If you consider investing your money in FD then the interest earned on the same is fully taxable. But considering the fact that your father has retired and assuming that he does not have any other source of income then the interest earned upto Rs. 180000 will definitely be tax free. Income over 180000 will be taxable at existing tax rates.
For example, if you invest Rs. 35,00,000 as FD and you get interest of Rs. 3,50,000 at rate of 10%, then your monthly income comes to Rs.29,167 p.m., but the bank is definitely going to deduct tax @10% on the same before crediting this amount to your account.
Although Rs. 180000 exemption limit for general individual is for the current financial year i.e. 2011-12 and considering that you invest the amount in April 2012, then you enter the next financial year i.e. 2012-13.
Exempted slab of income is not yet defined for the upcoming financial year as the budget has not yet come out and it is expected that the exemption limit is going to be raised to Rs.5,00,000, if it happens so then you will need not worry about evading tax and can very well invest the whole money in FD.
At least wait for the budget to come and then decide about investing in FD. Budget is expected by mid of March, 2012.
Although there are other options too for investing the money but that needs professional consultancy.