo with such FDs under Section 80C of the Income Tax Act. However, you can avail this benefit only if you're a part of the old tax regime.

Higher Interest Rates

Tax Saver FDs come with a higher interest rate compared to regular Savings Accounts. However, the lock-in period is 5 years, meaning you cannot withdraw the deposit amount before the stipulated period.

Minimum and Maximum Amount

You can invest a minimum amount of ₹1000 and a maximum amount of ₹1,50,000 in a financial year (FY) towards a Tax-Saver FD. This investment qualifies for tax exemption under section 80C.

Eligibility

Tax-Saver FDs are available for resident individuals and Hindu undivided families (HUFs) only. Non-resident Indians (NRIs) and foreign nationals are not eligible to open this account.

Interest Pay-out Options

Most banks offer three interest payment options for tax-saver FDs – quarterly, monthly, or at maturity. You can choose the option that suits your financial needs.

Now, let's dive into the process of opening an online tax-saver FD with your bank.

How to Open a Tax-Saver FD Online

The account opening process may vary across banks. However, for your ease of understanding, we have taken the process involved in opening a Tax Saver FD online with Ujjivan SFB.

If you are a new customer:

Step 1: Visit Ujjivan SFB website.

Step 2: Go to 'Deposits' and from the dropdown menu select 'Tax Saver FD'

Step 3: Click on 'Apply Now'

Step 4: Fill out the form and click 'Submit'

Bank representatives will contact you to help you with opening the account.

Final Thoughts

Tax Saver FDs can help you with both - save tax and growing your wealth. However, as pointed out before, you can deposit only up to ₹1.5 lakh in such FDs. Also, there's limited liquidity option compared to other Fixed Deposits. However, such FDs can be an excellent instrument to park your money for the long-term and reap the benefits of higher interest rates and the power of compounding. Consider all these factors before investing in Tax-Saver Fixed Deposits.

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FAQs

1. Is tax-saving option available in the new regime?

No, the tax deduction benefits are not available in the new tax regime.

2. Is the interest earned on Tax Saver FDs taxable?

Yes, the interest income is fully taxable as per Income Tax Act, 1961. Interest earned on FDs is treated as 'Income from Other Sources' as is taxed based on the income tax slab you fall into. However, there's a catch. The TDS (Tax Deducted at Source) is applicable only if your interest income exceeds ₹40,000 in a financial year. For senior citizens, the exemption limit is capped at ₹50,000. Also, if you fall below the minimum tax slab, you can submit Form 15G or Form 15H to the bank requesting not to deduct TDS.

3. What are the options for interest payment frequency?

The interest pay-out option is based on your preference and can be monthly, quarterly or at maturity. Monthly and quarterly interest pay-outs can be beneficial for those seeking a regular income stream.

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