Tax Saving FD vs. Post Office Time Deposit: Comparing Returns and Benefits

When it comes to saving taxes while earning returns on your investments, Tax Saving FDs and Post Office Time Deposits (POTD) are popular choices.

Let’s delve into a detailed comparison to help you make an informed decision:

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Tax Saving FD:

Tax Benefit: Allows tax savings under Section 80C of the Income Tax Act, 1961, with a maximum deduction of Rs 1.50 lakh.

Lock-in Period: Requires a lock-in period of 5 years, during which premature withdrawal is not permitted.

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Interest Rates: Offered by banks range from 5.5% to 7.75%.

Example Interest Rates:

State Bank of India (SBI): 6.50%

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HDFC Bank and ICICI Bank: 7%

DCB Bank: 7.75%

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IndusInd Bank: 7.25%

Withdrawal Restrictions: No withdrawal allowed before the lock-in period.


Post Office Time Deposit (POTD):

Tax Benefit: Offers tax benefits under Section 80C of the Income Tax Act, 1961.

Deposit Options: Available for one, two, three, or five years.


Premature Withdrawal: Allows withdrawal after six months from the deposit date, with a penalty.

Interest Rate: Fixed at 7.5% for the April-June 2024 quarter.

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Investment Amount: Minimum investment of Rs 1,000, with multiples of Rs 100.


Tax Benefit: Both Tax Saving FDs and POTD offer tax benefits under Section 80C.

Interest Rates: While Tax Saving FDs offer variable interest rates ranging from 5.5% to 7.75%, POTD provides a fixed interest rate of 7.5% for the specified quarter.

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Flexibility: POTD allows premature withdrawal with a penalty, providing more flexibility compared to Tax Saving FDs, which have a strict lock-in period.

Investment Options: POTD offers flexibility in choosing deposit durations, ranging from one to five years, whereas Tax Saving FDs typically have a fixed 5-year lock-in period.


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