Fixed deposits (FDs) remain a popular investment choice for investors seeking stable and predictable returns. As of May 2026, major banks in India are offering interest rates of up to 7% for general depositors, with senior citizens usually receiving an interest of additional 50 basis points. With assured returns and low risk, FDs continue to appeal those who prioritise capital safety over market-linked investments such as equities and mutual funds.
Tax-saving fixed deposits, on the other hand, are a type of term deposit that allow investors to claim deductions of up to ₹1.5 lakh under Section 80C of the Income Tax Act. These FDs come with a mandatory lock-in period of five years, during which premature withdrawal is not permitted. While they offer assured returns similar to regular , the interest earned is fully taxable as per the investor’s income slab.
Compare interest rates of regular FDs vs tax-saving FDs
For regular FDs, public sector banks such as the (SBI) offers an interest rate of up to 6.05% for general investors and 7.05% for senior citizens on callable deposits up to ₹3 crore. Similarly, other major lenders such as Bank of Baroda, Punjab National Bank, HDFC Bank, IndusInd Bank and ICICI Bank are offering approximately 6.25%–7% for regular customers and 6.95%–7.5% for senior citizens on three-year deposits.
Meanwhile for tax-saving FDs, public sector banks such as SBI offers an interest rate of 6% for general depositors and 6.75%-6.90% for senior citizens. Other private lenders such as ICICI Bank, HDFC Bank, and Axis Bank offer interest rate ranging from 6.25%-6.60% for general customers, and between 6.75%-7.20% for senior citizens, according to information available on their websites.
Lock in-period of regular FDs vs tax-saving FDs
The lock-in period for a general FD is the chosen tenure during which your money stays invested to earn a fixed interest rate, typically ranging from 7 days to 10 years. While you can withdraw your money before the maturity date, you would be asked to pay a penalty, usually 0.5% to 1% on the interest rate.
However, some banks offer “non-callable” or “locked” FDs, which offer higher interest rates but do no allow premature withdrawal at all, except in exceptional circumstances like the death of the depositor.
Meanwhile, tax-saving fixed deposits (FDs) in India have a strict mandatory lock-in period of 5 years. During this time, the depositor cannot prematurely withdraw or close the FD.
Tax benefits comparison
Fixed Deposits (FDs) interest income are taxed at regular slab rates. Under Section 80TTB, senior citizens can claim a maximum deduction of Rs.50,000 on interest income from savings account or deposits under the old regime, according to ClearTax. Apart from that exemption, any interest income earned is shown under the head ‘Income From Other Sources’ in your Income Tax Return.
Tax-saving FDs are typically offered by banks with interest rates comparable to standard deposits, making them a popular option for individuals looking to combine fixed returns with tax benefits. Under Section 80C of the, an investor can claim a deduction of up to 1.5 lakhs per financial year if they invest in a tax-saving FD. However, investors much note that the interest earned on these FDs are taxable.
What investors should before choosing between FDs vs tax-saving FDs
Before investing in either of the FDs, investors must know that tax-saving fixed deposits do no allow loans or overdraft facilities during the mandatory five-year lock-in period, limiting liquidity, according to ClearTax.
In contrast, regular fixed deposits generally offer the option to avail loans or overdrafts against the deposit, providing easier access to funds without breaking the investment.