Post Office Term Deposit Vs Tax-Saver FDs: Interest rates compared – which one should you opt for? | Business – Times of India

by The Technical Blogs


POTD vs bank tax-saving FDs: Every quarter, the government updates the interest rates of small savings schemes. For the April-June 2024 period, the rates remain unchanged for all 10 schemes, including the 5-year Post Office Time Deposit (POTD). Additionally, many banks provide tax-saving benefits on 5-year fixed deposits.
As per an ET, here’s how the 5-year Post Office Time Deposit (POTD) and tax-saving fixed deposits offered by major banks compare:

Tax-saving fixed deposits

A tax-saving fixed deposit lets you deposit up to Rs 1.5 lakh and earns quarterly compound interest.Interest is added to your account at the end of each quarter. Investments in tax-saving FDs qualify for a tax deduction under Section 80C of the Income Tax Act, 1961, up to Rs. 1.5 lakh. These FDs have a 5-year tenure and cannot be withdrawn prematurely like regular FDs.
Interest rates vary among different banks. For general residents, State Bank of India (SBI) offers an interest rate of 6.50%. HDFC Bank and ICICI Bank provide interest rates of 7% for tax-saving FDs. DCB Bank offers a 7.75% interest rate, while IndusInd Bank offers 7.25% for tax-saving FDs.
ALSO READ | Not all post office savings schemes entail Section 80C tax benefits! Here’s what you need to know

Post Office Time Deposit (POTD)

Post Office Time Deposit (POTD), with a five-year duration, also offers a tax benefit. Under Section 80C of the Income-tax Act of 1961, you can claim a tax deduction of up to Rs 1.5 lakh for investing in a 5-year Post Office Time Deposit.
For the period of April-June 2024, the interest rate on POTD is 7.5%. The minimum investment required is Rs 1000, with subsequent investments allowed in multiples of Rs 100.
Banks offering best rate on tax saving FD

Bank Name Tax Saving
DCB Bank 7.4
Indusind Bank 7.25
Yes Bank 7.25
RBL Bank 7.1
HDFC Bank 7

Tax benefit of Section 80C

Section 80C allows taxpayers to reduce their taxable income by investing in certain instruments or incurring qualifying expenses, thereby saving money on taxes. This benefit is applicable only for taxpayers who choose the old tax regime. It allows an annual deduction of up to Rs 1.5 lakh from the taxpayer’s gross income. Individuals investing in 5-year Post Office Time Deposits are eligible for this tax benefit. However, it’s important to note that the tax benefit is only available if the deposit is held until the end of the tenure, which is 5 years.


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