[India] Tax Saving Fixed Deposit: A Reality Check

Tax Saving Fixed Deposit, A good Investment ?

Fixed Deposit is one of the safest investment avenues for an investor. Tax Saving FD is similar to the normal FD except that these FD has a compulsory lock-in period of 5 Years.  That is to say that the investor cannot break this FD at any point of time before the tenure of the Deposit. While the general FD can be withdrawn before the maturity period but with penalty charges. Further, Tax Saving FD cannot be used as collateral to take a loan. The investor can invest a maximum amount of INR 100,000. On the front of Interest rate on FD, Tax saving provides a little more than normal FDs.

Save Tax - Investment Options


Tax Saving Investment is currently the best option to invest after Tax Free Bonds. Currently the Interest rates are at its peak. The Repo rate is 8.50% which a month ago was 9.0%. The 10 Year as well as 5 year G-sec Rate for GOI is hovering around 8.27%. The best Tax Saving FD rate by a private bank is 9.25% (9.75% for Senior Citizen). So, it will be prudent to say it’s the right time to lock yourself in a Tax Free FD before these rates fall which is quite imminent in near future.  This Investment will give you a post tax return of 9.25-9.75% and more over it’s the safest investment option.

This is a guest post by Mr. Mitesh Agarwal, BBA & MBA (Finance). Currently working as Financial Analyst with a leading firm in Mumbai.

1 comment for “[India] Tax Saving Fixed Deposit: A Reality Check

  1. Karan Batra
    December 6, 2012 at 5:43 pm

    If someone invests in this type of tax saving Fixed Deposit, is there any way in case any person wants to withdraw the money in emergency..

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