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1. How to invest in Post Office Fixed Deposit?

The post office fixed deposit (POFD), also known as ‘post office time deposit’ is a convenient alternative to the fixed deposits provided by banks. Through this fixed deposit scheme offered by Indian Postal services, an individual can earn a guaranteed return from the money deposited for a fixed period of time. The individual also earns an interest along with the return during the maturity period.

The utilization of post office fixed deposit has been more in the rural areas as compared to banks’ fixed deposit schemes. One can choose any tenure from 1-5 years for a POFD. The interest rate increases with the number of years you choose to apply for.

POFD is more suitable for those individuals who are highly conservative regarding the safety and risk involved in fixed deposits. At times, post office fixed deposits also provide higher interest rates as compared to bank fixed deposit.  

2.Features & Benefits of Post Office Fixed Deposit

  1. Any individual can open a fixed deposit in the post office.
  2. One can nominate a person while opening a POFD account. He/she can also nominate a person even with an existing POFD account.
  3. The account can be opened by cash or cheque. In government records, the date of realization of the cheque will be taken as the date of opening the account.
  4. There is no limit to the number of FD accounts that can be opened at the post office.
  5. A POFD account can be opened in the name of a minor and shall be operated by the parent or legal guardian.  
  6. An FD account can be transferred from one post office to another.
  7. The interest rate on POFD account earns a higher interest.
  8. When the account matures, it will be renewed for the same tenure as it was opened in the beginning.
  9. The account holder can withdraw the amount before maturity. However, this will be subject to certain terms and conditions laid by the post office.
  10. Under Section 80C of Income Tax Act of India, 1961, the investment made within 5 years are eligible for tax benefits and deductions.
  11. The interest paid by the post office is subject to TDS. If no TDS is deducted, the same needs to be offered in the return of income.
  12. NRIs are not allowed to open fixed deposit accounts in the post office.
  13. The minimum amount required to open a POFD account is Rs. 200 and there is no maximum limit.
  14. A POFD account can be converted from single to the joint account and vice versa.

3.Tax benefit for senior citizens

Do note that with effect from 1 April 2018, any interest received by senior citizens from deposits in Post Office would be exempt up to Rs 50,000 under Section 80TTB.

4. Interest Rates in Post Office Fixed Deposit (Effective 1st January 2018)

The rate of interest for POFD is revised by the government at the starting of every quarter of the final year. It is calculated on the basis of yield on government securities.  

  • Post office Interest rates table

Period Rate
1 year 6.6%
2 years 6.7%
3 years 6.9%
5 years 7.4%

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