A government-backed Post Office Fixed Deposit, also known as the 'Post Office Time Deposit Account,' is similar to a fixed deposit account of a bank that allows you to earn guaranteed returns over a fixed maturity period. A deposit with a 5-year lock-in clause is also a tax-saving benefit. By investing in a 'Post Office Time Deposit' account you can deduct up to Rs. 1.5 lakh in a financial year under Section 80 C of the Income Tax Act, 1961. For risk-averse investors, holding their money in a post office fixed deposit is the best option. Since the scheme is backed by the Government of India, the money invested in the POTD is absolutely safe and secure, and thus generates assured returns. Let's check out the benefits of Post Office Time Deposit and the procedure to open an account both online and offline.
Key benefits of post office time deposit account
Below are the benefits of a Post Office Fixed Deposit account which you need to know before opening an account.
- The Post Office Time Deposit account comes with a tenure ranging from 1 to 5 years.
- A POTD account can be opened by making an initial deposit of Rs 1,000 and in multiples of 100, with no upper limit.
- Deposits made over a period of five years are eligible for tax deductions of up to Rs. 1.5 lakh per fiscal year under section 80C.
- The account can be opened individually or jointly for up to 3 members.
- Rate of interest payable annually but calculated quarterly.
- One can transfer his or her POTD account from one post office to another or from one person to another.
- On maturity, the depositor has the option to extend the TD account for another period than that for which it was initially opened. Under the specified time, TD accounts will be extended from the date of maturity, i.e. 1 year TD (within 6 months of maturity), 2 year TD (within 12 months of maturity) and 3 to 5 years (within 18 months of maturity).
- By filing an application, the annual interest will be credited to the account holder's savings account.
- A minor with 10 years of age or above can also open a post office fixed deposit on behalf of his or her name.
Post Office Time Deposit Rates
The Government of India adjusts interest rates of post office small savings schemes on a quarterly basis. For the quarter ending on March 31, 2021 the interest rates of post office time deposit scheme are as follows:
Tax benefits on post office fixed deposit
Unlike bank fixed deposits, no tax TDS (Tax Deducted at Source) is deducted on the interest received in the post office fixed deposit account. One can specify the Post Office Time Deposit investments in his or her ITR to seek a deduction under Section 80C of the Income Tax Act, 1961. Every financial year, the upper limit for deductions under this provision of the IT Act, 1961 is capped at Rs. 1.5 lakh.
Premature closure of the account
Here are some key points to remember when withdrawing a Post Office fixed deposit early:
- No deposit can be made until the six-month period has passed after the date of deposit.
- PO Savings Account Interest Rate will apply if TD account is closed after 6 months but before 1 year.
- If a 2,3,5 year TD account is prematurely closed after 1 year, interest will be determined at 2% less than the TD interest rate (i.e. 1,2 and 3 years) for completed years, and PO Savings Interest rates will apply for part periods less than a year.
- Premature closure of a TD account is possible by submitting a prescribed application form along with a passbook to the relevant Post Office.
Eligibility required to open a post office fixed deposit account
An individual must be any of the following to open a time deposit account:
- An individual can open a single account on behalf of his or her name.
- An individual can open a joint account with up to 3 adults only.
- A guardian on behalf of a minor or a guardian on behalf of a person of unsound mind
- A minor with a minimum age limit of 10 years or above.
Documents required to open a post office time deposit account
The following documents must be submitted to open a fixed deposit account at a post office:
Identity proof: Aadhaar Card, PAN Card, Voter ID Card
Address proof: Aadhaar Card, Ration Card, Driving License, Utility bills, PAN Card
Income proof: Bank account statement of the last 6 months, salary slip of the last 3 months
Duly filled application form attached with passport size photographs.
Steps to open a post office time deposit account online
Customers can open a fixed deposit or time deposit account in any post office in India, both offline or online. But before opening an account online some prerequisites must be met such as an active mobile number and email ID, a savings bank account, valid KYC documents, and PAN Card.
- Visit https://ebanking.indiapost.gov.in and sign in to your account using the required credentials i.e. User ID and Password.
- Now under the 'General Services' section, click on the 'Service Request' option.
- Now click on 'New Request' to make a request for opening a TD account.
- Now fill the application form with all the required details correctly.
- Make the initial contribution and click on 'Submit'
- Upon successful submission, you will get a confirmation alert on your registered email ID.
- Fill up the required application form with all required details. You can get the Post Office Time Deposit application form by clicking here.
- Along with the application form, attach all the required KYC documents and passport size photographs.
- Make a visit to the post office where you have maintained a savings account and submit the application form by making the initial contribution of Rs 1,000.
How to make contributions towards a POTD account online?
- Download the 'India Post Mobile Banking app' on your mobile and sign in to the app using the required credentials.
- Now to open a post office fixed deposit account tap on the 'Requests' tab.
- To open the account, fill in the required details, such as the deposit amount, tenure, the account from which you want to debit the deposit amount and so on.
- To make a deposit to your TD account, go to the 'Transfers' section and follow the further steps.