If you still haven't done any tax-saving investment and are looking for a safe and easy bet for saving tax then a tax-saving fixed deposit could be a solution.

Tax-saving FD is one of the tax saving instruments where one can invest to save tax under section 80C of the Income Tax Act. One can invest in this FD easily by visiting a bank, filling the form and giving a cheque. In fact, if you place the FD in the same bank branch on which you are drawing the cheque then the transfer of funds can happen quickly and the investment can be done within a few hours.

As the transfer of funds would be between accounts in the same bank branch, it can be done within say, 20 minutes (depending on bank staff efficiency) and you could walk out with your FD receipt within half an hour. Of course, this investment can be done online also provided you have access to net banking and are comfortable using it.

Tax saving FD being a debt investment is safer than equity-based tax saving avenues such as ELSS schemes. Returns on a tax saving FD are also guaranteed contractually by the lender (the bank or post office) and fixed for the term of the FD.

Among debt investments offering the section 80C tax benefit, this is one with the smallest lock in period of 5 years and offering a periodic interest pay out option. Five-year NSCs also offer Section 80C tax benefit but are cumulative instruments and do not offer periodic interest pay outs. Consequently, among debt investments tax saving FDs are a comparatively more liquid, safe and easy option.

Currently, banks are offering the interest rate for the general public ranging from 6.75% to 6.90%, whereas the Post office tax saving FD is currently offering an interest rate of 7.8%.

Currently, all the post office savings schemes are offering higher interest rate than the bank FDs but they are due for review from 1.4.2017 by the government.

Here are the few points to note while making the investment in Tax- Saving FD:

1 . Only Individuals and HUFs can invest in tax saving fixed deposit(FD) scheme.
2. The FD can be placed with a minimum amount which varies from bank to bank. The maximum amount is of course Rs 1.5 lakh in a financial year which is the ceiling for tax saving investment under section 80C of the Income Tax Act.

3. These deposits have a lock-in period of 5 years. Premature withdrawals and loan against these FD's are not allowed.
4. A person can invest in these FD's through any public or private sector bank except for co-operative and rural banks.
5. Investment in Post Office Time Deposit of 5 years also qualifies for deduction under section 80 (C) of the Income Tax Act, 1961.
6. Post Office Fixed deposit can be transferred from one Post office to another.
7 . One can hold these FD's either in 'Single' or 'Joint' mode of holding. In the case the mode of holding is joint, the tax benefit is available only to the first holder.
8. The interest earned is taxable as per the investor's tax bracket and therefore, TDS is applicable. The interest on deposits is payable on either monthly/quarterly basis or can be reinvested.
9. Nomination facility is available for these FDs.
10. Most banks offer slightly higher interest rates on FDs to senior citizens (as compared to the interest rate offered on the same FD to a non-senior citizen). This interest rate differential exists for tax saving FDs also. However, the post office does not offer higher interest rates to senior citizens.