Bank FD Vs Post Office FD Vs Corporate FD: Which is more suitable for you and why?

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If you wish to do so, it is possible to multiply the amount of money you have in your bank account through a fixed deposit (FD) investment. When it comes to saving towards a goal or creating an emergency fund, fixed deposits are a good option for someone who has a low tolerance for risk. Numerous financial institutions in India offer fixed deposits, including banks, non-banking financial companies, Corporates, and post offices. 

Listed below are the comparing of analyses of Bank FD Vs Post Office FD Vs Corporate FD

Regarding the investment options available to you, there is no universal answer that applies to all investors. However, being aware of the subtle differences will enable you to see the merits of each option and select the one that is best for you and your investment plan. 

Bank FD Vs Post Office FD Vs Corporate FD

On the basis of Interest rates

  • Bank FDs

The interest rate on Bank FD starts from 5.75% to 8.25%. It depends on financial institution.

  • Corporate FDs 

The interest rates on corporate FDs start at 7.5% and can be as high as 8.70%.

  • Post office FDs 

Post office offer high post office FD rates between 6.6% and 7.4%.

On the basis of Tenure

  • Bank FDs

An individual can open a fixed deposit in a bank for as little as seven days or as long as ten years. As a result, it offers a high degree of flexibility.

  • Corporate FDs 

There is a wide range of tenures for corporate FDs, typically from six months to several years.

  • Post office FDs 

In Post office Fixed Deposit scheme, you can deposit a principal amount from one to five years of tenure.

On the basis of Minimum deposit amount

  • Bank FDs

There is no set amount for the minimum amount to be invested with a bank FD.

  • Corporate FDs 

As with corporate FDs, the minimum amount must be deposited varies from company to company.

  • Post office FDs

There are several post office FDs in which you can invest as little as Rs 200.

On the basis of Tax benefits

  • Bank FDs

FDs held by banks for more than five years are eligible for tax benefits under Section 80C of the Income Tax Act. However, your funds will be locked in for the duration of this period. Regarding FDs with less than five years of tenure, the interest income is tax-free only if it is less than Rs 10,000 a year. Any amount above this amount will be subject to TDS. 

  • Corporate FDs 

It is important to note that these FD bonds are subject to TDS only if the total annual earnings exceed Rs 5,000. You will be charged 10% TDS if you provide your PAN information and 20% if you do not.

  • Post office FDs

Investing in a post office fixed deposit for five years is a great way to take advantage of the deduction allowed Section 80C under act of the Income Tax Act of up to Rs 1.5 lakh. 

On the basis of Liquidity

  • Bank FDs

Bank FDs allow you to withdraw your money prematurely from the account at any point, but you will be subject to a penalty of around 1%.

  • Corporate FDs

If you withdraw the money from these fixed deposits within three to six months of the commencement date, you may not be paid out your interest income by certain companies. Despite this, if you wish to withdraw funds before finishing 15 months from the commencement date, you will need to pay the penalty costing between 2 and 3%.

  • Post office FDs

It is also a fact that post offices, like banks and non-bank financial institutions, impose penalties on premature withdrawals of funds. Therefore, you will be charged a penalty rate based on the tenure of your FD and when you withdraw the funds. 

Final Thoughts

There may be a risk that you could just be wooed away by the current market trends. There is no doubt that you should be clear regarding the purpose of your investment, the amount you plan on investing, as well as your financial needs in the future. There are several factors to consider when making an investment decision, including the amount you plan to invest. A fixed deposit enables you to invest a lump sum amount for a specific period, whether a bank FD, corporate FD or a post office FD.

olivia jones
Editorial Team

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