Post Office Time Saving and Investments

Post office time deposits give investors good returns over a fixed period of time. Moreover, the returns are guaranteed making the scheme suitable for risk-averse individuals.

Every investor looks for attractive investment schemes which give good returns over the investment period. Some investors like to take risks while others are risk-averse. Risk-averse investors look for fixed interest investment avenues. While there are a lot of fixed interest avenues, post-office time deposits are quite popular. Do you know what the deposit scheme is all about?

Post-Office Term Deposit is a savings account scheme of the India Post which is a Government of India undertaking. This scheme allows you to deposit any amount of money for a period of five years or more. You can also get the benefit of tax saving through these deposits. Since the deposits allow fixed interest incomes and tax benefits, they are quite popular among investors. Let’s, therefore, understand the scheme in detail.

To opt for a post office time deposit scheme, you would have to fulfil the below-mentioned eligibility criteria -

• You should be an Indian citizen aged 18 years and above
• Parents or authorised guardians can also avail the scheme on behalf of children who are below the age of 18.
• A joint Account can also be availed by a minor child over the age of 10 years with a guardian as a co-account holder.

The scheme is applicable for individuals and cannot be opted by the following entities

• Group Accounts
• Trust Funds
• Institutional Accounts
• Regimental Fund
• Welfare Fund

Here are some key features of the scheme which you should know about

• You can open an account either with a cheque or with cash.
• The maturity period of the deposit may vary between 1,2,3 and 5 years and you can extend the deposit term after the selected term comes to an end
• You need to deposit a minimum amount of Rs.200 to open a POTD account. However, there is no limit on the maximum amount and you can deposit any amount that you want.
• If you want, you can change an individual account to a joint account with your spouse, child or any other individual
• If you select a deposit term of 5 years, the deposit that you make would be allowed as a deduction up to INR 1.5 lakhs under Section 80C of the Income Tax Act, 1961.
• On attaining the age of 18 years, a minor holding a Post Office Time Deposit Account needs to change the account name to his own in place of the guardian.
• You can transfer your deposit account from one post office to another.
• The account is automatically renewed upon the maturity of the deposit time period.
• You can nominate a beneficiary to the account at the time of opening the account or even after the account has been opened.
• You can withdraw cash from your deposit account or use the deposit as collateral for borrowing money.

Post office time deposit saving schemes give you a lot of benefits which include the following

• Easy procedures: These term deposit schemes are easily available at rural as well as urban regions and at the same time are very simple to apply. You can, therefore, open an account from any part of the country where you live.
• Easy Documentation: Very minimal documents are required for opening the account. You would just have to submit your basic documents and the account would be opened.
• Long-term Investment Benefits: The Post Office Saving Schemes have a long term investment horizon over which they allow you to save in a disciplined manner and create a good return.

If you want to open a time deposit account in the post office in your name, you have to follow the below-mentioned steps

• Choose the Post Office from where you want to open the account.
• Procure the application form from the post office of your choice and fill in the form in the format presented. The POTD Account Opening Form is also available online for your convenience.

• Fill in the form mentioning the below details:

• Your name
• Permanent Residential Address
• Your Date of Birth
• Your KYC details
• Nomination Details
• Your Aadhar Card Number

• All proof records like the PAN Card, address proof of current residential address along with identity proof needs to be attached to the Post Office Time Deposit Account application form at the time of submission for verification processes.
• After accurately filling the form and getting all relevant documents attached, you can submit the form at the post office.

POTD Interest Rates

The below table will give you a brief detail of the current interest rate applicable on Post Office Saving Account Interest Rate as applicable from 01.07.2019 till further notice.

However, it should be noted that the Post Office Saving Account Interest Rates are variable, subject to quarterly review by the Finance Ministry. So, it is advisable to check the applicable interest rates at the time of opening the account.

Tax benefits on Post Office Time Deposits under the Income Tax Act can be availed only for deposits made for a minimum tenure of 5 years. If you choose short term deposits, you would not get any tax benefit. Under Section 80C, deposit made for a period of 5 years gives you a deduction up to INR 1.5 lakhs on the amount that you deposit.

Rules for Withdrawal

The Post Office Time Deposit Accounts provide you the flexibility of early withdrawals if you fulfill the following conditions

• The withdrawal date should not be within the time period of 6 months from the date of the first deposit.
• Early withdrawals within the 1st year of the tenure are liable for simple interest at the same rate as the Post Office Time Deposit interest rate prevalent at the time.
• Early withdrawals after the 1st year of the tenure are liable for a 1% lower interest rate.

So, invest in a time deposit scheme only after understanding all the aspects of the scheme so that you know what the scheme promises and how you can use the scheme to your advantage.

Recommended Read: Know About India Post Savings Account And Its Charges