80c- 5 year term deposit with co-operative banks

Tax planning 1156 views 3 replies

What are the conditions to be satisfied for claiming deduction in respect of a 5 year term deposit made with a co-operative bank under section 80c of Income Tax Act, 1961?

In other words, when does a 5 year term deposit with a co-operative bank qualifies for deduction under section 80c, are there any specific conditions to be satisfied or just that a simple 5 year term deposit with any bank qualifies for deduction under section 80c, irrespective of the bank, rate of interest, periodicity of payment of interest, or metioning on the top of FD certificate as tax saver deposit.

Kindly clarify

Replies (3)

1 . Only Individuals and HUFs can invest in tax saving fixed deposit(FD) scheme. 

2. The FD can be placed with a minimum amount which varies from bank to bank, but maximum deductible u/s. 80C is 1.50 lakhs. 

3. These deposits have a lock-in period of 5 years. Premature withdrawals and loan against these FD's are not allowed. 

4. A person can invest in these FD's through any public or private sector Scheduled bank 

5 . One can hold these FD's either in 'Single' or 'Joint' mode of holding. In the case the mode of holding is joint, the tax benefit is available only to the first holder. 

6. The interest earned is taxable as per the investor's tax bracket and therefore, TDS is applicable. The interest on deposits is payable on either monthly/quarterly basis or can be reinvested. A person can avoid TDS deduction on the interest earned by submitting Form 15G/15H

7. Nomination facility is available for these FDs. 

8. Most banks offer slightly higher interest rates on FDs to senior citizens.

Hi Sir, 

Thanks for the detailed explanation.

I have small doubt about 5 Years of FD against whether we can claim Exemption by only 1st year U/s 80C? or we can claim exemption by all 5 years ( FD Period)?

 

regards,

Naresh

Deduction u/s. 80C of IT act, can be claimed in the year of investment only. (i.e. only for ONE/First year)


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