Bank term deposits have been included in the long list of saving instruments that are eligible for income tax exemption.
However, the investment in these term deposits by an individual or Hindu Undivided Family, along with investments in the other saving schemes, will be subject to overall ceiling of Rs one lakh for the purpose of tax benefit under section 80C, an official release said on Monday. In the case of joint deposits, only the first holder would be eligible for the tax benefit.
Finance Ministry's notification also stipulates a five-year lock in period for deposits on which individuals propose to avail tax benefits. While no deposit can be encashed before the five-year term expires, the banks would fix the interest on such deposits from time to time.