5-year Income Tax Saving FD: How you can save up to Rs 1.50 lakh in tax? What Rs 1 lakh, Rs 3 lakh, and Rs 5 lakh investments can give you in this scheme

This is the last week to invest for tax saving for the financial year 2023-24. From April 1, 2024, the new financial year will start, so March 31, 2024, is the last date to make investments for the current financial year. To save tax, a the post office's or a bank's five-year fixed deposit (FD) scheme can also help you save tax.

Know more about five-year tax saving FD here-

Fixed Deposit (FD) is a financial service provided by banks and NBFCs in which you deposit a lump sum of money for a certain term. The five-year FD provides tax exemption on deposits up to Rs 1.50 lakh under Section 80C of the Income Tax Act of 1961.

It has a lock-in period of five years, which implies that you cannot withdraw early. The interest earned, if it is more than Rs 40,000 in a financial year, is taxed in the form of TDS. When a tax-saving FD matures, the maturity value is credited to the linked savings account.

Features of 5-year tax saving FD:

Tax exemption: You can avail of the tax benefit on deposits of up to Rs 1.50 lakh in a financial year under Section 80C of the IT Act, 1961.

Interest

The interest earned as part of the Tax Savings FD is taxable and deducted at the source. But the interest is taxable only if it is more than Rs 40,000 on an FD in a financial year. For senior citizens, this limit is Rs 50,000. 

Premature withdrawals

A normal FD gives loan opportunities against deposits. Premature withdrawals, overdraft (OD), or loan capabilities are not accessible with a tax savings FD.

Auto-renewal option

No renewal facility is available on a tax saving FD.

Lock-in

This has a lock-in period of five years, and the interest rate also remains unchanged during the period.

How you can get tax-saving FD?

The option of a 5-year tax saving FD is available in all banks. Besides, you will easily get this option at the post office. However, its interest rate may vary in different banks and post offices. Amid many FD options, you may pick the one with the best interest rate.

What investments of Rs 1 lakh, Rs 3 lakh and Rs 5 lakh can give you in this FD?

Here, we will tell you about calculations of a Post Office five-year FD, which provides a 7.5 per cent annual interest rate.
If your investment is Rs 1 lakh
If you invest Rs 1 lakh in the scheme, you get an interest of Rs 44,995 in five years, and the maturity amount will be Rs 1,44,995.

If your investment is Rs 3 lakh
If you invest Rs 3 lakh in the scheme, your interest in five years will be Rs 1,34,984, and the maturity amount will be Rs 4,34,984.

If your investment is Rs 5 lakh
If you invest Rs 5 lakh in the five-year FD, you will get an intrest of Rs 2,24,974, and the maturity amount will be Rs 7,24,974.

How you can get tax-saving FD?

The option of a 5-year tax saving FD is available in all banks. Besides, you will easily get this option at the post office. However, its interest rate may vary in different banks and post offices. Amid many FD options, you may pick the one with the best interest rate.