Tax on Interest on Tax Saving Fixed Deposit

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  1. Shaila Mehta

    Shaila Mehta New Member

    Can interest amount on Fixed Deposit for five years by Senior Citizen (Pensioner)be included in sec 80? If yes under which sub head.
  2. Shishir Nayak

    Shishir Nayak Member

    Yes interest on Fixed Deposit is taxable under income from other source.
  3. Shaila Mehta

    Shaila Mehta New Member

    but can a SENIOR CITIZEN take deduction under sec 80 as accrued interest amount (FIXED DEPOSIT FOR FIVE YEARS)
  4. rudrabose

    rudrabose Active Member

    The Interest earned would be taxable under head "Income from Other Sources"

    However, as this interest has been reinvested, you can claim deduction for the same under Section 80C.

    So this interest will first get included in your income and then you can claim deduction under section 80C for the same.
  5. ileana

    ileana New Member

    Yes, interest earned on Tax saver 5-year fixed deposits can be claimed as IT deductions under Sec 80C. This is usually included under the head "Income from Other Sources."

    But since the interest income has been reinvested, you can claim deduction for the same under Section 80C. Both general public and senior citizens are eligible to claim this deduction.

    For accounting purposes, this interest is included in your gross income and then the IT assesses can claim deduction under section 80C for the same.

    Click to know more about Tax Saver FD.
  6. Rajesh Goyal

    Rajesh Goyal New Member

    1. There is difference between Fixed Deposit and Tax Saving Fixed Deposit. In 2006 Indian government announced bank fixed deposits booked by an individual/HUF for 5 years and up to Rs. One Lac or Rs. 100,00/- will be eligible for exemption. This exemption would be under section 80C of the income tax act 1961. The interest rates on tax saving fixed deposits are generally calculated on a quarterly basis and the interest is reinvested into the fixed deposit.
    2. This income will be classified as Income form other sources.
    3. Section 10 is specifically dedicated to grant various exemptions to assessees of all class on Incomes earned by them.
    4. As per section 10(15) interest on deposit made by retired govt servant (Refer para-5 below) out of money received on retirement is exempted.
    5. Only Investment in Senior Citizens Savings Scheme 2004 for 5 year by resident individuals is claimed u/s 80C.
    6. There is a column provided in both ITR 1 and ITR2 for exempt income. Such income could be interest income on tax-free bonds or dividend income, agricultural income or long-term capital gain that is exempt. Hence, it may be better that you declare them for record purposes.
    7. Check your position in view of above.
  7. Rajesh Goyal

    Rajesh Goyal New Member


    Tax saving Deposit Schemes are special category of fixed deposits where the investor gets the benefit of a tax break when they invest a sum of money in the deposit. It is different from Fixed Deposits of 5 years. As it was announces in the budget of 2006, it is also called as Tax Saving Deposit scheme 2006 (Notification Number 203/2006 and SO1220 (E) dated 28/07/2006 ). Salient Feature of the scheme are:

    1. Fixed tenure without premature withdrawal. Since there is an underlying tax advantage under section 80C of Income Tax Act, there would be a minimum lock in period of 5 years on the FD under this scheme.
    2. Year is defined as a financial year , FY 2012-13 is Apr 1 2012-Mar 2013 .
    3. Amount one can invest in Tax saving Fixed Deposit is limited to Rs. 100 minimum and lakh(100,000) maximum.
    4. One gets tax benefit on money put in Tax saving Fixed Deposit :
      1. Tax benefit is under section 80C.
      2. Maximum amount one can put in Tax saving Deposit scheme is Rs one lakh( 1,00,000).
      3. Investment is part of the Rs 100,000 exemption presently available in respect of life insurance premium, contribution to PF etc.
    5. Bank will issue a Fixed Deposit Receipt that shall be the basis of claiming tax benefit.
    6. Term deposit under this scheme cannot be pledged to secure a loan.
    7. Two types of deposits are to be offered under the scheme,
      1. Interest is payable monthly or quarterly as per your convenience.
      2. Interest is compounded quarterly and reinvested with principal amount
    8. Interest is taxable.
    9. Tax is deducted at source (TDS), from the interest on Tax-Saver Fixed Deposit will be deducted according to Income Tax Regulations prevalent from time to time .
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