Want To Invest In FDs Before Mar 31 To Save Tax? Compare Returns Against Other Assets
As the financial year comes to an end, it’s the most opportune time to pick tax-saving bank FDs before Mar. 31 to maximise income tax deductions.
As the current financial year 2024-25 (FY25) comes to an end soon, investors may want to explore financial tools that can help them to reduce their tax liability. There are several options available catering to different risk appetites. These range from conservative fixed deposits (FDs) and certain mutual funds to long-term schemes like the Public Provident Fund and National Pension System (NPS), among others.
These tax-saving investment options are eligible for the benefits under Section 80C of the Income Tax Act, 1961. You can claim deductions up to Rs 1.5 lakh in a financial year.
It is also important to understand that not all investments are eligible for tax deductions. While the government offers tax deductions on certain investments, others may not qualify for such benefits. The interest rates, lock-in period and maturity tenure, among other features, for the tax-saving investments may also differ depending on the scheme and the bank.
Tax-saving bank FDs have traditionally remained a reliable savings instrument for many investors. The tax-saving FDs are preferred by risk-averse investors due to the secured return and fixed tenure of investment. However, there are also several other savings instruments that offer the dual benefit of tax savings and secured returns.
Here’s A Comparison Of Returns In Various Assets Under Section 80C:
Fixed Deposits: Prominent lenders in India offer FD return rates ranging from over 2% to 8%. While the returns may not look very attractive, FDs are critical to ensure that your investment comes with guaranteed returns with minimal risk.
PPF: The Public Provident Fund (PPF) is a long-term savings scheme with a 15-year maturity period. Individuals can deposit a maximum of Rs 1.5 per financial year in their PPF accounts. This government-backed scheme provides 7.1% interest at present. The PPF interest rate is reviewed and fixed by the government periodically. Certain investors see it as attractive because the maturity amount from PPF is entirely tax-free. Investments under the PPF qualify for tax benefits under Section 80C.
Tax Savings Mutual Funds: There are certain tax-saving mutual funds, also called Equity-Linked Savings Schemes (ELSS) investments, which can be claimed under Section 80C deductions. These funds typically have a lock-in period of 3 years. Some of the funds in the ELSS category have offered annualised returns of more than 15% in the last three years.
National Savings Certificate: This is another savings bond scheme, backed by the government, which can be claimed under 80C. It offers a 7.7% interest rate and has a 5-year maturity period.
Sukanya Samriddhi Yojana: This government-backed scheme is aimed at ensuring the financial security of girls. To encourage parents to invest in this scheme, the government has made Sukanya Samriddhi Yojana (SSY) investments eligible for tax deductions under Section 80C. The scheme has a maturity period of 21 years and offers an 8% return per annum.
