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K.R. Srivats

New Delhi, Dec 17 The Finance Ministry has relaxed encashment norms for joint holder type term deposits under the tax-saving ‘bank term deposit scheme’ framed last year. This scheme was developed to encourage flow of long-term deposits into the banking system.

In the event of the death of the first holder, the Central Board of Direct Taxes (CBDT) has now allowed the joint holder to encash the term deposit before its maturity. Hitherto, the scheme did not permit any encashment of term deposits before the expiry of five years.

A joint holder could encash the deposit before maturity by making an application to the branch manager of the bank concerned and supporting it with proof of death of the first holder, a CBDT official said.

Term deposits made under the ‘bank term deposit scheme’ of 2006 are eligible for deduction up to a limit of Rs 1 lakh in a year under Section 80 C of the Income-Tax Act. Only term deposits with a minimum period of five years could qualify for this tax deduction. In the case of joint account, the 80C deduction was available only to the first holder of the deposit.

“A term deposit made under the scheme can now be encashed by the joint holder before the expiry of the fifth year in the event of the death of the first holder. This facility was not available earlier. The scheme has been amended to provide for this new benefit,” the official said.

More Stories on : Fixed Deposits | Financial Policy | Income Tax

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