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Post Office Time Deposit Account (Fixed / Term Deposit)

The Post Offices of India offer a fixed deposit product, called Post Office Time Deposit. This article introduces you to the features of this scheme.



In “Fixed Deposit (FD) – A favourite for generations”, we saw the characteristics of a fixed deposit (FD).

The Department of Posts, Government of India offers a fixed / term deposit through the post offices in India. It is called “Post Office Time Deposit Account”.

Let’s see the features of this scheme.

Tenure / Duration

The durations offered are 1, 2, 3 and 5 years.

Interest Rate

The rate of interest offered depends on the tenure, just like bank FDs.






Duration Interest
One year 6.25%
Two years 6.50%
Three years 7.25%
Five years 7.50%


Investment Amount

The minimum amount that needs to be invested for opening this account is Rs. 200. There is no maximum / upper limit for investment.

Payouts

The interest is paid out at the end of every year during the tenure of the time deposit.

The principal is paid back at the time of maturity of the account.

Automatic Payment to Savings Account

If you have a savings account with the same post office, you can instruct the post office to credit the interest earned and the maturity amount to your savings account.

(Please check “Post Office Schemes: Downloadable Forms” to download forms for opening the Post Office Time Deposit Account, direct transfer of interest to savings account, form for nominations, etc) http://www.raagvamdatt.com/Article186.html

Premature Withdrawal / Early closure of the account

The account can not be closed within 6 months of opening it.

Between 6 months to 1 year, the account can be closed – but no interest is paid out in this case.

After one year, the account can be closed – in this case, the interest that you receive is 2% less than the interest fixed at the time of opening the account. (There is a penalty of 2% on the interest rate).

For example, if you opened a Post Office Time Deposit Account for 3 years, and close it after 1 year, you would receive interest at the rate of 5.25% instead of 7.25%.


Amount not withdrawn after maturity

If the Post Office Time Deposit Account matures, but you do not withdraw the amount (the amount remains with the post office), it would continue to earn interest upto 2 years, at the rate of interest applicable to savings account in the post office.

Loan against deposits / Pledge the account

You can pledge your time deposit account as a security for availing a loan.

Who can open the time deposit account?

The account can be opened in a single name by people over the age of 10 years. For individuals under the age of 10 years, a guardian can open the account.

The account can also be opened in joint names.

(Please check “Post Office Schemes: Downloadable Forms” to download forms for opening the Post Office Time Deposit Account, direct transfer of interest to savings account, form for nominations, etc)

Nomination Facility

Nomination facility is available for the Post Office Time Deposit Account.


Where to open the account

The time deposit account can be opened in any head post office or a sub post office.

Income Tax Benefits / Treatment

Just like FDs in a bank, the Post Office Time Deposit Account opened for 5 years enjoys the benefits under section 80C of the Income Tax Act.

(Please read “Fixed Deposit (FD) – A favourite for generations” to know more about fixed deposits (FDs), including their income tax benefit)

(Please read “Saving Income Tax – Understanding Section 80C Deductions” to know about the IT benefits u/s 80C)

Apart from this, there is no Tax Deducted at Source (TDS) on the interest earned.

Safety / Risk

The amount invested, and interest promised on it, are risk free, as they are backed by the government.

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