Post Office Time Deposit 2023 - Interest Rates, Scheme, & Tax Benefit

India Post Office, operational since 1854 with over 1.55 lakhs offices across India, is the most widely used postal network in the world. In addition to mail delivery, India Post offers vital services like money transfers, Postal Life Insurance and Rural Postal Life Insurance, money orders, investments in savings plans, and other financial transactions.

Post office savings plans also incorporate post office time deposits or National Savings Time Deposit Accounts which are quite similar to fixed deposits offered by banks but with some fundamental differences. You can visit the nearest post office or use the India Post official website or app to open a time deposit account.

These investments are perfect for risk-aversive investors and come with lucrative returns over some time. India Post is a GOI undertaking which offers Post office time deposit schemes. The post office time deposit account allows depositing any amount for 5 years or more, after which it generates enticing returns and other benefits like tax savings. Let's understand what post office time deposits all are about.

What Are Post Office Time Deposit Accounts?

Post office time deposits, also known as POFD or Post office Fixed deposits, are quite like the fixed deposit schemes offered by banks. Post office time deposit accounts are quite popular among people living in remote or rural areas because of the lack of access to investment products.

These are prominent means of savings that any Indian citizen can utilize. You can open your post office time deposit account with cash, cheque, or online transfer, and the minimum account is INR 1000 in multiples of 100s (with no limit to the maximum amount).

One of the best features of post office time deposits is that these can be in the form of joint savings accounts for up to three people. There is quite a relaxation when investing in the post office, as these investments can easily be transferred from one post office to the other, anywhere in India, and Indians can open multiple post office time deposit accounts without restriction.

Procedures for Opening a Post Office Time Deposit

To open a postal fixed account, you must follow the following steps:

Step 1: First, you need to decide which post office to open an account with.

Step 2: Next, obtain the required application form from the post office of your choice and complete the post office time deposit application form in the prescribed form, entering your correct credentials.

Step 3: You may need to fill in information like your name, address, date of birth, KYC details, deposit details, nomination details, Aadhar card number, Pan card (if you have one), etc.

Step 4: You must submit the designated form, deposit amount, and other documents.

Step 5: You must attach your PAN card, Aadhar Card, proof of address, and all identification documents and go through the KYC verification procedure.

Step 6: When the documentation and form-filling procedure is done, you must submit them to the counter in charge.

Online Method

Applications for post office time deposit schemes can be made through net banking or mobile banking options available in online application mode. The process is as follows:

Step 1 - The first step is to log in to the post office time deposit e-banking site using your registered user ID and password.

Step 2 – Click on General Service and then go to Service Request.

Step 3 – You can select the deposit opening request to proceed.

Step 4 - Accounts for this scheme can be opened in one of the following ways:

You can open one account or joint accounts limited to a maximum of 3 adult account holders.

Account Type

The Post office time deposit scheme offers 4 accounts with maturities of 1, 2, 3, and 5 years. These accounts can be managed individually or in groups of up to three people.

Minor accounts are allowed along with a legal guardian who should manage minors' accounts until they reach the age of majority. This approach allows one person to have multiple accounts.

Features of Post Office Time Deposit Accounts

Here are some of the details you need to know about investing in Post office time deposits:

Eligibility

Anyone who is an Indian citizen and is over the age of 10 can open a post office time deposit account. Minor can also open a POTD account, provided a legal guardian manages the account till the minor attains the age of 18

Up to 3 joint holders can also manage accounts. You can create an unlimited number of accounts and are free to transfer your POTD accounts from one post office to another.

Tax Benefits

Income tax incentives are only for accounts maintained for 5 years or more. You can avail of income tax exemption of up to INR 1.5 lakh under Section 80C of the Income Tax Act 1961.

Multiple Lock-Ins available

You can opt for 1, 2, 3, and 5-year post office time deposits, extending after a formal and written request is made to the post office.

