{"id":4292,"date":"2023-02-01T19:13:49","date_gmt":"2023-02-01T19:13:49","guid":{"rendered":"https:\/\/lxme.in\/?p=4292"},"modified":"2025-08-02T07:27:43","modified_gmt":"2025-08-02T07:27:43","slug":"tax-saving-bonds-vs-fixed-deposit","status":"publish","type":"post","link":"https:\/\/lxme.in\/v1\/tax-saving-bonds-vs-fixed-deposit\/","title":{"rendered":"Tax Saving Bonds vs Fixed Deposit: Which Investment Is Right for You"},"content":{"rendered":"\n<p>Are you torn between investing in tax-saving bonds or a fixed deposit? Making the right financial decision starts here. In this comprehensive guide, we unravel the age-old debate of bonds vs. fixed deposits. We&#8217;ll help you understand the key differences, risk factors, potential returns, and which option aligns best with your financial objectives. Let&#8217;s dive into this comparison and empower you to make a confident investment choice.<\/p>\n\n\n\n<p>In India, Fixed Deposit is one of the go-to investment instruments for us as it is one of the safe investment instruments and offers fix interest rates.<\/p>\n\n\n\n<p>But, does it offer you any tax benefits?<\/p>\n\n\n\n<p>If you are getting the same returns and safety as FD along with tax benefits then would you choose FD? So, which investment instrument we are talking about here? Yess!! We are talking about<strong> Tax Saving Bonds<\/strong>.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_75 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/lxme.in\/v1\/tax-saving-bonds-vs-fixed-deposit\/#What_are_Tax_Saving_Bonds\" >What are Tax Saving Bonds?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/lxme.in\/v1\/tax-saving-bonds-vs-fixed-deposit\/#What_are_Fixed_Deposits\" >What are Fixed Deposits?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/lxme.in\/v1\/tax-saving-bonds-vs-fixed-deposit\/#FAQs_%E2%80%93_Common_Questions_on_Bonds_vs_Fixed_Deposit\" >FAQs \u2013 Common Questions on Bonds vs Fixed Deposit<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/lxme.in\/v1\/tax-saving-bonds-vs-fixed-deposit\/#1_Which_is_better_a_bond_or_a_fixed_deposit\" >1. Which is better, a bond or a fixed deposit?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/lxme.in\/v1\/tax-saving-bonds-vs-fixed-deposit\/#2_Are_RBI_bonds_better_than_FD\" >2. Are RBI bonds better than FD?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/lxme.in\/v1\/tax-saving-bonds-vs-fixed-deposit\/#3_Are_bonds_tax-free_in_India\" >3. Are bonds tax-free in India?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_Tax_Saving_Bonds\"><\/span><strong>What are Tax Saving Bonds?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>&#8211; The Government offers few tax benefits on bonds offered by government undertakings in order to encourage more investors to participate in these<strong> bonds <\/strong>and help finance the infrastructure needs of India.<\/p>\n\n\n\n<p>&#8211; They come with a lock in period of <strong>5 to 7 years<\/strong> with a fixed interest rate.&nbsp;<\/p>\n\n\n\n<p>&#8211; They are one of the investment instruments that are <strong>low risk<\/strong> and provide<strong> similar returns as FD<\/strong>.&nbsp;<\/p>\n\n\n\n<p>&#8211; One can save taxes by investing in these bonds under <strong>Sec 80CCF upto \u20b920000<\/strong> and are excluding the \u20b91.5 Lakh deduction offered under 80C.&nbsp;<\/p>\n\n\n\n<p>&#8211; These bonds are in a form of paper that bear the name of owner and the issuer of bonds.&nbsp;<\/p>\n\n\n\n<p>&#8211; They provide a rate of interest between<strong> 6%-8% <\/strong>depending on the issue price at the time they are issued.&nbsp;<\/p>\n\n\n\n<p>&#8211; They are one of the good options for people looking for<strong> safe<\/strong>,<strong> tax efficient<\/strong> investment instrument and have <strong>mid to long term investment horizon<\/strong>.&nbsp;<\/p>\n\n\n\n<div style=\"height:27px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<figure class=\"wp-block-gallery has-nested-images columns-default is-cropped wp-block-gallery-1 is-layout-flex wp-block-gallery-is-layout-flex\">\n<figure class=\"wp-block-image size-large\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1280\" height=\"720\" data-id=\"5616\" src=\"https:\/\/lxme.in\/wp-content\/uploads\/2023\/09\/Tax-Saving-Bonds-vs-Fixed-Deposit.webp\" alt=\"Tax Saving Bonds vs Fixed Deposit\" class=\"wp-image-5616\"\/><\/figure>\n<\/figure>\n\n\n\n<div style=\"height:27px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_Fixed_Deposits\"><\/span><strong>What are Fixed Deposits?