A tax-saving fixed deposit is, as the name suggests, a fixed deposit that can help an investor save tax by reducing his/her taxable income.
A tax-saving fixed deposit falls under Section 80C’s list of instruments that can give an individual tax deduction up to Rs. 1.5 lakh. This means an investor can claim a deduction of a maximum Rs. 1.5 lakh by investing in various tax-saving instruments and one such instrument is the tax-saving fixed deposit.
A tax-saving fixed deposit has a lock-in period of five years and the interest earned on it is taxable. Usual interest ranges from 5.5% – 7.75%