Is Post office Term Deposit better than bank fixed deposit?

Post office Term deposit better than bank fixed deposit

Corrected: 20-Jan-2013

Post office Term Deposit better than bank fixed deposit?

Post office offers variety of small saving schemes. One among is Term deposit. Post office term deposit is similar to bank fixed deposit. However, there are several features associated term deposit offered by Post office.

What is Post office term deposit?
Post office offers term deposits for 1 year, 2 years, 3 years and 5 years period. Any investor who wants to invest a lump sum amount for such periods can invest in such term deposits.

Who is eligible to open?
Any individual adult either single or jointly can open the account. Group accounts, institutions, trust and welfare funds are not eligible to open the account.

How much can we invest?

  • Minimum of Rs 200, multiples of Rs 200 thereof.
  • Maximum – No limit

Penalty for premature withdrawals

If the time deposit is withdrawn from 6 months period to 1 year period, only simple interest rate would be payable

If the time deposit is withdrawn from 1 year, but before the maturity period, then while interest would be paid based on the interest rate applicable for the tenure the time deposit is there, one percent penalty would be deducted.

What are the rates of interest?

Below are the rates of interest. Interest would be compounded every quarter.

  • 1 year – 8.2%
  • 2 year – 8.3%
  • 3 years – 8.4%
  • 5 years – 8.5%

What about Tax

  • If you invest for 5 years in post office term deposit, you would be eligible for income tax exemption under 80C.
  • There is no TDS deducted on the interest.

Is post office term deposit is better than bank fixed deposit ?

Below are the major differences among these two

  1. Tenure of deposit
  • Term deposit offered by Post office is available for 1, 2, 3 and 5 years period
  • Bank fixed deposits are available from 15 days period to 10 years period. 
  1. Interest rates:
  • Post office deposit rates are between 8.2% to 8.5% p.a.
  • Bank fixed deposit interest rate varies between 7.5% to 9.25% p.a.
  1. TDS
  • For Post office term deposit, there is no TDS deducted by Post office.
  • For Bank Fixed deposits, TDS would be deducted on interest.
  1. Opening the deposit account
  • Post office term deposit can be opened only by adult individuals either single or jointly. Others cannot open the deposit account.
  • Bank fixed deposits can be opened by any one
  1. Safety
  • Post office run by Govt. of India, hence term deposits are 100% safe.
  • Bank fixed deposits does not provide any safety. However investment up to 1 lac in bank fixed deposits are covered under insurance. 

Conclusion: Term deposits offered by Post office and bank fixed deposits have their own advantages and disadvantages. Select the fixed deposit which is best suitable for you to maximize your returns.

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Post office Term deposit better than bank fixed deposit?




  • sabin das

    As per my personal experience i found, the main problem of post office term deposit comes out at the time of maturity of a TD a/c,because some factors like frequent LINK FAILURE , UNDER PROCESS etc makes the consumer embarrassed, Last time i had to struggle for several days (some time it increases up to a month) to close a TD a/c. Modern technology become a curse in this matter, as i didn’t got my money back from 1 year TD in time for which I had to suffer a lot.

  • Abhishek M R

    Hello sir,
    Rgarding Vivek question,Can we invest 10K monthly per month in Fixed deposit,Because as per my knowledge , FD is one time investment,Please correvt me if i am wron,and if the above thing is posible plase let me know how we can do it,Thaks in Advance

  • Abhishek M R

    Hello Sir,
    I have an HDFC salary account,I would like to open an Fixed deposit of 20000 rupees , Shall i open it in Post office term deposit or fixed deposit in HDFC,Please advice

  • Vinit Wani

    -vinitSir;this is regarding sukanya samurrudhi daughter is going to complete her 10 years within 4 questions related to this scheme are as follows.1)whether I have to invest up to 14 years means 2015+14=2029 or 14 years of her age I.e.2019.2)can I invest any time in year any amt up to 1.5 lakhs.3) can I invest varying amt each year I.e.50000 rs this year & 10000 rs next year.4)maturity will be after 21 years of her age I.e.2015+11(since currently she is 10 years old)or 2015+21years.5)lastly should I opt for sip in mutual funds to get better amt comparatively. Thanks -vinit

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