So, what is the Post Office Time Deposit Scheme? India Post provides the post office time deposit as a modest savings program for Indians. Post Office Time Deposit Scheme is a savings account investment provided by India Post. This program gets intended for depositors who desire to make a one-time deposit with an FD of 5-year which is a tax advantage.
With a few exceptions, it is identical to a bank fixed deposit. People can create a post office time deposit account by approaching their closest post office or by utilizing India Post’s official app or website.
India Post has been in existence since 1854. It is the most globally disseminated postal network, with over 1.55 lakh offices spread over India.
Majorly known for mail delivery, India Post also offers these services:
- Small savings schemes.
- Postal Life Insurance and Rural Postal Life Insurance
- Instant money order
- E-money order.
- Mutual funds.
- Services for money transfer
Post Office Time Deposit Account Categories
Post Office Time Deposit Scheme offers four accounts, each with a different date of maturity. This system provides accounts with maturity durations of 1, 2, 3, and 5 years.
Such accounts can get kept singly or by a band of up to three people. Minor accounts are permissible. But, they must get managed by the legal representative until the minor achieves the age of adulthood. Also, a person may have several accounts under this strategy.
Post Office Time Deposit Scheme Benefits
Some of the necessary details for investing in a post office term deposit are as follows:
- Account Eligibility and Joint Accounts
A post office time deposit account can get opened by anybody over the age of ten at a postal office. Guardians can also establish accounts on a child’s behalf. But, once the kid achieves the required age, they must request account possession. Accounts can also get carried out by up to three people only. Before or after creating a post office time deposit account, users can also suggest someone. One of the key advantages of post office time deposits is that consumers can open as many accounts as they like. Depositors of a post office time deposit account can also move their account from a postal office to the other.
- Several periods of lock-in are available
Account holders can start a post office time deposit account for 1, 2, 3, or 5 years. But, account tenure can get prolonged by filing a separate application to a postal office.
- Tax Breaks
Tax advantages are accessible only for a 5-year post office time deposit account. Section 80C of the IT Act, 1961 allows depositors to seek income tax exemptions of up to Rs.1.5 lacs.
- Profitable Results
The interest rates on a post office time deposit Account are as follows:
|One year||5.5 percent|
|Two years||5.5 percent|
|Three Years||5.5 percent|
|Five years||6.7 percent|
Consider the example below to comprehend the returns of Post Office Time Deposit Scheme:
Mr. Joe deposits Rs.5,000 in four post office time deposit plans. Each plan lasts one year, two years, three years, and five years. She will earn – based on current rates.
After one year, Rs.5,281 becomes Rs.5,578. after two years, Rs.5,891 after three years, and Rs.6,970 after five years.
- Rate Modification and Computation
The Indian government revises the interest rate on post office time deposits quarterly. Interest gets computed quarterly and distributed once a year. The rate gets calculated using the returns on government securities or G-sec. Besides the G-sec rate, a spread of 25 basis points (bps) or 0.25% gets applied to 5-year time deposits. But, similar spreads do not apply to 1-year, 2-year, and 3-year post office time deposits.
- Rates Transfer to Other Accounts
The depositor’s interest can get moved to his post office savings account at the same post office. It can also get moved as the annual’s deposit to the depositor’s National Savings RD Account. Also, it is possible to move to a 5-year post office RD account. For this move to take effect, RD account holders must fill an official application every year prior to the time deposit interest gets credited.
- Interest Payment
The interest of the Post Office Time Deposit will get reimbursed in cash or by check, together with the principal. Payments of more than Rs.20,000 will get done via cheque.
- Interest Post Maturity Applicability
Those who do not redeem the money once a time deposit account matures will not get any more interest. In the event of postal offices integrated with primary banking systems, the time deposit will get extended for the same period for which it was initially made. After renewal, the post office time deposit interest rate at the time of maturity will apply.
- The minimum Deposit Amount is Low
A Post Office Time Deposit Account requires the least deposit of Rs.1,000 to get opened. Individuals can make multiple deposits of Rs.100/-. The maximum investment is not limited. Individuals can make their first deposit in cash or by check.
- Withdrawal Before the Due Date
Premature withdrawals from a Post Office Time Deposit Account are not permitted within the first six months. If there is an early corpus withdrawal between 6 and 12 months, the post office term deposit rate will be the rate authorized for a savings account.
Crucial Documents required For Post Office Time Deposit Account
The following papers must get supplied to start a Post Office Time Deposit Account:
- Specimen Signature Slip
- SB13 or Pay-in slip
Post Office Time Deposit Vs Bank FDs: The Distinction?
