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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.

  1. How to invest in Post Office FD?
  2. Features & Benefits of Post Office Fixed Deposit
  3. Tax benefit for senior citizens
  4. Interest Rates in Post Office Fixed Deposit (Effective 1st January 2018)

1. How to invest in Post Office Fixed Deposits?

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.

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.Who can invest in POFDs

Any individual 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. NRIs cannot open a fixed deposit account in the post office.

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.

3.Features & Benefits of Post Office Fixed Deposit

a. Flexibility

The minimum amount to open a POFD account is Rs.200 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 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.

b. 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.

c. Interest

Additionally, the individual also earns interest 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.

d. On maturity

Once the account matures, you can withdraw or renew the account for the same tenure. You may also withdraw the amount from your POFD before maturity. However, it will be subjected to certain terms and conditions laid by the post office.

e. Tax Implications

Section 80C of the Income Tax Act of India, 1961, allows tax deductions on the investment made within 5 years. The interest paid by the post office is subject to TDS. If no TDS is deducted, the same needs to be declared in the return of income.

4.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.

5. Interest Rates in Post Office Fixed Deposit (Effective 1st January 2019)

Government revises the rate of interest for POFD at the beginning 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 7.0%
2 years 7.0%
3 years 7.0%
5 years 7.8%

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