This article on INVESTMENT IN FIXED DEPOSIT – AN INCOME TAX DEDUCTION FOR AAM AADMI is written by Ankit Gupta (Author) who is a founder member of www.eMunshe.com has contributed various articles for Dainik Jagran & India TV.

Many of the assessees and their advisors which I came across have doubts regarding the claim for deduction under section 80C on Investments in term deposits with scheduled bank regarding their statutory requirements to be fulfilled for claiming such deductions. So, I decided to bring a comprehensive article on this matter.

AUTHOR’S EXPLANATION ON BARE ACT

Where an Individual or HUF has deposited or paid any amount as Fixed Deposit in any Scheduled Bank for a term not less than 5 Years in any previous year subject to Scheme framed by Central Government in this behalf then such Individual or HUF is eligible to claim deduction to the extent of INR 1,00, 000 (INR 1,50,000 from AY 2015-16 onwards) under section 80C for assessment year relevant to the previous year .

Note– The amount of deduction has to be claimed by the assessee by keeping in mind the provision of Section 80CCC.

BANK TERM DEPOSIT SCHEME 2006

• Where an assessee being Individual or Hindu Undivided family has made an Investment in term deposit of any Scheduled Bank for a fixed period of not less than five years for an amount not more less than hundred rupees is eligible to claim deduction on Total income under section 80C at an amount lower of amount invested or One Lakh (Which is One Lakh Fifty Thousand from Assessment Year 2015-2016).
• The Term Deposit can be made in the name of  Single Holder or Joint Holder.
• The single holder or Joint Holder may nominate any person who in the event of death of the single holder or both the joint holders shall become entitled to the deposit and to the payment due thereon; Nomination shall be made before the expiry of term deposit in the prescribed form and manner.
• A term deposit may be transferred from one branch of the scheduled bank from which it has been issued to any other branch of the said bank.
• Provided that no term deposit shall be transferred from one scheduled bank to another scheduled bank.
• The term deposit shall not be pledged to secure loan or as security to any other asset.
• If a term deposit receipt is lost, stolen, destroyed, mutilated or defaced, the person entitled to may apply for the issue of a duplicate receipt to the branch of the scheduled bank from where the receipt was issued earlier.
• If the officer-in-charge of the bank is satisfied with the loss, theft, destruction, mutilation or defacement of the certificate, he shall issue a duplicate receipt on the applicant furnishing an indemnity bond in the prescribed form with one or more approved sureties or with a bank guarantee.
• Such duplicate receipt issued shall be treated as the original receipt for all the purposes of this scheme except that it shall not be encashable at a branch of the bank other than the branch at which such receipt is issued without previous verification.
• The maturity period of a term deposit receipt of any denomination shall be five years commencing from the date of the receipt.
• The interest may be paid either in lump-sum at the time of maturity or it may be paid every quarter or every month in accordance with the regulatory guidelines for payment of interest on the term deposit.
• If a holder of a term deposit dies and there is no nomination in force at the time of his death, then the manager of the branch of the bank from where the term deposit was issued, shall pay the sum to the legal heirs of the assessee so deceased.
• Interest on these term deposits shall be liable to tax under the Act, on the basis of annual accrual or receipt, depending upon the method of accounting followed by the assessee.
• The tax on such interest shall be deducted in accordance with the provisions of section 194A or section 195 of the Act.
• Where the Central Government is satisfied that the operation of any of the provisions of this scheme causes undue hardship to the assessee, it may, by order, for reasons to be recorded in writing, relax the requirements of that provision in a manner not inconsistent with the provisions of the Act.