Post Office Time Deposit Account Review

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.

Tenure

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.

Maturity

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).

Conclusion

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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Reference

Subhodeep Mukhopadhyay

I am a Management Consultant in the Education Sector. In my previous corporate career, I have worked in Banking, Private Equity and Software industry. I am an MBA in Finance/ Computer Engineer and enjoy doing equity research and financial analysis in my free time.

4 thoughts on “Post Office Time Deposit Account Review

  • December 25, 2015 at 9:42 pm
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    I deposited one year time deposit scheme on 22/10/2013.It was matured on 22/10/2014.As per orders of Government of India from 1/4/2014 the the TD will be automatically renewed and interest will be applicable on the prevailing date of maturity.In my case I went to Post Office on 23/12/2015.How much interest would I get till 23/12/2015.I invested 133000.

    Reply
  • January 6, 2016 at 12:25 pm
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    Sir ,whether interest earned in PPF a/c during 5 yr extension without subscriptions period ( ie after 15 yr maturiry ) is exempt or taxable.

    Reply
    • March 27, 2016 at 3:25 pm
      Permalink

      Thank you sir for your comment.
      To my knowledge, the rules for contribution for the 5 year remain the same as during the 15-year period and that the interest earned during the extended period of the PPF continues to be tax-free, but you have to fill a Form called Form H. http://www.indiapost.gov.in/pdfForms/PPFContinuation.pdf
      Please however consult with your Financial Adviser, as I am not a Financial Adviser.

      Reply
  • January 11, 2017 at 6:46 pm
    Permalink

    Hi Subhodeep,

    How safe or insured is the money kept in Post Office as Fixed Deposit ? Is is 100% insured ? I am very much keen to know as in current scenario were the public-pvt banks have a NPA or GNPA of 6L crores, and just in case any bank goes bankrupts people who have placed their hard earned money in FD’s are only insured for Rs.1L even if they have put in more than 1L in bank FD, is that a case with Post Office FD too ?

    Thanks & Regards,
    Smeeta

    Reply

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