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>-Fixed deposits are financial instruments provided by banks, non-bank financial institutions, and post offices which is a <strong>guaranteed return<\/strong> investment option for fixed maturity time.&nbsp;<\/p>\n\n\n\n<p>&#8211; In India, FD is a popular investment option because it offers a higher rate of interest than a regular savings account.&nbsp;<\/p>\n\n\n\n<p>&#8211; As per the Income Tax Act, 1961, the interest earned on fixed deposits is added to the<strong> \u2018Income From Other Sources\u2019<\/strong> and is <strong>fully taxable<\/strong>.&nbsp;<\/p>\n\n\n\n<p>&#8211; The interest you earn on a fixed deposit is taxable as per your <strong>income tax slab<\/strong>. So if the interest rate of the FD is 5%, the post-tax rate would be 3.5% if you fall in the 30%.<\/p>\n\n\n\n<p>&#8211; If your interest income <strong>exceeds Rs 40,000<\/strong> (<strong>Rs 50,000<\/strong> in the case of senior citizens) then banks need to cut <strong>10% TDS <\/strong>on your interest.<\/p>\n\n\n\n<p>So, after learning both instruments let\u2019s learn how you can get tax benefits through an example:<\/p>\n\n\n\n<p>If Mrs. Sharma aged 35 years earns <strong>\u20b912 lakh<\/strong> annually. She also invests in other tax saving instruments such as PPF, ELSS and NPS so her limit of<strong> Section 80C of \u20b91.5 lakh <\/strong>is exhausted. She wanted further tax benefits so, she opted to invest in <strong>tax saving bonds<\/strong> which offered tax benefit under<strong> sec 80CCF<\/strong> up to<strong> \u20b920,000,<\/strong> she invested \u20b940,000 at 7%.<\/p>\n\n\n\n<p>So, let\u2019s have look what is the tax liability of Mrs. Sharma if she invested in Tax Saving Bonds and also have a look what if she was investing \u20b940,000 in FD at 7% instead of tax saving bonds.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Particulars&nbsp;&nbsp;<\/strong><\/td><td><strong>Invested in Tax Saving Bonds<\/strong><\/td><td><strong>Just invested in Sec 80C investment instruments and FD<\/strong><\/td><\/tr><tr><td>Income<\/td><td>\u20b912,02,800 (Income+Tax Saving Bond Interest)<\/td><td>\u20b912,02,800 (Income+FD Interest)<\/td><\/tr><tr><td>Less: Sec 80C Deduction<\/td><td>\u20b91,50,000<\/td><td>\u20b91,50,000<\/td><\/tr><tr><td>Less: Sec 80CCF Deduction (Tax Saving Bonds)<\/td><td>\u20b920,000<\/td><td>&#8211;<\/td><\/tr><tr><td>Total Income<\/td><td>\u20b910,32,800<\/td><td>\u20b910,52,800<\/td><\/tr><tr><td>Tax liability (Calculated as per old regime slab rates)<\/td><td><strong>\u20b91,22,340<\/strong><\/td><td><strong>\u20b91,28,340<\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>As you can see in the above table, you can save<strong> \u20b96000<\/strong> on your tax by just investing Tax Saving Bond. If Mrs. Sharma had invested in FD then she would have to pay tax on interest earned as well as she won\u2019t get any taxation benefit.&nbsp;<\/p>\n\n\n\n<p>While if she invests in Tax Saving Bond, she will have to pay tax on interest earned and at the same time she can get taxation benefit under Sec 80CCF.<\/p>\n\n\n\n<p>So, choose the investment instrument according to your need and goals. If your goal is to save tax and you can serve the 5 years lock in period then you can opt for these bonds as they offer same interest as well as safety as Fixed Deposit. <\/p>\n\n\n\n<p><strong>Related Article You May Like:-<\/strong>\u00a0<a href=\"https:\/\/lxme.in\/sovereign-gold-bond\/\" target=\"_blank\" data-type=\"link\" data-id=\"https:\/\/lxme.in\/sovereign-gold-bond\/\" rel=\"noreferrer noopener\">Sovereign Gold Bond 2023: Golden Investment Opportunity<\/a><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"FAQs_%E2%80%93_Common_Questions_on_Bonds_vs_Fixed_Deposit\"><\/span><strong>FAQs \u2013 Common Questions on Bonds vs Fixed Deposit<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<div id=\"rank-math-faq\" class=\"rank-math-block\">\n<div class=\"rank-math-list \">\n<div id=\"faq-question-1695722428658\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"1_Which_is_better_a_bond_or_a_fixed_deposit\"><\/span>1. Which is better, a bond or a fixed deposit?