Term Deposits Under 80C

If you want to save tax in a safe way in India, term deposits under Section 80C are one of the most common choices. These tax-saving fixed deposits (FDs) lower your taxable income and at the same time, provide you with stable returns. The basics of the topic are explained in simple words.

What Are Term Deposits Under Section 80C?

They are fixed deposits made in certain banks or post offices where you are entitled to a tax deduction of up to ₹1.5 lakh per year under Section 80C of the Income Tax Act. The 5-year lock-in period during which you are not allowed to withdraw the money is the condition, however. The interest earned is taxable as per your income tax slab.

Key Features of Tax Saving Term Deposits

• Deduction limit: Up to ₹1.5 lakh per financial year   
• Lock-in period: 5 years (no premature withdrawal allowed)   
• Interest earned on FD is taxable   
• Low-risk, secure investment option   
• Available to Individuals, Hindu Undivided Families (HUFs), and NRIs   

We could better understand the benefit of this instrument by a simple example. In case you put ₹1.5 lakh into a tax-saving FD while also being in a 20% tax bracket, the consequence will be that the taxable income for that year will reduce by ₹1.5 lakh and thus you save ₹30,000 in tax. So, it’s not bad to invest safely, is it?

H2: How to Invest in Tax Saving Term Deposits

1. Find out from your bank or post office the tax-saving FD schemes they offer.   
2. Decide how much you want to invest (up to ₹1.5 lakh) to get the deduction.   
3. Keep the amount locked for 5 years to qualify for the benefit.   
4. Save the receipt or certificate for your income tax filing.   

File your return declaring your investment and claim the deduction.