All About Post Office Fixed Deposit Scheme

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Post Office Fixed Deposit 

One of the popular and traditional schemes that Indian post offices have been offering for years is the Post office saving schemes. Many Indian households still prefer putting their hard earned money in a Post Office Fixed Deposit scheme as it is backed by the Government of India. Also, people who do not have a bank in their vicinity can invest in the nearest Post offices as well.  People in rural areas invest more in post office deposits in comparison to bank deposits. Nowadays the government allows private banks and public sector banks to open a post office FD scheme for its customers. 

 

What is a Post Office Fixed Deposit?

A post office fixed deposit is an investment scheme that allows one to deposit in fixed deposits by post office in order to earn interest on the investment. The duration of these fixed deposits is 1-year, 2-years, 3-years and 5-years. The post office fixed deposit interest rate currently varies from 6.9% to 7.7%. The interest that is paid is charged with Tax Deduction at Source (TDS). By investing in this deposit scheme one can get tax benefits under section 80C in the old tax regime.

The post office FD scheme or post office time deposit makes a good alternative to the bank fixed deposits. Indian Postal Services enable an individual investor to invest money in a fixed deposit scheme and earn a guaranteed return on the deposited amount for a fixed span of time.

 

Eligibility Criteria to Open a Post Office Fixed Deposit Account

The account can be opened by:

  • A single adult
  • Minor above 10 years of age
  • Joint Account (3 adults max.)
  • A guardian on behalf of a minor/ or specially challenged person

Post office savings account holders with internet banking facility can open the post office fixed deposit or time deposit scheme online.

 

Who Can Invest in a Post Office Fixed Deposit Scheme?

A post office fixed deposit scheme is suitable for conservative investors like retirees or those about to get retired. It makes an ideal investment option for those who are looking for a low-risk investment option with a steady income along with capital protection.

Both cash and cheque payments can be done to open a post office fixed deposit scheme. If the payment is done via cheque then the date of realization of the cheque shall be considered as the date of opening the account. However, NRIs cannot open a post office fixed deposit scheme.

 

Features and Benefits of Post Office Fixed Deposit

From premature withdrawals to the integration of post office savings account or integration with post office recurring deposits, there are various features and advantages that follow. Some of them are discussed below:

  1. Post Office Fixed Deposit Investment Amount – There is no limit on the number of accounts in a post office. However, there can be only one deposit for one specific amount. The minimum deposit limit is Rs. 1-00 with no limit on the maximum amount (in multiples of Rs. 100 only).
  2. Post Office FD Maturity – Once the scheme is matured, a renewal form needs to be filled. However, some post offices with CBS facilities provide the auto-renewal option as well.
  3. Integration with Post Office RDs – The account holder can file an application to direct the monthly interest payments to a five year post office RD. Provided the post office savings account is in the same post office. This facility is available only at the HOD sub- Post offices.
  4. Integration the Post Office Account with the Savings Account – The account holder can also instruct the post office to redirect the post office FD interest earned to the post office savings account in the same post office. This facility is also available only at the HOD sub- Post offices.
  5. Premature withdrawal – Premature withdrawals on the post office fixed deposit scheme is not allowed before six months. If one exits within 6 months to 1 year then the interest earned will be reduced to 4%. After that, the account holder can exit with a 1% penalty on the interest rate.
  6. Taxation – The tax benefits under section 80 C are valid only on 5-year post office fixed deposits. Post office FDs with tenure of less than 5 years are not eligible for tax benefits. The interest earned on such FDs needs is taxable as per the applicable tax rate. 

Post Office FD Interest Rate

The government decides the Post Office Fixed Deposit interest rate that is paid every year but is calculated quarterly. The post office FD interest rates for January 2020 to March 2020 remain the same as in the previous quarter and are given in the table below:

Scheme Post Office Fixed Deposit Interest Rate (in %)
1-year 6.9
2-years 6.9
3-years 6.9
5-years 7.7

Post Office FD Calculator

A post office FD calculator makes a great investment tool to calculate the returns on Post office fixed deposits:

  • The calculator breaks up the maturity value into interest earned and the maturity value. T
  • Information required for the calculator includes:
  • Investment Amount
  • The current rate of interest
    Investment tenure
  • Deposit Term
  • Frequency
  • And then click calculate
  • For instance, if the invested amount is Rs.1 lakh for a period of 5 years in a Post Office fixed deposit, the total interest earned will be Rs.46, 034 and the maturity value of the deposit will be Rs.1, 46,034.

 

Post Office Fixed Deposit Account Documents Required

Once the post office branch is selected to open the post office time deposit account, the following documents are required:

  • The applicant needs to fill and submit the post office fixed deposit-opening form
  • Address and ID Proof such as the Aadhaar card or passport copy
  • Declaration in Form 60 or 61 or PAN (permanent account number) card
  • Voter's ID, driving license, or ration card
  • Original ID proof is required for account verification
  • Mention a nominee and get the signature of a witness to complete the formalities

FAQs of Post Office Fixed Deposit

Q1. Who all can open a fixed deposit account?

Indian residents except for NRIs can open a post office time deposit account. A joint account can have more than 3 adults and minors above the age of 10 years can also have a post office fd account.

 

Q2. Who can be the nominee of my POFD account?

An applicant can nominate a person while opening the post office fixed deposit account. Even the nominated person can nominate another person in the existing post office fixed deposit scheme account.

 

Q3. What are the tenure options available in the post office fixed deposit?

The tenure options that are available in a post office fixed deposit scheme are- one year, two years, three years, and five years.

 

Q4. What is the maximum amount limit under the post office fixed deposit?

There is no limitation on the maximum amount but it has to be in the multiples of Rs. 100.

 

Q5. What is the minimum amount required in the Post office fixed deposit?

The mintaimum required amount in post office time deposits is Rs. 1000.