Lucrative Returns

The post office time deposit interest rates applicable nationwide are as follows:

Tenure	Post office time deposit interest rate
1 year	5.5%
2 year	5.5%
3 year	5.5%
5 year	6.7%

Let us use an example and understand how the post office time deposit scheme returns are calculated. You can calculate it manually or use the post office time deposit calculator, which is the most effective, accurate, and convenient tool to estimate the returns you will earn on your post office time deposit accounts:

Suppose Mr Raj from Punjab deposits INR 10,000 in his post office time deposit account. Let us look at the interest Mr Raj can earn on all four permissible tenures of POTD.

Use the post office time deposit calculator, punch in the amount (10000) and different tenures(1, 2, 3 and 5 years), and enter different post office time deposit interest rates (5.5%, 5.5%, 5.5%, 6.7%). The amount that Mr Raj can earn is:

Term	Rate of Interest	The initial deposit plus interest earned	The total amount at the end of the tenure
After 1 year	5.5%	INR 10000 plus INR 561	INR 10561
After 2 years	5.5%	INR 10000 plus INR 1154	INR 11154
After 3 years	5.5%	INR 10000 plus INR 1781	INR 11781
After 5 years	6.70%	INR 10000 plus INR 3941	INR 13941

Withdrawal Rule of Post Office Time Deposit Accounts

Early closure of fixed deposits is possible but only after 6 months of deposit. For early withdrawals within one year and six months from the date of deposit, simple interest at prevailing interest rates will be charged from the postal savings account.

Payment of Interest

Normally, the interest is paid out annually but calculated every quarter. You can opt for retrieval of the interest amount in cash or cheque. If the interest payable is INR 20000 or more, the payment will be made through cheque only.

Post Office Time Deposit Interest Rate - Revisions and Determinations

The Indian Government assesses the post office time deposit interest rates every quarter based on government G-sec bond yields. The yield is topped up by a spread of 25 bps or 0.25%, but these spreads are not available for 1-, 2-, and 3-year post office term deposits.

Transferring Interest Amounts to Other Post Office Accounts

You can transfer the interest accrued from your post office time deposit accounts into other post office savings accounts. It can be deposited as an annual investment or a 5-year post office time deposit account.

Applicability of Post-Maturity Interest

There is a contingency for people who don't use the interest amount, even after the maturity of their post office time deposits. But this deposit will be considered a fresh term deposit, and the applicable post office time deposit interest rate will be applied.

Not Only Limited to Post Offices

With the new authorizations by the Central Government, besides investing in post office time deposits through the post office, you can also know to make these investments through public/private banks. These shall be considered a substitute or an alternative to the bank's fixed deposits.

Security of Guaranteed Returns

Compared to fixed deposits, investments in post office time deposit accounts guarantee returns, and there is no limitation to the number of accounts one can hold as term deposits in post offices.

Eligibility Criteria to Open Post Office Time Deposit Accounts

To be eligible to open a postal term deposit account, the following criteria should be considered:

1. Any resident Indian may open and maintain this account individually or collectively with a maximum of 3 joint holders to one POTD account
2. Minors over the age of 10 can open and maintain this account, but their account needs to be managed by a legal guardian, who will do the needful until the minor attains maturity. Parents/legal guardians can open post office fixed deposit accounts for minors

The following organizations and funds cannot use the Postal Time Deposit System:

• Trust Funds
• Institutional Account Holders
• Regimental Funds
• HUFs- Hindu Undivided Families
• NRIs – Non-Resident Indians
• Social Welfare Funds

Required Documents for Post Office Time Deposits

The basic documents required to open a post office time deposit account are:

• Identity Proof of the Applicant – In the case of a minor, the identity proof of the parent/legal guardian shall be attached.
• Address Proof of the Applicant – In the case of a minor, the identity proof of the parent/legal guardian shall be attached.

You can submit any of the following documents:

• Aadhaar Card
• Ration Card
• Driver's License
• Passport
• Voter Id Card
• PAN Card, Form 60 or Form 61, according to the guidelines of the Income Tax Act, 1961
• Passport Size Photograph of the applicant
• Application form for Post office time deposit scheme.

To open a fixed deposit at a post office, you must also present the following documents:

• SB3
• SB13 (payment slip)
• Sample Signature Receipt

Who Should Invest in Post Office Time Deposits?

Post-office time deposit investments are risk-aversive for people looking for alternatives to bank term deposits. Since POTDs offer a fixed rate of interest and guaranteed returns, thus these are considered safer.

