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Why A 5 Year Fixed Deposit Is The Ideal Choice For You?

By Author: Mayur Sheitty
Total Articles: 116

It is always a good thing to inculcate the habit of saving money on a regular basis. Fixed deposits offer an investment opportunity that not only ensure higher returns but also effectively helps save money on taxes.

The 5 year tax saving fixed deposit is ideal, if one wants to make the most out of his investments. According to the Income Tax Department of India, any earning individual can make investments of about 1.5lakh, to save taxes. Since some time back, 5 year fixed deposits have been qualified for tax deduction as per Section 80C of Income Tax laws, making it a perfect form of short term investment for many.

Here are some of the features of the 5 year fixed deposit scheme-

• The length of the tenure is 5 years, after which the principal amount can be reclaimed.

• The 5 year FD interest rates vary from bank to bank. The FD rates are quite attractive too.

• 5 year tax saving fixed deposit accounts can only be opened with banks. This option is not available with companies as per Income Tax Laws.

• Even if the amount of the fixed deposit is more than 1.5 lakhs, tax deduction under Section 80C can only be done for 1.5 lakhs.

• Money from this type of fixed deposit may be withdrawn only after its maturity. Premature withdrawal is not possible. The amount is locked-in permanently for the entire period of 5 years.

• Premature withdrawal of the cash is possible only if the investor passes away. In that case, the legal heir of the investor or the nominee can ask for closure of the fixed deposit. In case of premature closure the FD interest rates vary from bank to bank.

• Overdraft facility is also not allowed in case of 5 year savings fixed deposits.

• If the fixed deposit has joint holders, only one, mostly the first, is allowed tax deduction.

• Tax deduction can be claimed on the principal amount which is invested. The interest earned during the 5 years on the principal is taxable.

Thus, 5 year fixed deposits are an ideal investment option for many individuals seeking a fast and effective way to earn money and save taxes over a short period of time. Moreover, fixed deposit is definitely more liquid in comparison to EPF as well as PPF. Fixed deposit interest rates are also higher in comparison to savings account, thus ensuring greater returns.

Author Bio :

An experienced writer on finance topics, the author articulates of investment choices such as fixed deposit products in India & recurring deposit schemes. He writes about a variety of topics including the benefits of recurring & fixed deposit and how to make the right investment choice.

Total Views: 121Word Count: 446See All articles From Author

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