Investment in five-year fixed deposits or tax-saving FDs - is locked in for a period of five years

Money invested in a five-year fixed deposit (FD) account offers income tax benefit - in the form of deduction of taxable income - under Section 80C of the Income Tax Act. Using this special type of fixed deposit or FD, the investor can obtain a deduction up to Rs 1.5 lakh from taxable income in a financial year under Section 80C rules. Major commercial banks - from state-run State Bank of India (SBI) and Punjab National Bank (PNB), to private sector peers HDFC Bank and ICICI Bank - pay interest at rates to the tune of 6.25-7.25 per cent to the general public, and 6.7-7.75 per cent to senior citizens, on tax-saving fixed deposits up to Rs 1 crore.

Here's a comparison of interest rates offered by major banks on income tax-saving FDs (or tax-saver FDs) of up to Rs 1 crore:

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Bank Interest rate General public Senior citizen State Bank of India 6.85% 7.35% Punjab National Bank 6.25% 6.75% Bank of Baroda 6.70% 6.70% HDFC Bank 7.25% 7.75% ICICI Bank 7.25% 7.75% (Source: Bank websites)

State Bank of India (SBI)

The country's largest bank pays interest at the rate of 6.85 per cent to the general public, and 7.35 per cent to senior citizens, on five-year fixed deposits under its tax savings scheme, SBI Tax Savings Scheme, according to its corporate website - sbi.co.in.

Punjab National Bank (PNB)

Under its five-year tax-saving fixed deposit, PNB Tax Saver FD, the state-run bank pays interest at the rate of 6.25 per cent to the general public and 6.75 per cent to senior citizens, according to Punjab National Bank's website - pnbindia.in.

Bank of Baroda

Bank of Baroda pays interest at the rate of 6.7 per cent on investment in the tax-saving fixed deposit - Baroda Tax Savings Term Deposit - with effect from November 1 , 2018, according to the lender's website - bankofbaroda.com. Meanwhile, Vijaya Bank and Dena Bank will become a part of Bank of Baroda with effect from April 1 this year. The merger will make Bank of Baroda the country's second-largest public sector bank, after State Bank of India.

ICICI Bank

ICICI Bank offers interest at the rate of 7.25 per cent to the general public, and 7.75 per cent to senior citizens, on deposits in five-year tax-saving fixed deposits, called 5-Years Tax-Saver FDs, according to the lender's website - icicibank.com.

HDFC Bank

HDFC Bank pays interest at the rate of 7.25 per cent to the general public and 7.75 per cent to senior citizens, on five-year tax-saving fixed deposit, according to its website - hdfcbank.com.

Banks do not allow a premature withdrawal from such FD accounts before completion of five years from the date of issue. In other words, investment in these fixed deposits - tax-saving FDs - is locked in for a period of five years from the date of issue, which means that in order to utilise the tax benefit, the investor has to keep the amount locked in the fixed deposit during this period.