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Benefits of investing in tax saving fixed deposits

Saving tax is something that plays on everyone’s minds. It is sad to see one’s hard-earned money going away in taxes. However, there are some effective and legitimate ways in which tax savings are possible. While some of the tax-saving instruments carry a certain amount of risk, others allow the investor to save tax without taking any risk. Among them is a tax-saving fixed deposit. Read on to learn more.

What is a tax-saving fixed deposit?             

A tax-saving fixed deposit is a financial instrument that locks in your money in an FD and fetches returns. Under Section 80C, the investor can claim a tax refund of up to Rs 1.5 lacs per year through the tax-saving fixed deposits. There is a minimum lock-in period of 5 years in the tax-saving FDs.

What are the benefits of a tax-saving fixed deposit?             

Here are some benefits offered by the tax-saving FDs:            

Short lock-in period – The tax-saving fixed deposits have a short lock-in period of five years. This is lower as compared to the other tax-saving investments, such as the post office schemes, PPF, etc. the PPF, for example, has a longer lock-in period of 15 years. The investor gets the tax benefits while having to stay invested for just five years.

Minimal risk – A tax-saving fixed deposit is ideal for those who like taking minimal risks with their money. The risk involved is very low when compared to an ELSS or equity. The money is invested in the safest possible financial instruments such as cash bonds, which carry little or no risk. There is no possibility of losing the invested money when using a tax-saving fixed deposit. Quick investment – The process of opening a tax saver FD is very simple. It can be done with a cheque of the selected amount in a matter of a few minutes. It can also be done online through the bank’s mobile app or website. The online FD can be opened instantly by just clicking a few buttons.

Joint fixed deposits available – A tax saving fixed deposit can be opened by an individual or two people jointly. However, the tax benefit is only available to the primary investor and not to both the parties jointly operating the FD. Attractive schemes for senior citizens – Senior citizens get better returns when investing in tax-saving fixed deposits. The interest rates offered are generally higher for the senior citizens and this helps in quicker wealth creation. Such an FD is a great option for a retired person who wants to save tax in a risk-free manner.

The final word            

With so many benefits available, the tax-saving fixed deposits are indeed an excellent investment option for anyone looking to save tax while growing their wealth. Every bank offers these FDs, so do check them out and make a quick application.

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Written by Sakshi

I work as a finacial advisor. I hold expertise in the field of investment and finance. I love to blog on topics related to finance and investment

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