Five-Year Tax-Saving Fixed Deposit: Interest Rates, Investment Limits And Other Key Details

FD interest rates: Investment in the five-year income tax-saving FD is eligible for the 80C tax benefits

Section 80C of the Income Tax Act offers deduction of up to Rs. 1.5 lakh from taxable income in a year. A variety of investments, such as premium paid towards life insurance and contribution to a Public Provident Fund (PPF) Account, are eligible for the income tax benefit offered under Section 80C. A special type of term deposit or fixed deposit (FD) is also eligible for deduction in taxable income under Section 80C. A five-year time-deposit small savings scheme account in the post office is also eligible for Section 80C benefits. (Also read: You need to furnish these additional details in new income tax return forms)

Here are five important things to know about the five-year term deposit or fixed deposit (FD) accounts which offer income tax benefits:

Income tax-saving FD: Interest rates

Major banks today - from state-run State Bank of India (SBI) to private sector peers HDFC Bank and ICICI Bank - pay the following interest rates on the five-year, tax-saving fixed deposits, according to their websites.

Bank	Interest rate
	General public	Senior citizen
State Bank of India	6.85%	7.35%
Punjab National Bank	6.25%	6.75%
India Post (five-year TD small savings scheme)	7.80%	7.80%
HDFC Bank	7.25%	7.75%
ICICI Bank	7.25%	7.75%
(Source: Bank, India Post websites)

Income tax-saving FD: Premature withdrawal

Also known as a tax-saving fixed deposit or tax-saving FD, this account allows a minimum maturity period of five years and a maximum of 10 years. That means the deposit is locked-in for a period of five years.

Lenders do not allow a premature withdrawal from this type of FD accounts before completion of the lock-in period of five years.

Income tax-saving FD: Lock-in period

Investment in these fixed deposits - tax-saving FDs - is locked in for a period of five years from the date of issue, which means the investor cannot withdraw money during this period in order to utilize the tax benefit.

Income tax-saving FD: Investment limit

A maximum investment of Rs. 1.5 lakh in a financial year is allowed in income tax-saver five-year fixed deposit.