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Not all bank deposits qualify for relief u/s 80C

Please refer to the Tax Forum in The Hindu dated August 7, 2006 on the new scheme for fixed deposits under Section 80C. Since this scheme was announced in the 2006-07 budget in March 2006, but the Notification No. 203 of 2006 was issued only on July 28, a doubt arises if a deposit made in public sector bank during the intervening period (April 1 to July 28) will also be eligible for deduction subject to the conditions laid down therein.

Not all deposits in scheduled banks qualify for deduction under Sec. 80C. Only term deposits for a minimum period of five years under the Bank Term Deposit Scheme, 2006, vide Notification No. S.O. 1220(E) dated July 28, 2006 (2006) 284 ITR (St.) 73 qualify for deduction under Sec. 80C along with other deductions available up to the maximum of Rs. 1 lakh under Sec. 80C. The deposit receipt would indicate the acceptance of the term deposit under the scheme, so that the reader's expectation that his earlier deposit should be covered under Sec. 80C is not correct.

S. Rajaratnam

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