Which gives a better return: FD or Savings Bank Account?


Every individual wishes to save their hard-earned money for their future or any financial emergency. These amounts are generally kept securely in the Savings account of banks. The funds held in the Savings account are secure but do not involve any growth or return. Millennials have started investing their savings into the trade market for better returns; however, it involves risks and requires expertise. A Fixed Deposit can be an ideal option in a scenario where you desire to avail better returns from savings with fund security.


Read the table below to understand Fixed Deposit and Savings Account in detail.

Parameters Fixed Deposit Savings Account
Brief IntroductionIn Fixed Deposit, a specific amount of money is kept for a particular tenure by an individual with the financial institutions with the accrual of interest at periodic intervals.A Savings account is a type of bank account used by individuals to save their money. The account offers interest and the flexibility to deposit and withdraw funds at any point in time.
Offering InstitutionsPost Offices, Banks, and Non -banking Financial InstitutionsBanks
Key FeaturesThe tenure and interest accrued via FD are fixed.  The interest rate offered for Fixed deposits is comparatively higher than the Savings accounts.A Savings account is one of the liquid forms of the asset. The bank provides the facility to deposit or withdraw funds per the accountholder’s convenience.
Interest Rate3-6% (Varies with every institution)2-4% (Varies with every institution)
Tax BenefitsUnder Section 80C of the Income Tax Act, a depositor can avail of tax benefits on FD for upto Rs. 1.5 lakhsUnder Section 80TTA, there is no tax applicable on the Savings account interest if the interest amount earned on the Savings account does not exceed Rs. 10,000 in a financial year


Difference Between Fixed Deposit and Savings Account


Parameters Fixed Deposit Savings Account
Interest RateThe rate of interest offered for FD investments is generally higher than the Savings accounts. Axis, HDFC, and ICICI bank’s FD rates help individuals generate good returns. The Fixed Deposit investment also offers additional interest to senior citizens  0.25 -0.75% above the regular rate.Savings accounts offer minimal interest rates to account holders ranging between 2-4%, which hardly contributes to money growth.
TenureFD investments allow investors to select a tenure for their investment ranging from 7 days to 10 years. The FD investment tenure affects the interest rate applicable to the investment.There is no tenure in Savings Account. The account holder can wish to close the account and withdraw money at any time as per their convenience.
Interest Calculation MethodFD investments can be calculated through Simple Interest and Compound Interest methods, depending upon the planIn Savings accounts, the interest is calculated only through the compound interest formula.
Emergency SupportThe depositor can apply for a loan against their FD investment for emergency fund requirements. The FD acts as collateral against the loan.There is no emergency loan support offered to the Savings account holders.
PenaltyIn case the depositor wishes to withdraw their money from FD investments before its maturity, a 1-2% penalty on the investment will be charged.There are no penalty charges applicable on the fund withdrawal from the Savings account; however, if the account holder wishes to close its Savings account at any point in time, there will be minimal foreclosure charges for it.


Which is Better – FD Investment OR Savings Account?

An FD investment allows you to grow your money with minimal risk involved. The interest rate offered. Commercial institutions like ICICI bank’s FD rates are comparatively higher than Savings account interest rates. The features like emergency loan support, the exclusive rate for senior citizens, etc., make it an ideal investment option for people who wish to grow their money without any hassle. The fund lock-in feature in FD investment also eliminates unnecessary expenditures.

On the other hand, a Saving account also holds certain benefits. The flexible fund deposit and withdrawal facility are helpful in day-to-day activities, which are also important. Therefore, it is advisable to prioritize your goals by considering these parameters and then choose.

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