Are bank fixed deposits for five years now eligible for tax deduction under section 80C? Which is deductible ? the principal or the interest? Is there any benefit for subsequent years? Is it only in case of nationalised banks? Please give details.

Tapan Guha Roy, Calcutta

k fixed deposits for five years and above are now eligible for tax deduction under section 80C. In a recent meeting with bankers, finance minister P. Chidambaram had clarified that the finance ministry approves of the existing format of these term deposits. However, fixed deposits with scheduled commercial banks are eligible for the tax deduction. This includes public as well as private sector banks. Regarding taxes, bank fixed deposits will be treated in the same way as National Savings Certificates ? accrued annual interest will be considered as reinvestment and hence will be eligible for tax deduction. The principal amount will get the tax benefit only once.

Now or later

I’m a senior citizen holding a PAN card and have been filing my income tax returns regularly. My PPF account will mature on May 31 this year and I don’t want to extend it. If I deposit Rs 70,000 as subscription by May 31, can I claim tax deduction on it under section 80C?

T.K. Kar, Calcutta

the public provident fund scheme, the 15-year lock-in period is calculated on the financial year basis. However, you will be able to claim tax deduction on your final subscription in the assessment year 2007-08 if the investment is made after March. If it is made before March 2005, you can claim the deduction in 2005-06 financial year.

Long wait

I’m a railway employee earning Rs 2.1 lakh per year. During financial year 2005-06, the Railways has deducted Rs 2,645 excess tax from my salary. I filed my income tax returns in January and claimed the refund for the excess deduction. Still I have got no response. What should I do now?

S.C. Pradhan, Singhbhum

You can approach the assessment officer of the income tax circle where you have been filing your tax returns.

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