How to Get Instant Help on Term Deposit in India

There is no difference between a term deposit and a fixed deposit. Both are the same. Most bankers tend to use the word term deposit.

Term Deposit

What Is a Term Deposit?

A term deposit is a short-term investment that involves placing money into a bank’s account. Term deposits are short-term investments with maturities ranging from a month to a few years and varying deposit minimums. It is pertinent to note that the investor can withdraw his money only after the term ends. In certain cases, the institutions may allow [premature withdrawal with an applicable penalty. 

Are Term Deposits and Fixed Deposits the same?

The terms Term Deposit and Fixed deposits are commonly used to denote the same product. It is noticed that the term Fixed Deposit is more commonly used in Asian countries while in Australia, Canada, or the New Zealand Term deposit is more commonly used. The duration of the scheme is also considered in some cases in determining the nomenclature. For deposits of more than six months duration, the term Fixed deposits are usually used. Shorter duration deposits are called Term deposits. Many financial institutions offer a fixed deposit for 6 months.

Merits of Term Deposits

Term deposits are considered a much safer option ensuring an assured return at the end of the desired term. Although the returns may be lesser compared to stocks and shares you can be assured of the safety of your deposit. The interest rates are higher than the savings bank account interest rates. On completion of the term, an amount comprising the principal and the interest is payable to the investor. Institutions have the auto-renewal facility also for term deposits where your deposit is automatically renewed for another term with the same features. Fixed deposits are favored by the salaried class and also the senior citizens who give considerable importance to the safety of the deposit rather than more returns. Fixed deposits can be cumulative or non-cumulative. In the cumulative fixed deposit, the interest rate is compounded and the benefits are paid at the time of the maturity of the plan. In non-cumulative plans, customers have the option of withdrawing the interest on a monthly, quarterly, half-yearly, or yearly.

Most financial institutions have an online facility where you can easily invest in a fixed deposit from the comforts of your home. It provides the flexibility of choosing your deposit amount and duration with considerable ease. Senior citizens get the added advantage of better interest rates in many institutions.

Which one to buy.

As discussed earlier both fixed deposit and Term deposit denote almost the same product. From the point of view of tax savings, the five-year tax saving schemes floated by banks appear to be a good option. Options of monthly payback of interest on your deposits are also available. The interest rates on many savings have been restructured owing to the market conditions following the pandemic. Hence company deposits with a good rating have also become attractive.

The term fixed deposit and term deposit are used interchangeably to denote investments for a particular duration. These investments are preferred by individuals who wish to take a low risk of their hard-earned money, guaranteed returns are the most important advantage of these types of deposits. In this period of reduced interest rates term deposits and fixed deposits for 6 months or more appear to be prudent investment options.

1.    Investment amount

The deposits amount varies from institution to institution.

• Post office TD account can be opened with a minimum of Rs. 1000. There is no maximum limit to make a deposit.
• The minimum investment amount for Bajaj Finance fixed deposits is Rs.25,000 that can go up to Rs. 1 crore.

2.    Premature Withdrawal

When it comes to liquidity, Bajaj Finance is a suitable option for the deposit account.

• Post Offices do not allow withdrawal of 5-years term deposit account before the maturity date. 1 year TD can be withdrawn after six months and interest will be provided as per savings account rate on the date of withdrawal and not as per the FD rates.

• Any fixed deposit can be withdrawn after three months of FD account opening with Bajaj Finance.

1.    Online Deposit Account

• Post offices do not provide the facility to open a TD account online. You need to go to the post office to open a term deposit account.
• Bajaj Finance fixed deposit India can be opened online by uploading necessary documents in the digital form. FD certificate /Receipt will be couriered to you on your registered address.

2.    Safety

• Post office TDs are government-backed investments to keep your funds safe.
• Bajaj Finance keeps your capital safe in the highest-rated FDs backed by credit ratings – like MAAA (stable) rating by ICRA and FAAA/Stable by CRISIL.

3.    Eligibility

• Post office term deposits are available for Indian citizens only.
• Bajaj Finance fixed deposits are available for Indians, NRIs with NRO account.

4.    Taxation

• Both deposits are similar for tax treatment.
• Post office five years deposit is the only tax-free TD. You can claim tax exemption under section 80C.
• With Bajaj Finance fixed deposits, you can save on TDS on interest income with Form 15 G/H.

Although, both post office term deposits and Bajaj Finance fixed deposits are safe for your capital, Bajaj finance FDs are more convenient to start and offer higher interest rates than the post office TDs. With Bajaj Finance Company FD, you will get 1-2% higher interest rates along with the flexibility of tenure that makes it preferable for depositors.

The deposits are generally of cumulative or noncumulative nature. In a cumulative plan, the interest is paid at the end of the tenure along with the principal. In noncumulative plans, the payoff of interest could be monthly, quarterly, half-yearly, or yearly. It is pertinent to note here that while small finance banks may be offering better interest rates care should be exercised to ensure that the institutions are covered under the Deposit Insurance and Credit Guarantee Corporation (DICGC) which insures the deposits.

Author Bio:

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.