Tax-Saving (5-Year) Fixed Deposit

A tax-saving fixed deposit is a special bank FD with a five-year lock-in whose principal qualifies for deduction under Section 80C, up to the overall limit. It offers the safety and predictability of a regular FD with an added tax benefit.

Unlike ordinary FDs, it cannot be withdrawn prematurely or used as loan collateral during the lock-in. The interest earned is fully taxable and subject to TDS, so the post-tax return is lower than the headline rate, especially for those in higher tax brackets.

Compared with other 80C options like ELSS or PPF, the tax-saving FD suits very conservative savers who want guaranteed returns, but its taxable interest and lock-in make it less efficient than tax-free alternatives for many.