Despite the fact that Post Office Time Deposit Scheme is comparable to bank FDs in certain ways, they differ in others. These distinctions get depicted in the table below –
|Particulars||Bank FDs||Post Office Time Deposits|
|Interest rate||5.5 percent – 6.5 percent||5.5 percent – 6.7 percent|
|Extra interests for seniors||0.25 percent – 0.5 percent||None|
|Frequency of payment of interest||Monthly, quarterly, and annual payments||Annually|
|Duration of Lock-in||7 days- 10 years.||1 year- 5 years|
|Auto-renew||Yes||Only upon previous application, or in the event of post offices equipped with key banking solutions|
|Loan secured by a deposit||Accessible via NBFCs and banks.||Not available|
|Premature/ Early withdrawal||A few financial organizations make this service available at any time.||Only after 6 months.|
Post Office Time Deposit Vs Various Post Office Savings Schemes: The Distinction?
The post office has a number of additional initiatives that might provide individuals with attractive investment options. The distinctions between a Post Office Time Deposit Scheme and the various investment choices offered by the Post Office are discussed below.
|Post Office Saving Schemes Products||Interest Rates||Period||Early Withdrawal||Tax Breaks|
|Post Office Time Deposit||5.5 percent – 6.7 percent||1 year – 5 years||After six months||No tax breaks except on 5-year time deposit.|
|Recurring deposit/ RDs||5.8 percent||5 years||After three years||Yes|
|POMIS/ Post Office Monthly Income Scheme||6.6 percent||5 years||After one year but just before three years/after three years||No|
|Sukanya Samriddhi Account||7.6 percent||Till the female hits the age of 21 or marry after the age of 18.||When the girl turns 18.||Yes|
|PPF||7.1 percent||15 years||After five years||Yes|
|SCSS/ Senior Citizen Savings Scheme||7.4 percent||5 years||After one year||TDS gets applied if the interest generated exceeds Rs.50,000.|
|NSC/ National Savings Certificate||6.8 percent||5 years||Allowable in the event of the certificate holder’s death or by judicial order.||Yes|
Perks of Post Office Time Deposit Scheme
- The Post Office Time Deposit Scheme ensures a profit on your investment.
- Section 80C of the IT Act provides a tax break for 5-year time post office time deposits.
- Minors above the age of 10 can also administer their own accounts.
- There is an alternative for nomination.
- The investments are extremely adaptable because they may get made for as low as Rs. 200 without a maximum investment limit.
- Post office time deposit accounts may get moved easily from one post office to another. Premature withdrawal of deposits is possible.
- Post office time deposit investments get rated better than FDs since the original amount invested and interest earned get assured by the government.
- Each post office has an infinite amount of accounts that can get created.
The Post Office Time Deposit is a savings account investment provided by India Post. It gets intended for depositors who desire to make a one-time deposit with an FD of 5-year tax advantage.
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Post Office Time Deposit FAQs
You may start a Post Office Time Deposit for as low as Rs.200.
Yes, you have the option to terminate your term deposit prematurely. But, your account must have been in use for at least the past six months to qualify. Simple interest at the Post Office Savings Account interest rate will be payable if you withdraw between 6 months and 1 year. If you withdraw after one year of opening the account, the relevant interest rate will be one percent lower than the interest rate applicable to the account’s original length.
Yes, you can move your post office term deposit from one post office to another. You can transfer so by filling and completing the SB10(b) form or submitting a physical application to the post office.
Tax reductions are only available to Post Office Time Deposit investors. But, they can get tax breaks only if the deposit gets kept for 5 years.
The interest rate on a post office time deposit is 5.5 percent – 6.7 percent, but the interest rate on bank Fixed Deposits is 5.5 percent – 6.5 percent. As a result, the real return on post office time deposits is greater.
The Post Office Time Deposit Scheme offers four accounts, each with a different maturity date. This system provides accounts with durations of 1, 2, 3, and 5 years. These accounts can get kept singly or by a band of up to three people.
Only when it is a five-year time deposit is an interest generated taxable under section 80C. Investors cannot pay out their TDs before six months.
Fixed deposits give more options when it comes to the regularity of interest distributions. Post office time deposits only pay interest once a year, whereas fixed deposits pay interest monthly, quarterly, or yearly. Fixed deposits are also more flexible in terms of duration.
Post Office Time Deposit is a savings account investment provided by India Post. This gets intended for depositors who desire to make a one-time deposit for an FD of 5-year which is a tax advantage.