Tax Savings FDs and the 5-Year Post Office Time Deposit offer both security and tax benefits under section 80C of the Income Tax Act.
Nidhi | Mar 24, 2025 |
Tax Savings Bank FDs Vs. 5-Year Post Office Time Deposit: Which Scheme Gives the Higher Interest?
Many individuals prefer Fixed Deposits (FDs) because they are safe and offer guaranteed returns. Among them, Tax Savings FDs and the 5-Year Post Office Time Deposit offer both security and tax benefits under section 80C of the Income Tax Act. Both banks and post offices offer these investment options. However, they vary in aspects such as returns, accessibility, tax benefits, and eligibility criteria.
Tax Savings FD comes with a five-year lock-in period and one cannot withdraw the money before the mandatory 5-year tenure. The interest rates earned under this scheme vary from bank to bank.
| Bank Name | Interest Rate (%) |
| Axis Bank | 7.00% |
| IndusInd Bank | 7.25% |
| Yes Bank | 7.25% |
| DCB Bank | 7.40% |
| Federal Bank | 7.10% |
| HDFC Bank | 7.00% |
| Bank of Baroda | 6.80% |
| Canara Bank | 6.70% |
| SBI (State Bank of India) | 6.50% |
| RBL Bank | 7.10% |
| IDFC FIRST Bank | 6.75% |
| Kotak Mahindra Bank | 6.20% |
The interest earned under this scheme is subject to TDS at a rate of 10% if the interest is above Rs. 40,000 for the general citizens. If PAN is not provided, the bank will deduct TDS at a rate of 20%. However, investors whose total income is below the taxable limit can submit Form 15G/15H to prevent TDS deduction.
The interest rates earned under this option for senior citizens are usually higher than the regular rates by 0.5%. This makes it an ideal investment option for senior citizens, as it gives financial security to them in their old age days. The interest earned under this scheme is subject to TDS at 10% if it is above Rs. 50,000 in a financial year. If PAN is not submitted, the bank will deduct TDS at 20%. The Investors can submit Form 15G/15H to avoid a TDS deduction if their total income is less than the taxable limit.
Bank Interest Rates on Tax Saving FDs for Senior Citizens
| Bank Name | Interest Rate (%) |
| Yes Bank | 8.00% |
| DCB Bank | 7.90% |
| Axis Bank | 7.75% |
| IndusInd Bank | 7.75% |
| Federal Bank | 7.60% |
| RBL Bank | 7.60% |
| HDFC Bank FD | 7.50% |
| ICICI Bank | 7.50% |
| Bandhan Bank | 7.50% |
The Post Office 5-Year Term Deposit (TD) Account is a government-supported saving scheme that offers fixed interest rates along with tax benefits. It gives an interest rate of 7.5% for the first quarter of 2025 i.e., January to March. The government updates the interest rates for the post office’s small savings scheme every quarter. The interest rate that is applicable at the time of opening the deposit will stay the same throughout the entire investment period.
The minimum amount for investment is Rs.1000. Individuals investing in Post Office 5-Year Term Deposit can avail tax deduction upto Rs. 1.5 lakh under Section 80C of the Income Tax Act, 1961.
In this scheme, TDS is deducted and the interest you earn is not tax-free. You must report the interest income under “Income from Other Sources” and pay the tax as per your applicable income tax rate.
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