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What is the Difference Between Post Office FD or Bank FD?

Practising the habit of saving money will ensure a financially secure future. However, it is not possible to always maintain a firm stature for this amidst a busy schedule. The idea of a fixed deposit makes this notion easier and more flexible.

If you are looking for an option between post office FD or bank FD, keep reading the blog below.

What Is a Post Office Fixed Deposit (POFD)?

There are many money-saving schemes in the post office, and Post Office Time Deposit (POTD) is one of those. You can easily open an account from your local post office and enjoy the following features of POFD:

Tenure of an FD account can be 1, 2, 3, or 5 years.
Interest rate stays fixed, and you'll receive it annually as it doesn’t depend on the market.
Minimum deposit value must be Rs 1000 to open an account.
Available option for pre-mature withdrawal by paying penalty.
Open a single or joint account with at most 3 adults depending on different financial instituitions.

What Is a Bank Fixed Deposit?

Several types of accounts opened in banks allow you to withdraw money, but FD accounts let you save by restricting easy withdrawals. The following are some of the features of FDs in banks:

FD interest rates change frequently in most banks.
Various banks offer tax liability on the amount invested through FD under specific terms and conditions.
The tenure of a bank can exceed up to 10 years from as low as 7 days.
During emergencies, you can withdraw money before its maturity by paying penalty.
Apart from getting interest on a monthly, quarterly, half-yearly, or annual basis, you also have the option to reinvest on interest.

What Are the Differences between POFD and Bank FD?

The differences between POFD and bank FD are as follows:

Criteria	Post Office Fixed Deposit	Bank Fixed Deposit
TDS (Tax Deduction at Source)	Regular citizens can get TDS as per section 80C on availing the 5-year FD. Section 80TTB allows a tax exemption of up to Rs 50,000 for senior citizens.	Regular citizens are eligible for TDS. Section 80C applies to all average citizens except seniors, for whom there is section 80TTB.
Tenure	Post offices offer tenure of 1 year, 2 years, 3 years and 5 years.	Banks offer it from 7 days to 10 years.
Minimum Deposit	Rs 1000 is to be deposited minimum while opening an FD account.	It depends on bank to bank
Withdrawal Facility	If you want to take your FD amount before it matures, the post office will cast a penalty based on your tenure.	Some banks may charge a penalty on your interest amount in case of pre-mature withdrawal.

What Are the Differences between Post Office FD and Bank FD in Terms of Interest Rates?

In terms of interest rates the differences between post office FD and bank FD are mentioned below:

Criteria	Post Office FD	Bank FD
Change in Interest Rates	It stays fixed on a quarterly basis as post offices are backed up by the government.	It changes frequently based on interest rates provided by RBI. However, certain banks keep the interest rate constant so that it doesn't affect the account holders.
Payment of Interest Rates	The interest rates can be paid annually.	Buyers can pay the interest rates in monthly, quarterly or annual basis
Revision of Interest Rates	Interest rates in post offices remains constant and gets revised quarterly hence it doesn’t change often	Depending on repo rates the interest rates of bank FD might vary

An example of the post office FD and bank FD returns in case of different investment cases is as follows:

Investment	For 1, 2, 3 years Post Office Interest Rates Returns (Interest Rate: 5.5%)	For 1,2,3 years Bank Interest Rate Returns (Interest Rate: 6.8%, 7%, 6.5%)
Rs 50,000	Rs 58,947	Rs 53,488, Rs 57,444 and Rs 60,670
Rs 1 lakh	Rs 235,790	Rs 1,06,975, Rs 1,14,888 and Rs 1,21,341
Rs 2 lakh	Rs 589,474	Rs 2,13,951, Rs 2,29,776 and Rs 2,42,682
Rs 5 lakh	Rs 117,895	Rs 5,34,877, Rs 5,74,441 to Rs 6,06,704

Since different banks have their set criteria, it is better to talk with their representative. This way, you can have all the details regarding fixed deposits at both the post office and the bank. Opening an FD account in the bank where you have your savings account is not always necessary. You can get an FD account in a separate bank too. Moreover, going over the interest rates is crucial to see which one suits you better before deciding to choose post office FD or bank FD.

FAQs About Post Office FD vs Bank FD

Can I apply fixed deposit account online?

Yes. Banks and post offices both have the facility to apply for FD online or offline. In this regard, if you have an internet banking facility as an account holder in a bank or post office, you can apply from there.

Can I open a post office FD or bank FD for my 16-year-old son?

Yes, many banks and all post offices have this option where you can open an FD account for minors. In this case, the guardians or parents should hold maintenance rights till the child becomes 18 years old.

Moreover, post offices have this facility where you can open FD accounts under the name of the minor if they are 10 years of age.

What are the interest rates of FD offered by the post office?

The following are the interest rates offered by the Indian post office as per the financial year 1st January 2023 to 31st March 2023:

Tenure of 1 year- 6.6%
Tenure of 2 years- 6.8%
Tenure of 3 years- 6.9%
Tenure of 5 years- 7.0%

What will happen if I don’t withdraw the amount on maturity from the bank?

As per current RBI rules in 2022, if you don't withdraw the matured money, it will have a lesser interest rate than what you had earlier. Previously even after maturation, the funds would have gained similar interest rates as long as it was unclaimed.

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Disclaimer

This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.