Definition and Purpose

• A tax-saving fixed deposit is a special type of fixed deposit that offers tax benefits.
• It allows individuals to claim deductions under applicable income tax laws.
• The primary purpose is to encourage long-term savings with tax advantages.
• It is offered by most banks and recognized financial institutions.
• Suitable for individuals looking to combine savings and tax planning.

Fixed Tenure and Lock-In Period

• The deposit comes with a fixed lock-in period of five years.
• Premature withdrawal is not permitted during this period.
• The tenure cannot be altered once the deposit is booked.
• Loans or overdrafts against these deposits are generally not allowed.
• The entire maturity value is accessible only after five years.

Eligibility and Investment Limit

• Available only to individual Indian residents, including senior citizens.
• The minimum deposit amount varies by bank, starting from a nominal sum.
• The maximum amount eligible for tax benefit is defined under current tax rules.
• The deposit must be held in the name of the individual to claim deduction.
• Joint accounts may be permitted, but the benefit is claimed by the primary holder.

Interest Payout and Rate

• Interest can be received either periodically or on maturity.
• Rates are usually similar to regular fixed deposits for the same tenure.
• Senior citizens may receive slightly higher interest rates.
• The interest earned is subject to tax as per applicable income slabs.
• TDS is deducted if the annual interest exceeds the prescribed limit.

Documentation and Account Opening

• Requires submission of standard identity and address proofs.
• PAN is mandatory for tax benefit eligibility and interest reporting.
• Can be opened at bank branches or through internet banking.
• A specific declaration form may be needed to claim tax benefits.
• The deposit is issued with a certificate indicating the tax-saving status.