This bank deposit scheme is popularly known as Bank Term Deposit scheme, 2006, which came into force on the date of submission of the official gadget. Under bank deposit scheme, the term “assessee” means, any individual or a Hindu undivided family; Act refers to the income tax Act, 1961 and form means any form prescribed from the schedule banks.
Bank term notification scheme is made by the government in 2006, according to which an individual can deposit an amount of Rs. 1,50,000 each year with any scheduled bank and can demand tax exemption on the same under section 80C. Amount deposited should be a minimum of Rs. 100 or its multiples.
How to Deposit in Bank Term Deposit Scheme
To apply for bank term deposit scheme, the assessee should walk in to the respective branch of the bank and fill up the prescribed form. The bank after accepting the deposit, issues the investor a receipt. The scheme can be transferred from one branch to the other of the same schedule bank, if the investor, applies for the same. However, it cannot be transferred between two schedule banks.
Types of Bank Term Deposit Scheme
Bank term deposits are of two type, single holder time deposit scheme and joint holder type deposit scheme. Single holder type, are issued to an individual for himself or to the “karta” of the Hindu undivided family. For joint holder type, it is issued either to the two adults jointly or to one adult and a minor, payment in this case is made to the holder or to the survivor.
Single and joint holders may furnish the necessary details for keeping nominee or nominees at the time of filling up the forms. The nominees will subject to receive the principle and the interest in case of death of the single holder or the joint holders. If nominees are more than one than the amount received shall be appropriated among them. If nomination is not done at the time of issue, then it can be done after its issue but before its maturity by putting an application in the prescribed form before the officer in charge of the respective bank. No nomination is accepted in case of minors. Where a case arises such that the holder dies without any nominee for the deposit, in that case the legal heirs will be entitled to get the sum due on term deposit. The term deposit can be utilized as a security to obtain a loan from any schedule banks.
The rate of interest on term deposits, vary from time to time, as fixed by the individual schedule banks. The interest can be paid either as a lump sum amount at the time of maturity, where it bears a yearly rate of interest or even it can be paid to the holder on a monthly or a quarterly basis, as specified in the scheme. Term deposits get matured after a minimum of 5 years. Interest under the respective act is liable to tax, on the basis of the annual receipt, which depends on the accounting method followed by the assessee. The tax on such interest is however, deducted under the provisions of section 194A or 195 of the Act.
Income Tax Benefits of Bank Term Deposit Scheme
The amount of Rs. 1,50,000 is allowable as a deduction under section 80C along with LIC/NSC/PPF/ULIP. The benefit is available to the first holder if having joint name on Bank term deposit scheme account.