The Post Office Time Deposit (POTD) is a term deposit product. It is almost same as a Bank Fixed Deposit.
An investor who saves money in a Post Office Time Deposit account for a certain period will get back the money and interest income at maturity.
The returns are guaranteed as Post Office Time Deposit is a government product. A major difference with a Bank Fixed Deposit is that an investor can invest either 1 year, or 2 years or 3 years or 5 years.
What is its objective?
The primary aim of the Post Office Time Deposit is to give an assured return to its investors. POTD is a small savings deposit scheme for the common man.
Interest Rate of Post Office Time Deposit
The rate of interest for different tenors are as follows.
- 1 Year – 8.4%
- 2 Years – 8.4%
- 3 Years – 8.4%
- 5 Years – 8.5%
Interest is calculated quarterly but payable annually.
Post Office Time Deposit is available for 1, 2,3 and 5 years period.
Minimum and Maximum Investment
- A person has to invest a minimum of INR 200.
- There is no maximum investment limit.
Eligibility for Post Office Time Deposit
- A resident can open a POTD account.
- A non-resident Indian cannot open a POTD account.
- A Hindu Undivided Family (HUF) cannot open a POTD account.
- The investor may add a nominee to his POTD account.
- A person can open a POTD account in the name of a minor.
- Two adults can open a Joint Account.
Post Office Time Deposit Account Details
- A person can open any number of accounts in any post office.
- He can transfer his money from one post office to another.
On maturity and investor can choose two options, auto-renew and withdrawl.
In Post Offices where Core Banking is available, when a POTD matures, the Post Office automatically renews it for the same period. The interest rate applicable would be the rate on the date of maturity.
Tax Aspects of Post Office Time Deposit
- There is tax benefit under Section 80C for a 5 year Term Deposit. That is, when an investors invests in 5 year POTD, he can deduct the amount from his taxbale income under Section 80C to get tax benefits, subject to a limit of Rs 150,000.
- Interest income is taxable.
- There is no tax deducted at source (TDS).
Post Office Time Deposit is therefore a very safe investment option with assured returns.
The main benefits of POTD are that:
- The investment is safe.
- The returns are guaranteed by the government.
- There is no TDS in POTD. But wherever applicable, the investor must pay his taxes.
For all these reasons, Post Office Time Deposit is very popular among risk-averse and conservative investors.
A Few Last Words
I hope you found this article useful. If you have something to add please leave a comment in the post. Please feel free to contact me.
Before making any investment decision, please contact your financial adviser. I have provided this article for educational purpose only.
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