If you want to take advantage of tax saving with safe investment, then Post Office 5-Year Time Deposit (TD) and Tax-Saving Fixed Deposit (FD) of banks can prove to be good options for you, but these two schemes are different in many ways, such as return, liquidity, taxation, and interest rate.

If you want to take advantage of tax saving with safe investment, then Post Office 5-Year Time Deposit (TD) and Tax-Saving Fixed Deposit (FD) of banks can prove to be good options for you, but these two schemes are different in many ways, such as return, liquidity, taxation and interest rate. Let us know which option will be better for you and in which you will get more benefit.

Post Office 5-Year Time Deposit (TD) Account

This is a savings scheme launched by the government, which offers a fixed interest rate of 7.5% (for January-March 2025). However, once you invest in it, the interest rate remains constant for the entire tenure.

Know the tax benefits too

This scheme is eligible for tax deduction under Section 80C. Also, TDS is applicable on the interest earned in this scheme and you have to include it in the tax return under "Income from other sources". In this, a deduction is available under 80C on investment of at least ₹ 1000 and a maximum of ₹ 1.5 lakh. In this, tax exemption is available only on 5-year deposits. If you make deposits for a period of 1, 2 and 3 years, this facility is not available.

Tax-saving FDs

Tax saving FDs offered by banks have a lock-in period of 5 years. However, interest rates may vary from bank to bank, like SBI offers 6.5 percent interest, while HDFC and ICICI offer 7 percent interest. Most banks offer an additional 0.5 percent interest to senior citizens.

Know the tax benefits too

For general citizens, if the interest is more than ₹40,000, 10% TDS is deducted. If PAN is not provided, 20% TDS will be applicable. If your total income is less than the taxable limit, then tax can be avoided by submitting Form 15G/15H.