This is probably the easiest way to save tax if you have a Net-banking account. After the demonetization and the digital push, almost everyone has one.

A few clicks of the mouse and your tax planning is done. However, as mentioned earlier, this convenience comes at a very high cost. Interest rates have come down significantly and are close to 7-7.5% right now.

The best tax saving FDs

Rates have been reduced after demonetisation. The post-tax yield is even lower.

The bigger problem is that the interest is fully taxable. It is added to the income of the investor and taxed at the marginal rate applicable to him. In the highest 30% tax bracket, the post-tax yield is close to 5%.

Even so, tax-saving fixed deposits are suitable for risk averse investors, especially senior citizens who might already have hit the Rs 15 lakh ceiling in the Senior Citizens’ Saving Scheme and don’t want to lock in money for the long term in a PPF account. Though NSCs offer higher rates than most banks, many senior citizens prefer to invest in deposits of their own banks, because they get better service than in a post office. Familiarity with bank staff is another important factor.

These deposits are also useful when time is running out and the taxpayer is unable to decide where to invest, since they can be opened very quickly. However, keep in mind that the interest from such deposits will be subject to TDS if the total income exceeds Rs 10,000 in a financial year.

Many investors have the misconception that if TDS has been paid, they have no further tax liability. This not correct. The TDS rate is only 10% and they have to pay additional tax if they fall in the 20% or 30% tax brackets. It doesn’t stop here. Taxpayers will also have to report the income in their tax returns as income from other sources. Ignore reporting the income at your own peril.

When TDS is cut, it gets reflected in the Form 26AS of the individual. The information in the Form 26AS is matched with the returns filed by the taxpayer. If tax has been cut, but that income is not declared by the taxpayer, he will surely get a notice for the discrepancy.

Smart tip : Opt for the annual interest payment option so that your money does not get locked for the full five years.

We have mobilized asset under various mutual funds over six crores+. We are well equipped with internet to address your problems and render investment & income tax related services.

So, join mutual fund investment or tax saving schemes under our guidance at earliest to grow your investment along with peace of mind. The earliest you start investing, more compounding growth you will have in future.