Business : tax saving in fd and insurance tax relief

Are : tax saving in fd and insurance tax relief you tired of paying hefty taxes every year? Do you want to reduce your tax burden and save some money for yourself? Well, we have good news for you! By using a combination of Fixed Deposits (FDs) and insurance policies, you can not only secure your savings but also lower your tax liability. In this article, we will guide you through the tips and tricks on how to make the most out of these financial instruments and reduce your tax burden. So sit tight as we take a deep dive into the world of FDs and insurance policies.

What are FDs?

Fixed Deposits (FDs) are one of the most popular investment options in India. They are low-risk investments that offer guaranteed returns over a fixed period of time. FDs can be opened with banks, non-banking financial companies, and post offices.

One of the biggest advantages of investing in an FD is that they offer higher interest rates than regular savings accounts. The interest rate on your FD is predetermined at the time you open it, which means there are no surprises later on.

Another advantage of investing in an FD is that they have flexible tenures ranging from 7 days to 10 years. This means you can choose a tenure based on your financial goals and requirements.

FDs also come with a premature withdrawal facility where you can withdraw your money before maturity if needed; however, this may lead to penalties or reduced interest rates.

Investing in an FD is a safe option for those looking for stable returns without taking risks.

What are insurance policies?

Insurance policies are a form of risk management that provides financial protection against unexpected events or losses. By paying monthly or yearly premiums, policyholders can be covered for a variety of situations such as accidents, illnesses, natural disasters and even death.

There are many types of insurance policies available depending on the individual’s needs and circumstances. For example, life insurance can provide financial support for loved ones in case of the policyholder’s untimely death while health insurance can cover medical expenses incurred due to illness or injury.

Insurance policies often come with different features such as deductibles and limits which determine how much money will be paid out in case of a claim. Additionally, some policies may offer additional benefits such as cash value accumulation or investment options.

Insurance policies serve as an important tool for managing risks and protecting oneself from unforeseen circumstances. It is important to carefully consider one’s needs when choosing an insurance policy to ensure that the coverage provided is adequate and affordable.

How do FDs and insurance policies work together?

Fixed deposits (FDs) and insurance policies are two of the most popular investment options in India. While they serve different purposes, both can work together to help you reduce your tax burden.

FDs are a type of savings account where you deposit a lump sum amount for a fixed period of time with a predetermined interest rate. Insurance policies, on the other hand, provide financial protection against unforeseen events such as accidents, illnesses or death.

One way FDs and insurance policies work together is through tax saving investments. By investing in an FD and paying premiums towards an insurance policy, you can claim deductions under Section 80C of the Income Tax Act up to Rs 1.5 lakh per annum.

Another way these two instruments complement each other is by using them as collateral for loans. Banks often offer lower interest rates on loans secured against FDs or life insurance policies because they consider them less risky than unsecured loans.

Furthermore, some life insurance plans also come with built-in savings components like endowment plans which offer returns similar to those offered by traditional FDs but with added benefits like life coverage and bonuses.

Combining FDs and insurance policies helps not only in reducing your tax liability but also offers additional benefits such as financial security and liquidity while keeping risks at bay.

How can you reduce your tax burden with FDs and insurance policies?

Investing in Fixed Deposits (FDs) and insurance policies can help you reduce your tax burden. FDs offer guaranteed returns that are not linked to market fluctuations, making them a reliable investment option for risk-averse individuals. Moreover, the interest earned on FDs is taxable as per individual income tax slabs. However, investing in Tax-Saving FDs can help you claim deductions under Section 80C of the Income Tax Act.

Alternatively, investing in insurance policies such as Unit Linked Insurance Plans (ULIPs), Endowment plans or Term plans can also help you save taxes. ULIPs provide dual benefits of life coverage and investment opportunities while endowment plans offer maturity benefits with assured returns at the end of the policy term. On the other hand, term plans offer pure protection without any survival/maturity benefit.

Premium paid towards these insurance policies is eligible for deduction up to Rs 1.5 lakh under Section 80C of the Income Tax Act. Additionally, claims received from ULIP or endowment plan are exempted from taxation under Section 10(10D). Therefore choosing an appropriate mix between FD and insurance investments could be beneficial based on an individual’s needs & goals.

It is important to note that while both fixed deposits and insurance policies offer tax-saving options, they come with their own set of terms & conditions which should be carefully considered before investing into one or more products depending on your financial objectives & preferences


Reducing your tax burden with FDs and insurance policies is a smart financial move that requires careful planning and research. Both products have their unique benefits and can work together to help you achieve your financial goals while lowering your tax liability.

By investing in fixed deposits with longer tenures and opting for life insurance policies with higher coverage, you can not only reduce your taxable income but also secure yourself financially against any unforeseen circumstances.

However, before making any investments or purchasing an insurance policy, it’s essential to consult a financial advisor who can guide you through the process based on your individual needs and requirements.

Incorporating these tips and tricks into your overall financial plan will not only lower your tax burden but also provide peace of mind knowing that you’re securing yours as well : tax saving in fd and insurance tax relief as your family’s future.

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