Senior Citizen Fixed Deposit in Banks vs Post Office: Should senior citizens open Fixed Deposit accounts in Post Office or banks? The answer to this question depends on various factors.
Senior Citizen Fixed Deposit in Banks vs Post Office: Should senior citizens open Fixed Deposit accounts in Post Office or banks? The answer to this question depends on various factors. This article provides a comparison of Post Office Time Deposit with the Fixed Deposit plans offered by scheduled banks on five parameters, which can help senior citizens decide which of the two options is better for them.
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Tenor
Post Office Fixed Deposit or Time Deposit account allows individuals, including senior citizens, to invest for 1, 2, 3 or 5 years. The interest rates across these tenors are different.
Compared to scheduled banks, the post office doesn’t have a 10-year Fixed Deposit plan. However, on the maturity of an FD account in the Post Office, depositors can extend their accounts by another tenor for which the account was initially opened.
Banks also offer short-duration FDs of 7 days to 6-9 months, which is not available in Post Office.
Interest Rate
In the current quarter of FY 2023-24, Post Office is offering 6.9% interest on FDs of 1 year, 7% on FDs of 2 years, 7% on FDs of 3 years and 7.5% on FDs of 5 years.
At present, however, several banks are offering higher interest rates than the post office on deposits of various tenors. While small finance banks are even offering up to 9.6% interest rates to senior citizens, banks like IDFC First Bank, Yes Bank, IndusInd Bank and Bandhan Bank are offering more than 8% FD interest to senior citizens.
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Taxation
Interest income from fixed deposit in the post office and banks are subject to taxation. However, deposits under 5-year Time Deposit in Post Office and 5-year Tax Saver Deposits in banks qualify for deduction under Section 80C of the Income Tax Act.
Security/Guarantee
Deposits up to Rs 5 lakh in any scheduled bank is guaranteed by RBI’s DICGC rules. In the case of post office FD, there is a full guarantee of the Government of India on any amount invested by a senior citizen or any other depositor. For amounts over Rs 5 lakh, the sovereign guarantee enjoyed by Post Office TD makes it safer than FD accounts offered by banks.
Ease of Managing Account
Banks have been adopting digital technologies at a faster pace than the post office. This has made opening and managing FD accounts in banks easier than in Post Office. Most of the leading banks now allow online opening and operation of FD accounts.
Though Post Office has also started offering online services, compared to banks, it still has a long way to go in terms of offering the same level of ease of managing FD accounts to customers from the comfort of their homes as banks.
