Post Office offers 7.5% fixed interest rate

Both Tax-Saving Fixed Deposits (FDs) from banks and the Post Office 5-Year Time Deposit are good choices for secure investments. They help people save on taxes under Section 80C of the Income Tax Act. However, they have different interest rates and rules. The Post Office 5-Year Term Deposit currently offers a fixed interest rate of 7.5% for the first quarter of 2025. This rate stays the same for the entire five years once you deposit your money. The minimum investment is Rs 1,000, and you can claim a tax deduction of up to Rs 1.5 lakh. However, only 5-year deposits qualify for tax benefits; shorter terms do not. Tax-saving FDs from banks also have a five-year lock-in period. Interest rates vary by bank. For example, State Bank of India offers 6.50%, while HDFC Bank and ICICI Bank offer around 7%. Some banks even provide higher rates. Senior citizens may receive an extra interest rate boost, usually around 0.5% more than regular rates. Tax on interest is also a factor. For general citizens, if the interest earned exceeds Rs 40,000 in a year, a 10% Tax Deducted at Source (TDS) applies. For senior citizens, this threshold is Rs 50,000. If no Permanent Account Number (PAN) is submitted, TDS may be deducted at 20%. Overall, the choice between the two depends on individual preferences for interest rates and tax benefits.