Lord Dalhousie, who was the Governor-General of India, formed the India Post in 1854. Today, this government agency serves 23 postal circles in the country with over 1,55,000 post offices. This makes India’s postal service the most widely distributed postal network in the world.
Along with delivering couriers and mails, the post office also provides fixed deposit and savings account options as viable investment options to individuals. Other investment schemes prevalent in the Post Office include Small Savings Scheme, National Savings Certificate, Senior Citizens Savings Scheme, Postal Life Insurance, etc.
Post Office FD Rates
India post-fixed deposit schemes offer attractive returns on investment, depending on the maturity tenure selected by an investor. Tenures range between one and five years. The table below breaks down the interest earnings based on investment tenure.
|Tenure||Non-senior citizen and NRO FD (%)||Senior citizen FD (%)|
|1 Year||6.90% per annum||NA|
|2 Year||6.90% per annum||NA|
|3 Year||6.90% per annum||NA|
|5 Year||7.70% per annum||NA|
Post Office fixed deposit schemes do not offer any additional interest to senior citizens. Therefore, the interest earnings on a particular sum are the same regardless of whether the investor is over or under 60 years of age.
Different Types of Post Office FD Schemes
At present, the Post Office offers just one FD scheme, which is, Post Office Time Deposit. This scheme is suitable for all sections of Indian society with a minimum investment of just Rs. 100. There is no upper limit on the investment. Further, investors can freely choose the tenure for investment, the minimum period being 12 months, while the maximum time is 60 months
The ability to opt for loans against such FDs is an added benefit, allowing investors to meet emergency expenses through such forms of credit quickly. Moreover, with premature withdrawal facilities, one can even cancel the investment midway through its tenure if necessary.
Benefits of Choosing Post Office FD
Postal fixed deposit, also known as Post Office Time Deposit (POTD), is often the preferred mode of investment for many. Investors can avail the following benefits from such FDs-
- Returns guaranteed – Due to the government backing, a Post Office fixed deposit scheme is safer and more secure than FD options from other financial institutions.
- Considerable interest rate – Post Office FD investment is more likely to result in higher returns when compared to other investment schemes.
- No volatility – While the market experiences periodic ups and downs, neither affects the returns from POTD. This means that investors earn the same interest irrespective of the market conditions.
- Other facilities – Eligible investors can avail tax exemptions on interest earnings from such schemes. Further, they can withdraw the invested sum prematurely and avail loans against the value of the Post Office FD plan.
Eligibility Criteria for Post Office FD
The following people are eligible to operate a Postal fixed deposit–
- Indian residents can manage such investments, either individually or jointly.
- Minors are eligible for Post Office fixed deposit scheme investments as well, managed by their legal guardian.
NRIs, trusts, companies and other organisations, however, are not allowed to avail fixed deposit investments through Post Office.
Documents Required for Post Office FD
Investors must furnish the following documents to deposit in the POTD scheme –
- Proof of Address
- Telephone bill
- Electricity bill
- Bank statement inclusive of cheque
- Post Office issued ID or certificate
- Proof of Identity
- Voter ID
- Pan card
- Aadhaar card
- Driving license
- Photo ration card
Moreover, the investor must provide details of a nominee for the FD. A witness must be present when he/she signs the investment papers as well.
Premature Withdrawal Terms and Conditions
The premature withdrawal facility is available to India Post fixed deposit investors. However, while ending the investment before its maturity term, here are some aspects that they should keep in mind.
- The investment needs to complete at least 6 months to become eligible for premature withdrawal. However, the principal amount is returned to the investor with added simple interest as per post office savings account interest rate.
- For Post Office fixed deposit schemes with tenures of 2 years and above, a 1% reduction in the proposed interest is made before disbursing the funds to individuals.
Special Forms to Fill
To avail tax waivers on total interest income of up to Rs. 40,000, investors need to fill Form 15G and 15H (up to Rs. 50,000) for general and senior citizens respectively. Failure to submit these forms will result in surrendering the applicable TDS on FD earnings for a year.
Loan against Post Office FD
Post Office fixed deposit schemes allow customers to avail loans against the value of their FDs. Apart from being a hassle-free source of emergency funding, such loans also come with reasonable interest rates, limiting the financial burden on the borrower.
- Can investors open Post Office FDs online?
No. At present, the Indian Post Office does not support FD opening online. Interested investors must visit their nearest Post Office branch in person. After document verification at the site, the Post Office opens its account.
- How can investors renew their Post Office fixed deposits?
Renewing a post office FD plan is simple. Investors should refrain from withdrawing the sum from their FD accounts after maturity. This leads to a renewal of the investment in the same scheme but with the interest rate effective on the date of renewal.
- Does POTD have a lock-in period?
Yes. Post Office term deposits come with a mandatory lock-in period 1 year and ranges up to 5 years.
- Can investors withdraw their deposits prematurely?
Yes. Premature withdrawal of an FD investment is valid. However, investors must read all associated terms and conditions to understand any repercussion of such early removal of funds.
- Is there a penalty fee for premature withdrawal?
No. The Post Office fixed deposit scheme does not charge any penalty due to premature withdrawal.
- Can a non-residential Indian open a POTD account?
No. Only Indian citizens are eligible for fixed deposit investment using the Post Office.
- Are minors eligible for Post Office FD investments?
Yes. Minors can open such an investment account jointly with their legal guardian, provided they are aged 10 years or older at the time of the deposit.
- Is the rate of interest different for minors investing in POTD?
No. The interest rate remains the same irrespective of whether the investor is a minor or an adult.
- Are senior citizens liable to receive extra interest earnings on these FDs?
No. Post Office fixed deposit schemes offer the same interest rate to both regular and senior citizen investors.
- What is the maximum deposit one can make under this scheme?
There is no upper limit to investments in Post office fixed deposits. Investors can deposit as much as they want without any limitations.