Post Office FD that is also known as ‘Time Deposit’ is a fixed deposit scheme managed by the Post Office of India. It is one of the safest investment options since it is a government-backed scheme.
You can open a Post Office FD account from any post office by filling an application form and submitting the required set of documents. The deposit can be locked-in for a period of 1, 2, 3, and 5 years and its interest rate ranges from 5.5 to 6.7% depending upon the tenor selected by you.
The minimum deposit amount is Rs. 1000 and you can receive tax benefits by investing in a 5-year deposit plan. However, even corporate FDs offer a high interest rate to investors.
Some finance companies like Bajaj Finance provide a high FD interest rate of up to 6.85% and its wide range of features make it one of the better instruments. Let’s compare corporate FDs with post office FDs based on their features and benefits to figure out the better investment options in India:
Post Office FDs will pay the interest annually to you whereas you can get more periodic payment options on investing in non-cumulative company FDs.
For example, you can opt for monthly, quarterly, six-monthly, or yearly interest payout options with non-cumulative FD from Bajaj Finance. You can even opt for the payment of interest directly at maturity by investing in a cumulative FD.
Both corporate FDs and post office FDs calculate interest every quarter. The post office FDs offer higher interest rates only for the 5-year deposit plan whereas a corporate FD usually offers a high interest rate across all the tenor options.
Let’s see how a higher FD rate translates into better returns from an example. Suppose that you invest Rs. 100000 in a 3-year post office plan and Bajaj Finance FD respectively. The below table shows the interest earnings and returns of both these FD schemes:
|FD scheme||Deposit amount||Tenor||Applicable interest rate||Interest earnings||Maturity Amount|
|Post Office FD||Rs. 1,00,000||36 months||5.5%||Rs. 17,807||Rs. 1,17,807|
|Bajaj Finance FD||Rs. 1,00,000||36 months||6.85%||Rs. 21,990||Rs. 1,21,990|
You can see that the post office FD doesn’t provide sufficient interest gains especially when you choose a shorter tenor whereas you can expect better returns with a corporate FD like Bajaj Finance. You can also compare the returns provided by post office FDs and Bajaj Finance FDs for different tenors by using a post office FD calculator and an FD calculator respectively.
Premature withdrawal can be made only 6 months after the deposit date in the case of post office FDs. Also, if you withdraw your deposits between 6 and 12 months, the interest will be paid as per the prevailing interest rate of the Post Office Savings Account.
On the other hand, you can withdraw your deposits after completion of the initial 3 months from the deposit date in case of corporate FDs. A nominal fee is charged as a penalty for withdrawing your deposits early.
Also, few corporate FDs like Bajaj Finance FD even provide a loan against your FD. This feature helps you to avoid breaking your deposits prematurely. A loan amount of up to 75% is approved that you can utilize to cover your immediate need for funds.
Apart from these benefits, you also get a 0.10% extra FD rate on investing in a Bajaj Finance FD online by utilizing the online FD form. A 0.25% additional rate is offered to senior citizens as well.
To find the FD exact returns upon completion of an FD tenor, you can use an online FD amount calculator. Moreover, it is safe to invest in Bajaj Finance FD as it has been rated highly by credit rating organizations like CRISIL and ICRA.
Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at Highlight Story.