Term Deposit
Savings & DepositsTerm deposit is another name for Fixed Deposit -- a bank deposit at fixed interest for a specified tenure. Post Office time deposits are also term deposits. 5-year bank/post office term deposit qualifies for 80C deduction.
In detail
Post Office 5-year time deposit at 7.5% (annual compounding): Rs 1L grows to Rs 1,43,563. Bank 5-year FD at 7.5% (quarterly compounding): Rs 1L grows to Rs 1,44,949. Bank wins from quarterly vs annual compounding.
Real-life example
🇮🇳 India example
Ravi has Rs 1.5L to invest for 80C and wants safe returns. 5-year tax-saving bank FD at 7.4% quarterly: Rs 1.5L becomes Rs 2.17L at maturity. Tax saved: Rs 30,000 (20% bracket). Net effective initial investment: Rs 1.2L for Rs 2.17L final.
Frequently asked questions
RD vs FD -- what is the difference? ▼
FD: single lump sum, earns from day 1 on full amount. RD: monthly deposits, each earning for different period. FD earns more on same amount invested.