Tax saving fixed deposit schemes are available with every bank. Amount you deposit in this scheme is tax Exempted.
- Advantages
- Deposited amount is exempted form Income Tax under Section 80C
- These Fixed deposits will have a lock in period of 5 Years less compared to PPF
- No Risk Involved
- Disadvantages
- Interest earned on this deposited amount is taxable
- Not liquid until maturity
- Less returns compered to PPF and Mutual Funds
- Interest rate will be 7% to 8% and as the Interest earned is taxable, If you are in 10% slab at the time of maturity, effective interest rate is 7.2% if your bank gives 8% Interest rate. If you are in 20% slab at the time of maturity, effective interest rate is 6.4% if your bank gives 8% Interest rate. Similarly If you are in 30% slab at the time of maturity, effective interest rate is 5.6% if your bank gives 8% Interest rate
- If we see effective Interest rate, this is worst investment compared to all other Investment options under 80C
- Notes
- If you don't have any other option then only go with Fixed deposit as tax saving option
- Under 80C section you can show upto 1.5L per year
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