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Fixed Deposit vs. Investment Bond


Choosing between investing in a fixed deposit or an investment bond requires careful deliberation, and evaluation of the advantages and disadvantages of both these investment vehicles. The success of any investment tool ultimately depends on how well it meets your requirements.

While FD interest rates are much higher than investment bonds, investment bonds offer more tax benefits.

To understand the difference better, take a look at the details of each investment option.

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For those looking to grow their savings in a safe investment avenue, Fixed Deposit is a preferred avenue. Here’s a look at its features and benefits :

  • They provide incredible growth and maturity to your savings without being affected by market fluctuations.

  • FD is an ideal option for senior citizens, who can also benefit from higher interest rates.

  • FDs are issued by banks, NBFCs and post offices. If you’re looking for a strong balance of safety and returns, it is best to choose FDs issued by institutions with high safety ratings, which makes them a credible investment option.

  • Fixed deposit enables you to meet urgent cash needs, with facilities such as loan against FD.

  • They can help you earn more from your savings as compared to a savings account.

  • FD enables you to choose the frequency of returns. For example, if you want monthly returns you can apply for a non-cumulative fixed deposit, whereas to receive lump sum interest, you can apply for a cumulative fixed deposit.

  • The returns from fixed deposits can be used for a range of purposes like financing a holiday, purchasing an asset or even funding your child’s education.

Investment bond is also a great option for those looking to reap tax benefits and grow their savings. Read on to know more.


  • These bonds provide a scope for capital appreciation, so you can make substantial financial gains.

  • The interest rate on these bonds is much lower than that offered by fixed deposits.

  • The returns from investment bonds aren’t subject to TDS or even tax. This means that you can keep most of your income from the interest gains without having to plan for tax deductions.

  • These bonds can be sold to another party later on.

  • Investment bonds may or may not have flexible tenors.

  • These bonds do not let you choose the frequency of your returns. There is a fixed time pertaining to when your returns will be paid to you.

  • Bonds are secured but not insured. This means that you do not have absolute safety. In case a bond goes unpaid, you only have rights over the assets submitted as collateral.