A tax-saving fixed deposit is a 5-year term deposit that allows individuals to claim deductions of up to ₹1.5 lakh under Section 80C of the Income-tax Act. These FDs are offered by banks and post offices and come with certain restrictions. The table summarises the key features of tax-saving FDs.
| Feature | Description |
|---|---|
| Lock-in period | 5 years; premature withdrawal is not permitted |
| Maximum deductible amount | ₹1.5 lakh per financial year under Section 80C |
| Interest payout | Can be cumulative (paid at maturity) or non-cumulative (paid quarterly/annually) |
| Taxation of interest | Interest income is fully taxable and subject to TDS |
| Eligibility | Resident individuals and Hindu Undivided Families (HUFs) |
Tax-saving FDs are attractive to investors who want assured returns along with tax benefits. However, they are less liquid because premature withdrawals are prohibited. Always compare interest rates across banks before choosing a tax-saving FD.
