If you want to avail tax savings along 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 both these schemes differ in many respects like returns, liquidity, taxation, and interest rates. Let us know which option will be better for you and which one will benefit you more. Do you also want to know which option is better for saving tax? So let’s know.
Post Office 5-Year Time Deposit Account
This is a savings scheme launched by the government, which gives 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 period.
Read More:- Big Gratuity Rule Update: Get Paid Even Before 5 Years, Know
Read More:- How to Turn Your Old ₹5 Note into ₹4 Lakh – Sell It Online Today
Also, know the tax benefits
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, deduction under 80C is available on investment of a minimum ₹1000 and a maximum ₹1.5 lakh. Tax exemption is available only on 5-year deposits. If you deposit for a period of 1, 2, or 3 years, this facility is not available.
5-year lock-in period for banks
Tax-saving FDs offered by banks have a lock-in period of 5 years. However, interest rates may vary according to different banks, such as SBI gives 6.5 percent interest, while HDFC and ICICI will give you 7 percent interest. At the same time, most banks give additional interest of about 0.5 percent to senior citizens.
Know TDS rules
For general citizens, if the interest exceeds ₹40,000, 10% TDS is deducted. At the same time, if PAN is not given, 20% TDS will be applicable. If your total income is less than the taxable limit, tax can be saved by submitting Form 15G/15H.
Both Post Office 5-Year TD and Tax Saving FD of banks are good options for safe investment and tax savings. However, depending on the interest rate, liquidity and other factors, you should choose the most suitable option as per your needs and financial goals. If you want fixed returns and government protection, then Post Office TD is a good option. If you want a little more interest and want to maintain a relationship with the bank, then Tax Saving FD may be better.
Read More:- Govt’s Solar Panel Scheme: Get Free Power for 20 Years, Apply Now
Read More:- Earn Up to 8.2% Interest, Top Post Office Savings Plans You Must Check