These investments are also popular because they offer higher returns than bank FDs. This investment is for you if you are a very conservative investor with no risk tolerance and hopeful for guaranteed returns.

Dissimilarities Between FDs and Post Office Fixed Deposits

The post office time deposits are quite similar to fixed deposits offered by banks but differ on several parameters, like the ones mentioned below:

Particulars	Time deposit	Fixed Deposit
Rate of interest	5.5% to 6.7%	5.5% to 6.5% (average)
Additional interest for senior citizens	No	0.25% to 0.5%
Interest payment frequency	Yearly	Monthly, quarterly, or yearly.
Lock-in period	1 to 5 years.	7 days to 10 years.
Auto-renewal	An application should be submitted for the same	Yes
Loan against the deposit	NA	Available from some banks and NBFCs.
Premature withdrawal	After 6 months.	You can avail of these at any time at specified banks
Applicability of tax deducted at source (TDS)	No	Yes

Dissimilarities Between POTDs and Other Schemes

Post office time deposit accounts can be lucrative options compared to other investment opportunities with guaranteed returns for many. Here is a comparison table of different investment options for your based on the interest that you can earn, premature withdrawals, tenure of the investment, and Income tax benefits:

Product	Rate of interest	Tenure	Premature withdrawal	Income tax benefits under Section 80C
Time deposit	5.5% to 6.7%	1 to 5 years	After 6 months	Only on a 5-year time deposit.
Recurring Deposit	5.8%	5 years	After 3 years	Yes
Monthly Income Scheme	6.6%	5 years	After 1 year but before 3 years/after 3 years	No
Sukanya Samriddhi Account	7.6%	Until the girl reaches 21 years of age or marries after 18.	After the girl is 18 years of age.	Yes
Public Provident Fund Account (PPF)	7.1%	15 years	After 5 years	Yes
Senior Citizen Savings Scheme (SCSS)	7.4%	5 years	After 1 year	Yes, provided the interest earned is more than INR 50,000.
National Savings Certificates - NSC	6.8%	5 years	Allowed in case of the certificate holder's death or via a court order.	Yes

Drawbacks of Post Office Time Deposit Schemes

Investing in post office time deposit accounts is considered a risk-free investment. However, investors should keep the following in mind when investing in this program:

• Investments in this system do not take inflation into account. If inflation exceeds interest rates, investors will not get a real return on this plan.
• Investing in this scheme is safe and backed by the Government of India. Still, interest rates are lower than other options available such as the Public Provident Fund, NSC, and term deposits in many banks.

Conclusion

All investors are looking for attractive investment concepts that deliver high returns over the investment period. Risk-averse investors are looking for fixed-income investment opportunities like bond investments, bank fixed deposits, etc. Post office time deposits are very popular in the country because of their guaranteed interest income and tax benefits.

Frequently Asked Questions

What are the minimum requirements to open a post office time deposit account?

If you meet the eligibility criteria for opening a post office time deposit account, you can open it with a minimum of INR 1000 in multiples of 100. You can approach a nearby post office or even contact a public or private bank for the same.

Can I get tax benefits by investing in post office time deposits?

Yes, you are eligible for tax benefits up to INR 1.50 lakhs under section 80C of the Income Tax law 1961. However, this exemption will only be made to post office time deposit account holders who have invested for 5 years or more.

Is there any option for early withdrawal of post office time deposit schemes?

Yes, post office time deposits can be closed early. To do this, your account must be active for at least the last 6 months. For withdrawals from 6 months to 1 year, you will be charged simple interest at the postal savings rate.

For payments made after 1 year of account opening, the interest rate will be 1% lower than the interest rate corresponding to the original account life.

Can I transfer my existing post office time deposit account to another post office?

You can submit a manual application to the post office or complete Form SB10(b).

For a new investor, is it made to invest money in a post office time deposit or a National Savings Certificate (NSC)?

National Savings Certificate or NSC interest is calculated semi-annually, while post office time deposit is calculated quarterly. Therefore, the actual interest rate on post office time deposits may be higher. Tax credits up to INR 1.50 lakhs under section 80C per year are available for both.