Features of Post Office Fixed Deposit Scheme

The post office fixed deposit scheme is also known as ‘Post Office Time Deposit’. It is one of the convenient alternatives to the fixed deposit accounts provided by banks. Through this scheme of Indian Postal Service, you can earn a fixed return on the money that is deposited for a specific period.

The people of rural areas prefer investing in Post Office Fixed Deposit schemes rather than the bank's fixed deposits. In this scheme, you can choose tenure between one year to five years. It is to be noted that the rate of interest increases with the years you select for your fixed deposit account with the post office.

At times, the rate of interest offered by the post office fixed deposit scheme is higher than the interest rate offered by the bank's fixed deposits. Most likely, the interest rate of Post Office fixed deposit lies between the FD rate of bank and FD rate offered by a company.

The Post Deposit Fixed Deposit is suitable for individuals who are conservative with their investment and have a low-risk profile. At times, the interest rate of the post office fixed deposit is higher than the interest rates offered by the fixed deposits of banks.

Who Can Invest in Post Office Fixed Deposit Schemes?

Any individual can open a Fixed Deposit account in the post office by cheque or cash. As per the records of the government, the realization date of the cheque is taken as the opening date of the account. The NRIs are not eligible to open a fixed deposit account with Post Office.

Post Office Fixed Deposit is highly suitable for those individuals who are conservative with their investments. Ideally, it is suitable for the individuals who have low-risk appetite with finances and especially those who are looking for a steady source of income as well as protection of capital – like for those who are nearing to retirement or are retired.

Features of Post Office Fixed Deposit Scheme

The features of post office fixed deposit scheme are:

• Flexibility: The minimum amount for opening a Post Office Fixed Deposit account is Rs.1, 000 with no maximum limit. You can as well convert your Post Office Fixed Deposit account to a joint account to single or vice versa. You can open as many fixed deposit accounts as you want with a Post Office, there is no limit on it. You can as well open a Post Office Fixed Deposit account even in the name of a minor which can be operated by the legal guardian or parent. You can also have the benefit of transferring a post office FD account from one post office to another.
• Interest: In addition to return, you also earn interest during the maturity period. The rate of interest on the Post Office Fixed Deposit account is very attractive and many times it is more than the interest rate of a bank FD.
• The Facility of Nomination: The facility of the nominee is also available with the Post Office Fixed Deposit account, wherein the person you nominate can as well nominate other person with the existing FD account with Post Office.
• The implication of Tax: The deduction of tax is allowed on the Post Office Fixed Deposit scheme for five years under section 80C of the Income Tax Act, 1961. The interest that you get with this scheme is very attractive and sometimes it is higher than the FD of the bank.
• Upon Maturity: You can withdraw your Post Office Fixed Deposit account upon its maturity or can renew it for the same tenure. If you need, you can also withdraw the amount from your Post Office Fixed Deposit account before maturity, however, you will have to follow certain terms and conditions of the post office.
• For Senior Citizens, It Offers Tax Benefits: With effect from April 01st, 2018, any interest that is received by the senior citizens from the Post Office Fixed Deposit scheme is tax exempted u/s 80TTB. The tax would be exempted for up to Rs.50, 000.

Rate of Interest on Fixed Deposits: The government of India has revised the rate of interest for the Post Office Fixed Deposit Scheme at the starting if every quarter. This revision is calculated as per the yield on the government securities. The current rate of interest is mentioned in the below table:

Final Words:

With all the aforementioned features, a fixed deposit scheme offered by Post Office becomes the best among those who have a low-risk appetite. So, if you want a safe investment option that offers a fixed rate of interest, then you should opt for this scheme as it is one of the best. As mentioned above sometimes the rate of interest offered by a Post Office Fixed Deposit scheme is more than the bank's fixed deposits. So, before opting for any of the investment options cross-check its rate of interest beforehand.