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If the time deposit is withdrawn from 6 months period to 1 year period, only simple interest rate would be payable

If the time deposit is withdrawn from 1 year, but before the maturity period, then while interest would be paid based on the interest rate applicable for the tenure the time deposit is there,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


  • Adhi venkatesh

    Sir ,

    I am 46 year old ,

    My requirements are below.

    If i invest a 3000-5000  per month  for pension plan for 10 years (That is upto 56 years my age)

    Can i get monthly interest/bonus after 1 year accumulation (that is 12*5000=60000) with tax benefitial

    Investing in Bank is good or invest in post office is good?

    If invest in bank which plan is good like

    sbi-saral pension scheme,

    Investing in Bank of india (SuD life insurance)

    Please advice of best PENSION PLANCE IN ANY BANK?

    Please ADVICE TO ME.

    Adhi venkatesh


  • Satya Pal

    I intend to invest Rs. 20,00,000/- in PO F.D. Pl. Tell me the rate of interest on yearly basis.

  • Sreeram

    very useful information.  Thanks a lot. I have cleared all my doubts on noticing this site.

    Now a days, when private financial institutions fail, these POs and Banks are the only alternatives for making investment for our hard earned money.  Safety first and interest next. 

    For this purpose PO investment is the best.

    In our country, a poor earns Rs.3000 per month, and gives his wife.  His wife spends 2900 and balance 100 is deposited in our Bank/post offices.  Small drops make ocean.  This is our concept.  Do not be attracted by higher rate of interest.  But see that your principal is safe first.

     Let us invest in our India.  Make India strong.  Let our money be used for our people and our Government for our development as we love our soil.

  • padma joshi

    I want to invest 50000. EEither in PO or in Canara bank wherever rate of interest is more fore 1 year. Pl advice.

  • amitabh kapoor

    my name is amitabh kapoor
    sir, i want to know that if i invest rs10,000 per month as fix deposit in bank till 10 years then after 20 years how much amount i get

    • Krupa

      For 10 years, ₹18, 50000. For 20 years, ₹55,73915. Assuming you start the deposit in a bank giving 7% interest for RDs.

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