Fixed Deposit and Term Deposits Which Should you Opt for
While gearing up for an investment in the right plan; one can probably get held up between the choices of term deposits and fixed deposits. Devised below is a comprehensive guide that draws out the difference between fixed deposits and term deposits and assists investors in making an informed decision.
Difference between fixed deposits and term deposits: A glance
Technically, there is hardly any difference between term deposits and fixed deposits. Some financial platforms define term deposits as a fixed investment made for three months, six months, etc. whereas a fixed deposit is an investment made for more than six months. Both the investment options are guaranteed with no susceptibility to stock performance.
In both the investment options, investors deposit a lump sum for a fixed rate of interest. At maturity, investors receive both the principal amount along with the interest income. When a premature withdrawal is made, the interest income received would be less than the amount promised at the time of depositing.
FD vs Term deposit options
Listed below are some of the features of popular term deposits and fixed deposits. The taxability of both the deposits remains the same. A TDS is deducted if the interest earned is more than Rs. 10,000. Investors can avoid this by filing form 15 G and 15H forms.
|Investment Tool||Interest rate||Tenure||Features|
|7 days to 10 years||
|Recurring Deposit (RD)||5% to 7.85%||Minimum 6 months (after that multiple of 3 months) to a maximum of 10 years||
|Corporate FD||7.5% to 8.5%, varies based on the lender||Same as bank FD||
|Government bonds||5.75% to 7% , government-backed investment tool||3 years and above based on the bond||
|Postal Time deposits||7.7% per annum||Same as bank FD||
There are technically many differences between fixed deposits and term deposits. However, owing to the other added benefits of premature withdrawal and loan against FD options, fixed deposits stand as the better choice.