Just as there are bank fixed deposits, post offices across the country offer the same. A post office time deposit scheme offers the same tax deductions as five year tax saving fixed deposits. Read this guide to learn more about time deposits offered at post offices.
A five-year Post Office Term Deposit (POTD) is a savings and investment scheme similar to the fixed deposits (FD) offered through banks, you can deposit money for a fixed period and earn a guaranteed return through the tenure with POTD. When the deposit gets matured i.e. at the end of the deposit’s tenure, an account holder / investor gets deposited amount and interest earned on it.
Since it is a government investment scheme, the amounts are risk-free and returns are guaranteed.
Any Resident Indian can open this account either individually or jointly. There is no entry barrier with respect to age. A minor above age 10 years can also invest with their own name as an investor. An adult guardian can also open the account on behalf of the minor.
You can open the account at any head post office or general post office. There is not any online facility or online access to post office accounts so far.
Note: Group Accounts, Welfare Funds, Institutional Accounts and Misc. Accounts are not permissible, as per The Post Office Time Deposit rules, 1981.
Five year fixed deposits can be opened with any branch of Indian Post Office. Recently, the central government had authorized all public-sector banks and private banks like ICICI, Axis and HDFC banks to allow individuals to open a POTD account. POTD are like any other fixed deposits. The only difference is they comes in with a lock-in period of five years.
The minimum amount that can be invested is INR 200, and in multiples thereof. There is no upper limit for investment in this scheme.
The following documents are required as KYC details to invest in a five year post office time deposit scheme
Along with application, an investor is required to carry original identity proof for verification at the time of account opening. An investor, to get the formalities done, needs to opt for a nominee and get a witness signature done. A pay-in slip is required along with the application. This pay-in slip should reflect the initial deposit opening sum to be credited into your POTD account. The entire payments can be made by either cash or cheque.
Rate of interest on five-year post office deposit is 7.9%. Interest is credited annually but calculated quarterly on compounding basis in POTD scheme.
The deposit amount can be withdrawn along with interest credited on it, at the end of its maturity period of five years.
Maturity incomes not withdrawn are eligible to savings account interest rate for a maximum period of two years. Premature withdrawal, for Accounts opened on or after 1st December 2011, is allowed at the end of six months from the date of deposit, subject to following conditions:
In case of 1-3 years or 5-Years deposits, which are withdrawn prematurely (after 6 months but before expiry of one year from the date of deposit) Simple interest shall be payable at the rate applicable to Post Office Saving Account
In case of deposits for two, three or five years withdrawn prematurely (after the expiry of one year from the date of deposit) Interest is payable for the completed years and months at 1% lower rate than specified for the completed period
• You need a pay-in slip with the initial deposit-opening sum to be credited into your account.
• Payment can be made by cash or cheque.
Points to Remember
To know more about POTD and other tax savings schemes for better investment and tax planning, enlist the aid of the experts at H&R Block India.