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>It depends on your financial goals and risk tolerance. Bonds offer periodic interest payments and can vary in risk, while fixed deposits are more stable but may offer lower returns. Choose based on your needs.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1695722452445\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"2_Are_RBI_bonds_better_than_FD\"><\/span>2. Are RBI bonds better than FD?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>RBI bonds may offer security and tax benefits, but their returns can be lower compared to fixed deposits. Consider your risk appetite and financial goals when deciding between the two.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1695722467157\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"3_Are_bonds_tax-free_in_India\"><\/span>3. Are bonds tax-free in India?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Not all bonds are tax-free in India. Some government bonds, like Sovereign Gold Bonds, offer tax exemptions on capital gains. However, the interest income from most bonds is taxable. It&#8217;s essential to understand the tax implications of specific bonds.<\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n\n\n<p>Opening your <strong>LXME account<\/strong> is easier than taking the perfect selfie! Watch this video and try it now! \u2b07\u2b07<\/p>\n\n\n\n<iframe width=\"720\" height=\"404\" src=\"https:\/\/www.youtube.com\/embed\/Bc-V1sq-R-g\" title=\"Open your LXME Investment Account in 5 easy steps!\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" allowfullscreen><\/iframe>\n\n\n\n<p><\/p>\n\n\n\n<p>To stay connected with&nbsp;<a href=\"https:\/\/www.financialexpress.com\/market\/cafeinvest-great-time-to-invest-money-anand-rathi-backed-lxme-tells-two-most-crucial-things-to-remember-interview-1941716\/\" target=\"_blank\" rel=\"noreferrer noopener\">LXME<\/a>&nbsp;and access inspiring content, follow us on&nbsp;<a href=\"https:\/\/lxme.in\/tax-saving-bonds-vs-fixed-deposit\/\" target=\"_blank\" rel=\"noreferrer noopener\">Instagram&nbsp;<\/a>and subscribe to our&nbsp;<a href=\"https:\/\/www.youtube.com\/@LXMEofficial\" target=\"_blank\" rel=\"noreferrer noopener\">YouTube channel<\/a>.<\/p>\n\n\n\n<p><strong><strong>If you found this helpful, share this blog with your friends and family!!<\/strong><\/strong><\/p>\n\n\n\n<p><strong>Download the&nbsp;<a href=\"https:\/\/lxme.onelink.me\/95JV\/lxmewebsite\" target=\"_blank\" rel=\"noreferrer noopener\">LXME app<\/a>&nbsp;now to start investing!<\/strong><\/p>\n\n\n\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"FAQPage\",\n  \"mainEntity\": [{\n    \"@type\": \"Question\",\n    \"name\": \"Which is better, a bond or a fixed deposit?\",\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"It depends on your financial goals and risk tolerance. 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Let&#8217;s dive <a href=\"https:\/\/lxme.in\/v1\/tax-saving-bonds-vs-fixed-deposit\/\" class=\"more-link\">&#8230;<span class=\"screen-reader-text\">  Tax Saving Bonds vs Fixed Deposit: Which Investment Is Right for You<\/span><\/a><\/p>\n","protected":false},"author":6,"featured_media":6480,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[655,650],"tags":[402,403,401],"class_list":["post-4292","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-saving","category-tax","tag-bonds","tag-bonds-vs-fixed-deposit","tag-tax-saving-bonds-vs-fixed-deposit"],"acf":[],"_links":{"self":[{"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/posts\/4292","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/comments?post=4292"}],"version-history":[{"count":9,"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/posts\/4292\/revisions"}],"predecessor-version":[{"id":18685,"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/posts\/4292\/revisions\/18685"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/media\/6480"}],"wp:attachment":[{"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/media?parent=4292"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/categories?post=4292"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lxme.in\/v1\/wp-json\/wp\/v2\/tags?post=4292"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}