Difference Between Fixed Deposits And Post Office Saving Schemes

While investing it is of prime importance to do the planning carefully. Before you lock your option of investment, it is always recommended to do the research and analyze every situation possible. When it comes to an investment it encompasses aspects likes the flexibility, duration, rate of interest, etc. and therefore it is important to analyze carefully as your investment decision does leave an impact. You need to be well informed about your investment so that you are in a good position to evaluate the options available and then come with an investment plan considering all factors.

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6.5%**

Fixed Deposits

(by SBI bank)

(5-10 Years)

7.1%***

Public Provident Fund

(other popular options)

(15 Years)

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You may be just wooed away with the current trends of the market. However, you should be clear with the purpose of your investment, the amount you are looking to invest and your needs in terms of finances for the future. It is important to understand the significant difference between a fixed deposit and a post office saving scheme and then make your choice accordingly.

Fixed Deposit

When money is deposited in a bank account or with a non-banking financial company for a decisive period at a defined interest rate then this is known as a fixed deposit. The interest rates of fixed deposit vary from bank to bank and depend on the category of investors like a regular investor or a senior citizen, etc. The fixed deposit has been a conventional financial instrument offered by the banks. Moreover, it is considered to be one of the secured and prominent schemes of investment in India. Over a significant period, the fixed deposit has managed to deliver good returns. If you are somebody who wants to play safe specifically at a point when it comes to investing your hard-earned money then without a doubt fixed deposit is worth a deal.

Comparison Between
Fixed Deposits, Guaranteed Return Plans & Debt Mutual Fund
Guaranteed Return Plans, Fixed Deposits &
Debt Mutual Fund
Guaranteed Return Plans
Returns Before Tax
7.5% (TAX-FREE)
Returns After Tax
7.5%
Guaranteed Returns
Yes
Life Cover
Yes
Tax on Profit
Tax Free*
Risk
No Risk
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Still Better than FD’s and Debt Mutual Fund
Fixed Deposits
Returns Before Tax
7% (TAXABLE)
Returns After Tax
4.8%
Guaranteed Returns
Yes
Life Cover
No
Tax on Profit
Taxable
Risk
Low Risk
Debt Mutual Fund
Returns Before Tax
8% (TAXABLE)
Returns After Tax
5.5%
Guaranteed Returns
No
Life Cover
No
Tax on Profit
Taxable
Risk
High Risk
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Post Office Saving Schemes

This scheme is also known as the small savings scheme. Moreover, it is not a single scheme. A post office saving schemes appends a roll of saving schemes, which in turn provides a risk-free and a dependable return on the investment. The post office schemes are accessible across the nation in all the post offices. One of the most prominent schemes under post office is the Public Provident fund, which is being operated in the post offices of every city furthermore in all both the private, and public sector of banks.

The different schemes available under post office savings schemes are as follows:

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Salient Features of Fixed Deposits

The following are some key features of fixed deposits:

  • To manage your monthly expenses fixed deposits give you the benefit of periodic interest payouts.

  • Fixed deposits offer investment stability.

  • Once you have deposited money in a fixed deposit account and if you wish to deposit more cash then you need to have another account of fixed deposit.

  • Higher rate of interest is offered to the senior citizens.

  • In case, if you opt for premature withdrawals you may have to pay a penalty. Moreover, when it comes to fixed deposit the liquidity is less.

  • The fixed deposit investment in your bank can be insured up to an amount of Rs.1 lakh. However, market fluctuations do not affect the fixed deposit.

  • The interest income, which you earn from the fixed deposit, is taxed at the source itself.

Salient Features of Post Office Schemes

The following are some key features of post office schemes:

  • A few saving schemes provided by post office qualifies for benefits of income tax wherein under Section 80C of the Income Tax Act, 1861 you are eligible enough to file for a claim.

  • Apart from a recurring deposit, any saving scheme of the post office can be opened up with an investment ranging from Rs.20 up to Rs. 1500.

  • Every quarter the rate of interest applicable to various post office savings are reviewed.

  • To keep your account active, it is important to invest a specified sum of minimum as the minimum deposit.

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Brief Comparison of Fixed deposits and Post Office Saving Schemes

Let us compare some features of fixed deposit and post office saving schemes:

  • The rate of interest on fixed deposit lies from 6% to 8%. In addition, the rate of interest under the post office savings scheme lies from 4% to 9%. Taking an instance of the largest lender SBI into account so if you invest in SBI fixed deposit you get an interest rate of 5.75% and a five-year term post office term deposit can give you 7.4% respectively.

  • In comparison to a fixed deposit, a few schemes of the post office are more efficient in terms of tax. Moreover, banks do provide a fixed deposit saving tax for a term of 5 years. On one hand Public Provident Scheme remains tax exempted and on the contrary, under Section 80C of the Income Tax Act, 1861 the interest income derived from the fixed deposit is taxable.

  • Mostly, the banks do not offer a higher rate of interest to senior citizens when compared to schemes of the post office. Moreover, a senior citizen who is keen for a monthly income may find the post office scheme more beneficial.

  • Banks cater to the needs of the customers quickly and definitely outweigh the post office far behind. Right from the service to delivering the quality banks are more organized and well equipped with the latest and advanced technology. Besides, the post office involves a lot of time and paperwork simultaneously.

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To Conclude

The decision of investment depends on the sum you are looking forward to investing. A fixed deposit encourages you to invest a lump sum amount for a specific period whereas the post office savings scheme allows you to invest a nominal amount on a regular basis.

Besides, fixed deposits and post office saving schemes has its pros and cons. It needs to be your call with which one to go wit.

Happy Investing!

* Applicable for Titanium variant of Max Life Smart Fixed-return Digital (Premium payment of 5 years, Policy term of 10 years) and a healthy male of 18 years old paying Rs. 30,000/- monthly (exclusive of all applicable taxes)
** Fixed deposit rate applicable for 5 year's 1 day to 10 years for investment amount less< 2 Crore ( Not for senior citizens).
*** PPF interest rate applicable for 15 years for investment amount upto 1.5 Lac
+ Trad plans with a premium above 5 lakhs would be taxed as per applicable tax slabs post 31st march 2023
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