1. How to invest in Post Office Fixed Deposits?

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 that is offered by the Indian Postal Services, an individual can earn a guaranteed return on the money deposited for a fixed period of time. Additionally, the individual also earns an interest with the return during the maturity period.

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. It should, however, be noted that the interest rate increases with the number of years you choose to apply for.

POFD is most suited to those individuals who are highly conservative with regards to the safety and risk of their investments. 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.

2.Features & Benefits of Post Office Fixed Deposit

a. There are no restrictions to opening a POFD. Any individual can open a fixed deposit in the post office.

b. 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.

c. The account can be opened by cash or by cheque. In government records, the date of realization of the cheque will be taken as the date of opening the account.

d. There is no limit to the number of FD accounts that can be opened at the post office.

e. You can even open a POFD account in the name of a minor and it will be operated by the parent or the legal guardian.  

f. You have the benefit of transferring an FD account from one post office to another.

g. The interest rate on POFD accounts are quite attractive, sometimes earning a higher interest rate than a bank FD.

h. On the maturity of the account, your account can be renewed for the same tenure as it was opened in the beginning.

i. You can withdraw the amount from your POFD before maturity but you will also be subjected to certain terms and conditions laid by the post office.

j. Under Section 80C of Income Tax Act of India, 1961, the investment made within 5 years are eligible for tax benefits and deductions.

k. 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.

l. If you are an NRIs, you will not be allowed to open a fixed deposit account in the post office.

m. The minimum amount you require to open a POFD account is Rs. 200 and there is no maximum limit.

n. You can convert your POFD account from a single to a 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 tax exempt up to Rs 50,000 under Section 80TTB.

4. Interest Rates in Post Office Fixed Deposit (Effective 1st October 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 6.9%
2 years 7.0%
3 years 7.2%
5 years 7.8%

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