A tax-saving FD (Fixed Deposit) is a 5-year bank deposit that qualifies for deduction under Section 80C up to ₹1.5 lakh per year. Unlike PPF, the interest earned is taxable.
Key Features
- Lock-in: 5 years (no premature withdrawal)
- Tax benefit: Deduction up to ₹1.5 lakh under 80C
- Returns: Interest is added to income and taxed at slab rate
- Risk: Zero—capital is guaranteed
Tax-Saving FD vs Other 80C Options
| Option | Lock-in | Tax on returns | Equity |
|---|---|---|---|
| Tax-saving FD | 5 years | Taxable | No |
| ELSS | 3 years | LTCG after ₹1L | Yes |
| PPF | 15 years | Tax-free | No |
| NPS | Until 60 | Partially tax-free | Yes |
For FIRE investors seeking equity growth, ELSS or NPS often beat tax-saving FD. FD suits conservative investors who want guaranteed returns and have exhausted other 80C options.