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Budget 2021 update :It has been proposed to exempt the senior citizens from filing income tax returns if pension income and interest income are their only annual income source. Section 194P has been newly inserted to enforce the banks to deduct tax on senior citizens more than 75 years of age who have a pension and interest income from the bank.
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.
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.
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 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.
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.
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.
If you are unsure of how much returns you can expect from a Post Office Fixed Deposit scheme, make use of our FD calculator.
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 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.
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.
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.
e. Premature Withdrawal
You may withdraw the deposit amount even before maturity subject to certain terms and conditions laid by the post office.
f. Tax Implications
You can claim income tax deduction under Section 80C of the Income Tax Act of India, 1961, on the deposit you have made in the 5-year fixed deposit account.
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.
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.
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.
|Period||Interest Rate for Q4 of FY 2020-21*|
* Please note that the interest rates on Post Office Term Deposits remain the same for both regular customers as well as senior citizens.