BANK TERM DEPOSIT : A NEW TAX SAVING INCENTIVE

The Central Government has come out with the BANK TERM DEPOSIT SCHEME, 2006 under section 80 C. The salient features of the same are as under :

• Investment in Term Deposit has to be with a Schedule Bank
• The investment shall not exceed Rs. 1 Lac.
• Term Deposit can be in joint names, however in case of joint holder, first holder would be entitled to deduction benefit u/s 80C.
• No term deposit shall be encashed before the expiry of five years from the date of its receipt.
• However, in the event of the death of the holder of a term deposit in respect of which a nomination is in force, the nominee or nominees shall be entitled at any time before or after the maturity of the term deposit to encash the term deposit.
• Term Deposit can be transferred from one branch to another branch.
• Term deposit shall not be pledged to secure loan or as security to any other asset.
• Only an individual or a HUF can invest.
• The rate of interest on the term deposit shall be in accordance with the rate fixed by the scheduled bank from time to time.
• Interest on these term deposits shall be liable to tax under the IT Act.
• Available under Shatabdi deposit scheme upto September 2006.
• Available under Shatabdi deposit scheme.