As tax-saving investments are long-term commitments, you should take some time to analyse which investment option would help you achieve your long-term financial goals.
In the last week of financial year 2018-19, people are in a hurry to make investments to save taxes. There are many tax-saving options available to get deductions up to Rs 1,50,000 u/s 80C of the Income Tax Act, like Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), life insurance, Unit Linked Insurance Plan (ULIP), Equity Linked Savings Scheme (ELSS), National Savings Certificates (NSC), 5-year Fixed Deposits (FDs) etc.
As tax-saving investments are long-term commitments, you should take some time to analyse which option would help you achieve your long-term financial goals.
However, one of the easiest options to save time and effort is to visit your nearest bank branch and invest in 5-year FDs and avail deductions up to Rs 1,50,000 on the investment amount. In fact, most people in India prefer to invest money in FDs as they are considered a risk-free investment with guaranteed maturity value. FDs are also the most popular choice for senior citizens as capital protection is their prime concern and they generally get higher interest rates than the younger citizens wherever age-wise different rates are offered.
Although, FDs give higher interest rates than the deposits in savings accounts and you may also get the tax deductions up to Rs 1,50,000 that you invest, but remember that will have to pay tax on the interest as the FD interest is fully taxable. The bank will even start deducting TDS from the interest amounts as soon as it crosses Rs 10,000.
However, apart from higher rate of interest on FDS, senior citizens now also get some relaxation on TDS, as the government has decided to make interest on FDs up to Rs 50,000 tax-free in a financial year for them.
Apart from scheduled commercial banks, Post Office also offers tax-saving time deposits with attractive rates that the government decides on quarterly basis and also provides sovereign guarantee to make the deposits fully protected. The current interest rate on Post Office 5-year time deposit is 7.8 per cent and that of Senior Citizen Savings Scheme (SCSS) is 8.7 per cent.
Following table shows high interest rates offered on tax-saving FDs by some top banks: