Post Office FD Interest Rates 2024 & Benefits For Senior Citizens

The Post Office Fixed Deposit (POFD), also known as ‘Post Office Time Deposit,’ is a convenient alternative to bank fixed deposits. Through this fixed deposit scheme offered by the Indian Postal Services, an individual can earn a guaranteed return on the money deposited for a fixed period of time. You also get various benefit under POFD such as Flexibility, Extension, Pledging, Pre-Mature Withdrawal etc.

Latest Update:

RBI has announced a new rule applicable to unclaimed, matured FD accounts. The funds in an unclaimed, matured FD account will attract an interest rate as applicable to the savings account or the contracted rate of the matured FD, whichever is lower.

Latest Update: 

The CBDT notified Form 12BBA, a declaration form, to be submitted by the eligible senior citizens to the specified banks to take relief from filing the ITR.
In Budget 2021, it has been proposed to exempt senior citizens from filing income tax returns if pension income and interest income are their only annual income sources. Section 194P has been newly inserted to enforce that banks deduct tax on senior citizens of more than 75 years of age who have a pension and interest income from the bank.

It is to be noted that eligible senior citizens will not be required to file the ITR once the banks have deducted the TDS at the rate calculated under Section 194P. The exemption is from filing the return, not from paying the tax.

Post Office FD Interest Rates 2024 (Effective 1 January 2024)

Government revises the rate of interest for POFD at the beginning of every quarter of the financial year. It is calculated on the basis of yield on government securities. 

Post Office Term Deposit Interest Rates

* Please note that the interest rates on Post Office Term Deposits remain the same for both regular customers as well as senior citizens.

Features and Benefits of Post Office Fixed Deposit

*Investment under 5-year time deposit is eligible for claiming Section 80C deduction.

Flexibility

The minimum amount to open a POFD account is Rs.1000 and there is no maximum limit. You can convert your POFD account from a single to a joint account and vice versa. There is no limit to the number of FD accounts you can open at the post office. You can even open a POFD account in the name of a minor (if age above 10 years) and it will be operated by the parent or legal guardian. You also have the benefit of transferring an FD account from one post office to another.

Nomination

You can even nominate a person while opening a POFD account. Furthermore, the person you nominate can also nominate a person even with an existing POFD account.

Interest

You earn interest annually with the return during the maturity period. The interest rate on POFD accounts is quite attractive, sometimes earning a higher interest rate than a bank FD.

Maturity

There are 4 types of POFD - One-year Term Deposit (TD), Two-year TD, Three-year TD and 5-year TD. The maturity depends on the type of TD you have opened. Once the account matures, you can withdraw the deposit amount or renew the account for the same tenure. 

Premature Withdrawal

You may partially withdraw the deposit amount even before maturity after six months from the date of deposit. 

Premature Closure

You can close your POFD before the tenure of the account subject to certain terms and conditions, which are as follows:

• When the POFD account is closed after 6 month but before 1 year, the PO savings account interest rate is applicable.
• When 2, 3 year POFD account is prematurely closed after 1 year, the interest will be calculated 2% less than TD interest rate for completed years and for incomplete year PO savings account interest rate shall be applicable.
• A 5 year POFD cannot be withdrawn before the conclusion of four years. Further, if it is withdrawn after the conclusion of four years but before maturity then interest rate payable will be the PO savings account interest rate. (Applicable for 5 year POFD made after November 9, 2023)
• You can prematurely close the POFD account by submitting the prescribed application form with pass book at the concerned post office.

Tax Implications

You can claim income tax deduction under Section 80C of the Income Tax Act of India, 1961, only on the deposit you have made in the 5-year fixed deposit account.

TDS on POFD Interest

If the interest you earn on the FD account exceeds Rs.40,000 per financial year for regular customers, the tax may be deducted at source by the Post Office.

Who can Open a Post Office Fixed Deposit?

• Any individual.
• Joint Account.
• A guardian on behalf of minor/person of unsound mind.
• A minor above 10 years in his/her own name.
• NRIs cannot open a fixed deposit account.

Individuals can open a fixed deposit in the post office by cash or cheque. In government records, the date of realization of the cheque will be taken as the date of opening the account. 

POFD is most suited to those individuals who are highly conservative when it comes to investments. Ideally, it suits low-risk individuals looking for a steady income as well as capital protection – like retirees or those nearing retirement.

If you are unsure of how much returns you can expect from a Post Office Fixed Deposit scheme, make use of our FD calculator.

How to Invest in Post Office Fixed Deposit?

You can either use the online method or offline method to open a Post Office Term Deposit or FD.

Mobile Banking Method

Step 1: Download the India Post Mobile Banking app on your mobile from Google Play Store.

Step 2: Log into the app using your credentials.

Step 3: Click on the ‘Requests’ tab on the home screen to open a POFD account and select the option to open Time Deposit Account.

Step 4: Enter the details, such as the deposit amount, tenure, the account from which you want to deposit the money, nominee, and others to open the account.

Step 5: Make online deposit of the amount mentioned in the above Step-4.

Offline Method

Step 1: Fill out the application form with relevant details. The form is also available on the Post Office website.

Step 2: Attach all the supporting documents along with the application form.

Step 3: Visit the post office branch where you have held your savings account. If you don’t already have an account, head to your nearest branch.

Step 4: Submit the documentation to the relevant person at the branch to open the account.

Documents Required for Opening a Post Office Fixed Deposit

• Post Office FD application form 
• Proof of address – telephone bill, electricity bill, passport, etc. 
• Proof of identity – Aadhaar card, PAN card, driving license, Voter ID card, etc. 

Why You Should Opt for Post Office Fixed Deposit?

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

At times, post office fixed deposit interest rates can be higher than the rates offered on bank fixed deposit. It is likely, your post office fixed deposit interest rate will stand somewhere between a bank FD rate and a company FD rate.

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 tax-exempt up to Rs 50,000 under Section 80TTB.

Extension of POFD

You can invest in POFD for a tenure of 1 year, 2 years, 3 years or 5 years. You can extend the TD upon maturity for another tenure for which you had deposited. You can extend the maturity of your TD within the following prescribed period: 

• 1 year TD - within 6 months of maturity 
• 2 year TD - within 12 months of maturity 
• 3 and 5 year TD - within 18 months of maturity

You can extend the TD account after maturity by submitting the prescribed application form at concerned post office along with passbook. When the TD is extended, the interest rate applicable to the respective TD account on the maturity date will be applicable to the extended period.

Pledging of Term Deposit Account

You can pledge or transfer a TD account as a security by submitting an application form at the concerned post office along with acceptance letter from the pledgee. The transfer or pledging can be made to the following authorities:

• President of India or Governor of the State
• RBI, scheduled bank, co-operative society or co-operative bank
• Corporation (public/private), government company or local authority
• Housing finance company