FD for tax saving

All salaried person will be making some investments to get the exemption of up to 1 lakh rupees under 80C.We will see how Fixed Deposit(FD) can be used effectively for that purpose.

Fixed deposit is a secured investment that can be done with any bank with a pre defined interest rate. It can be done for weeks or months or years.

But FD done for 5 years only considered for Tax exemption.

Some people who are in a hurry to make investments to save tax will be buying some tax saving mutual funds without even checking how they are performing or how they will perform. Though they get tax exemption,most of the times they lose their invested amount.

It doesn't mean that all people have lost money by investing into tax saving mutual funds. Some people have made good profit out of it. But you need to have good understanding of what that fund contain and how well it can perform in the long run.

But some people are not very enthusiastic to go for tax saving mutual funds and these can consider FD as a better option as

• ·         It will provide guarantee to your invested amount
• ·         The amount can be used for tax exemption
• ·         You get good returns based on pre defined interest rate .

The FD to be done for 5 years to get tax exemption and if we invest for the first 5 years continuously, the same amount can be used till you retire. We will see how this can be achieved

The FD that is done in 1^st year will be matured after 5 years, that is starting of 6^th year and the same amount can be used to invest into FD for 6^th year.

The FD that is done on 2^nd year will be matured after 5 years, that is starting of 7^th year and the same can be used to invest into FD for 7^th year.

The FD that is done on 3^rd year will be matured after 5 years, that is starting of 8^th year and the same can be used to invest into FD for 8^th year.

The FD that is done on 4^th year will be matured after 5 years, that is starting of 9^th year and the same can be used to invest into FD for 9^th year.

The FD that is done on 5^th year will be matured after 5 years, that is starting of 10^th year and the same can be used to invest into FD for 10^th year.

The same can be repeated till you retire.

HAPPY SAVING!!!!!!!!!