Which Is Better, Tax Saving Deposits Or Higher Interest Fixed Deposits?

One of the most reliable investment choices, granted exemption under section 80C, is the tax-saving fixed deposit (FD). Compared to other equity investment choices, these are viewed as less risky. Investors have the option to open a tax-saving deposit with all main lenders, including the State Bank of India (SBI), HDFC Bank, Axis Bank, and ICICI Bank.

Tax Saving Deposits:

Fixed deposits that help you save on taxes not only provide set returns but also do so by allowing you to take advantage of an exemption provided by section 80C of the Income Tax Act of 1961. Here are certain features of the tax saving deposits-

1) A tax-saving fixed account can be opened for as little as Rs 100 and as much as 1.5 lakh.

2) The deposit has a five-year lock-in term.

3) The tax-saving deposit provides interest payments either monthly or quarterly.

4) However, the income on the FD is taxable.

5) The tax-saving fixed deposit has a five-year lock-in term.

6) Tax-saving FDs do not permit early exit or borrowing against them.

7) For five years, the interest rate is set.

8) Joint accounts are a choice in the majority of tax-saving FD plans.

Many banks have declared an increase in their deposit rates following the Reserve Bank of India’s (RBI) most recent repo rate increase.

Other choices, besides FD, can be explored if you want to save money on taxes as an investor. This section’s Equity Linked Savings Scheme (ELSS) Mutual Fund offers tax relief on investments up to Rs. 1.5 lakh per year. Additionally, the earnings from these are tax-free. When buying an ELSS, you can receive tax benefits after just three years, unlike FDs where a five-year lock-in is required to save money on taxes. When considering interest, the IDFC Tax Advantage (ELSS) Fund has produced a staggering 20.8% yield in just three years. Additionally, it has an average yield of between 10% and 12%. Additionally, it has an average yield of between 10% and 12%. The typical return on a 3-year bank FD is between 6 and 7 percent.

In addition to FDs, Sukanya, PPF, and ELSS can be used to fund mutual funds if an investor needs to engage solely to reduce his or her tax liability and their 80C quota is full. In some post office programmes, senior citizens can receive returns that are greater than FDs. Money will be as secure as FDs here. Although the profits might be a little bit lower in this situation, 5-year FDs can still be helpful.

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