Investment: Post office term deposits vs bank FDs

Jul 01 2014, 09:46 IST
Comments 0
SummaryWhat you should do when faced with choosing between post office term deposits and bank FDs

happens with post office term deposits. Bank FD rates move with changing times, but post office term deposit rates remain fixed. Thus, as inflation rises, real returns come down for post office term deposits. However, post office term deposits are totally risk-free as they are backed by the government. Bank FDs are insured only up to R1 lakh.

Tax implications

Both avenues have a similar tax treatment: there is no tax benefit on deposits with tenures of less than five years. The five-year deposit qualifies for tax deduction under

Section 80C.

If you are looking for a safe investment, bank FDs are suitable for you. They are better than post office term deposits as they give higher returns and the capital also remains protected.

The writer is CEO, BankBazaar.com

THE FACE-OFF

* In post office term deposits, the interest rate for each tenure is fixed. Interest rates on bank FDs vary with market conditions

* A post office term deposit can be closed after six months, but before a year. If you close your account prematurely after six months, you get the investment back without interest. Most banks, on the other hand, have done away with premature withrawal penal charge

* Bank FD rates move with changing times, but post office term deposit rates remain fixed. As inflation rises, real returns come down for post office term deposits

Single Page Format
Ads by Google

More from Personal Finance

Reader´s Comments
| Post a Comment
Please Wait while comments are loading...