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All about Post Office Time Deposit Scheme: Better Interest Rates

Post Office Time Deposit

Post office has several saving schemes with different time periods and interest rates. India Post's time deposit or term deposit is the scheme to watch out for. The Post Office Time Deposit (POTD) is like bank fixed deposits (FDs), known as term deposits, an investment savings account scheme offered by the India Post. When you invest in post-office term deposit (POTD), you are saving money for a fixed period of time, and you get guaranteed returns during the tenure of the deposit. After the post office term deposit is matured, it includes the capital deposited as well as the interest acrrued every year. The interest rate offered are being reviewed by the government quarterly. Recurring Deposit Account (RD), Public Provident Fund (PPF), Kisan Vikas Patra, Monthly Income Scheme Account (MIS), Sukanya Samriddhi Yojana are some of the popular Post Office schemes.

Post Office Time Deposit Scheme Features

  • A person can open Post Office time deposits account via cash or cheque. As per the official Post Office website, the date of realization of the cheque in the government account is considered as the date of opening of the time deposit account in case you make the payment by cheque.
  • For one-year time deposit, Post Office provides an interest rate of 6.9%. For 2 and three years time deposit, an interest rate of 6.9% is given. Post Office offers an interest rate of 7.7% for five year time deposit account. The minimum amount needed to open Post Office Time Deposit account is Rs. 200 and in multiples thereof with no maximum limit.
  • If you invest under the 5-year fixed deposit account, you are liable to get income tax benefits under Section 80C of the Income Tax Act. No tax benefit is given on the deposits with less than five-year tenure.
  • After the completion of post office time deposit's tenure, the deposited amount with interest earned is taxable.
  • Post Office deposits are completely protected, with guaranteed returns, as they are controlled by the government.
  • Nomination facility is given on these Post office schemes.
  • The Post Office deposits account can be opened in the name of a minor and two adults jointly can open their account.
  • Any number of Post Office term Deposits accounts can be opened in any post office.
  • Post office also gives portability of the time deposit account between other post offices.

What can you expect from a Post Office Term Deposit Account?

Capital Protection
The capital in the Post Office Term Deposit is protected, with guaranteed returns, as the scheme is controlled by the Government of India.

Inflation Protection
Post Office Time Deposit scheme is not inflation protected, meaning the return from the Post office Term deposit scheme gets no real returns whenever the inflation is above the guaranteed interest rate. But the scheme gets a positive rate of return when the inflation rate is below the guaranteed return.

The interest rate is guaranteed for the time of term deposit one chooses to invest. Post Office Time Deposit scheme interest rate is 6.9 per cent for an yearly deposit and 7.7 per cent for a five-year deposit. The interest rates are not changed for the entire term of a deposit after an investment is made by the person.

Post Office Time Deposit offers liquidity, which means despite the deposit lock-in period, one can borrow against the deposit or withdraw the deposit prematurely.

Risk Free
As there is no risk involved with Post Office Time Deposit investment, it is risk-free.

Credit Rating
As Post Office Time Deposit (POTD) scheme is offered by the Government of India, it does not need any commercial rating.

Tax Implications
Investing in Post Office Time Deposit for less than 5 yrs gives you no tax benefit. It is only when you invest in five-year term deposit in Post office, you are entitled for a tax rebate under Section 80C.

What is the main benefit of Post Office Term Deposit?
The main benefit of the Post Office Time Deposit is to provide an assured return on the deposit made as per the duration of the deposit. Thus it provides guaranteed return on investment. As it is a risk free deposit scheme as well as one can get tax rebate under Section 80 C of the Income Tax act when one invest for 5 yrs, this makes it a popular small savings deposit scheme.

What is the Eligibility for Post Office Time Deposit Account (TD)?
You must be an Indian Citizen, preferably with a post-office savings account.

What is the Age limit for Post Office Time Deposit Account (TD)?
No age limit is mentioned. Account can be opened in the name of minor and a minor of 10 years and above age can open and operate the account

What is the minimum and maximum amount required to open an Post Office Time Deposit Account (TD)?
Minimum INR 200/- and in multiple thereof. No maximum limit.

What is the interest rate for Post Office Time Deposit?
Interest rates From 01.07.2019
For 1yr.A/c - 6.9%
For 2yr.A/c - 6.9%
For 3yr.A/c - 6.9%
For 5yr.A/c - 7.7 %

Interest is payable annually but calculated quarterly. If you do not wish to withdraw the annual interest, you can tell the post office to re-direct it into the post office savings account, which earns 4 percent per annum. This can be done for POTD with tenure of 2, 3 or 5 years. You need to know that the savings account has to be in the same post office. If the maturity amount, including interest, earned is more than Rs 20,000, the payment is not made by cash and can only be made by cheque.

How many years of investment needs to be done on the Post Office Time Deposit?
A person can invest in this post office scheme for 1, 2, 3 or 5 yrs.

Can a Minor or Joint account be opened in Post Office Time Deposit scheme?

  • Account may be opened by an individual
  • Account can be opened in the name of minor and a minor of 10 years and above age can open and operate the account
  • Joint account can be opened by two adults.
  • Single account can be converted into Joint and Vice Versa
  • Minor after attaining majority has to apply for conversion of the account in his name

Does Post Office Term Deposit offers Nomination facility?
Yes, Nomination facility is available at the time of opening and also after opening of account

Can the Post Office Term Deposit account be transferred to another Post Office?
Yes, POTD Accounts can be transferred from one post office to another.

How many Post Office Term Deposit account can be opened?
Any number of accounts can be opened in any post office.

Does Post Office Term Deposit scheme offers Tax Rebate?
The investment under 5 Years Term Deposit qualifies for the benefit of Section 80C of the Income Tax Act, 1961 from 1.4.2007. If you invest for a duration less than 5 yrs, no income tax benefit can be availed.

Can Premature Withdrawl be done on Post Office Time Deposit?
Premature withdrawl or closure of the scheme is allowed after the completion of 6 months of starting the scheme. Withdrawl after 6 months but before the completion of a year will earn 4 percent, which is the intereest rate for post-office savings account. Withdrawl after a year earns 1% less than what the deposit for that specific tenure earns.

Doe the POTD gets renewed automatically on maturity?
On maturity, POTD gets automatically renewed for the same period in Post offices enabled with core banking solution (CBS). Like a 2-year Post office time deposit account will be automatically renewed for 2 years. A person has to renew POTD by filling up the form again, in a non-CBS branch, though.

Where to open a POTD account?
You can open POTD account at any head or general post office. Also, Central government has authorised all public sector and private banks like ICICI Bank, Axis Bank, and HDFC Bank to allow investors to open Post Office Time Deposit accounts.

How to Open a Post Office Term Deposit Account?
You can open a POTD account by filling a form either by yourself or taking the help of an agent. You need to fill the Term deposit opening form given by the post office. You need a copy of any one for Address and identity proof : Aadhaar card, passport; PAN (permanent account number) card or declaration in the Form 60 or 61 as per the Income Tax Act, 1961, driving licence, voter's ID or ration card. You must take along the original identity proof for verification. You need to fill out your Name, Address, Date of Birth, details of Know Your Customer (KYC), nomination details, details of initial deposit and Aadhaar card or any other identity number. Its advisable to fill the nominee field also and get signature of a witness. If you already have a Post office savings account with internet banking facility, you can open the time deposits online.

How to Operate the Post Office Time Deosit Account?
A pay-in slip with the initial deposit-opening sum is needed which would be credited into your account. Payment can be made by cash or cheque. You can also pay online with post office savings account internet banking facility.

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