Only risk-averse investors should opt for tax-saver fixed deposits

PPF, ELSS and SCSS are more attractive options that will also get you Section 80C benefit

• For conservative investors, one option that combines safety with tax benefit is the five-year tax-saving fixed deposit
• It comes with a lock-in of five years. Deduction of up to Rs 150,000 is available under Section 80 C
• However, do give thought to whether you are being compensated adequately for allowing your money to be locked in for five years
• SBI’s one-year fixed deposit rate is 6.80 per cent currently while its tax-saving FD offers 6.85 per cent, a meagre 5 basis points more. Private sector banks and small finance banks offer higher rates (see table)
• Investors whose risk appetite permits will be much better off investing in ELSS (tax saver) funds, which have given a category average return of about 16.5 per cent over the past five years
• For those who have a long investment horizon, the Public Provident Fund (PPF), which offers a return of 8 per cent compounded annually (which is tax-free) is another attractive option
• Senior citizens looking to generate a regular income may opt for Senior Citizens Savings Scheme (SCSS), which is also eligible for Section 80C and pays an interest rate of 8.7 per cent