Premature withdrawal is not allowed in tax-saving fixed deposits.When it comes to tax-saving investments, fixed deposits continue to remain the preferred option by customers despite the cut in interest rates.

The tax-saving deposits are a good way to get the tax deduction under section 80C of the Income Tax (I-T) Act, 1961.

This is also known as a tax-saving fixed deposit (FD) and is a special type of fixed deposit as it allows a minimum maturity period of five years and a maximum of 10 years.

Premature withdrawal is not allowed in this type of FD account before the completion of the lock-in period of five years.

(Also Read: Section 80C Deductions: Your Guide To Popular Income Tax Benefits )Tax-saving fixed deposit schemes are offered by almost all top banks including the State Bank of India, ICIC Bank, HDFC Bank, Punjab National Bank.

The interest rate varies from bank to bank currently in the range of 5.25 per cent to 5.50 per cent for the general public and 6.00 per cent to 6.30 per cent for senior citizens.BankInterest rateGeneral publicSenior citizenState Bank of India5.40%6.20%Punjab National Bank5.25%6.00%HDFC Bank5.50%6.25%ICICI Bank5.50%6.30%(Source: Bank websites)Investors mostly rely on fixed deposits as they are bank-based investments and also due to their low-risk, safe nature.

Presently, section 80C of the I-T Act provides for deduction of up to Rs 1.5 lakh in taxable personal income in a financial year under some conditions.

Or in other words, depositors can claim a deduction of up to Rs 1.5 lakh by investing in tax-saving deposits. The Income Tax department returns extra taxes if paid on investments in life insurance, National Pension System (NPS), provident fund (EPF and PPF), National Savings Certificate (NSC), and tax-saving fixed deposits.