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What Is the Difference Between Fixed Deposit and Savings Account?

What Is a Savings Account?

What Is a Fixed Deposit?

What Is the Difference Between Savings Account and Fixed Deposit?

Savings accounts and fixed deposits have their distinct advantages and disadvantages. Here is a list of all the major comparison between savings accounts vs fixed deposits:

Basis

Savings Account

Fixed Deposit

Interest Rate

The interest rate of savings accounts depends on the bank and the regulations of RBI. Nowadays, the interest rate ranges between 2.5% to 7%.

The interest yield of fixed deposits also depends on the bank and the regulations of RBI. The fixed deposit interest rate generally varies between 2.5% to 6.65% for general citizens and 3% to 7.15% for senior citizens.

Purpose

To earn interest while obtaining liquidity benefits.

To earn risk-free fixed interest on a long-term investment.

Tenure

Savings accounts do not have any tenure.

The bank determines the tenure of fixed deposits. The tenure duration can start from seven days to ten years.

Emergency Loan

Savings accounts generally do not offer any loan facilities

You can take an emergency loan against your fixed deposit.

Liquidity

Savings accounts offer high liquidity. You do not have to pay penalties or charges for any withdrawals.

Funds of fixed deposits cannot be withdrawn during the tenure. If you want to withdraw the funds prematurely, you have to pay a penalty.

Tax Benefits

There are no tax benefits for savings accounts.

Fixed deposits offer tax exemption for FDs with 5-year lock-in periods under Section 80C of the Income Tax Act.

Senior Citizen Advantages

Many banks offer higher interest rates and discounts for senior citizen savings accounts. It is a great way to store funds for fixed income and pension.

Senior citizens can receive higher interest rates on their fixed deposit accounts. It helps them to increase their financial resources after retirement.

Withdrawal

There are no withdrawal limits for savings accounts. You can make any amount of withdrawal within your account balance.

Fixed deposits allow withdrawals only after the completion of the maturity period.

Deposit Proof

Banks offer passbooks to their account holders. They need to update their passbooks to know about their account details.

Banks provide a fixed deposit receipt to their fixed deposit account holders.

Which One Is Better - Savings Account or Fixed Deposit?

FAQs About Fixed Deposits and Savings Accounts