Post Office savings schemes are popular among Indian citizens because of the security and lucrative interest rates. At present many people are turning towards the mutual fund, SIP, and the equity markets, but Post Office (PO) schemes are still adopted by a large number of populations, mostly in the rural parts of India. Post Office National Savings Time Deposit (TD) Scheme is one of the most popular fixed schemes for its availability of small-scale savings with good interest rate options. The TD account gives better returns than some other savings bank accounts. Another reason to choose the Post Office Time Deposit (TD) Scheme is that you can withdraw your money from the scheme after 6 months of deposit if you require the money suddenly, on an immediate basis, unlike the Kisan Vikas Patra (KVP) or National Savings Certificates (NSC) by PO.
Interest rates of TD account
|1 year A/c||5.50%|
|2 years A/c||5.50%|
|3 years A/c||5.50%|
|5 years A/c||6.70%|
Information source: indiapost.gov.in
Interest under the scheme will be paid annually but it is calculated quarterly, and if you want the interest amount will be credited to your TD account itself. The investment under 5 years TD will qualify for the benefit of section 80C of the Income Tax Act, 1961. The deposit amount shall be repayable after the expiry of 1 year, 2 years, 3 years, and 5 years. However, on maturity depositors can also further extend the TD account for another tenure for which the account was initially opened. You can transfer your TD account from one PO branch to another.
Interest calculation for example
|Deposit amount (INR)||Tenure||Interest rate (percentage)||Total interest amount (INR)|
No deposit shall be withdrawn before the expiry of six months from the date of deposit. If the TD account is closed after 6 months but before 1 year, the PO Savings Account Interest rate will be applicable. If 2 or 3 or 5 years TD account prematurely closed after 1 year, interest shall be calculated 2% less than of TD interest rate for the completed years, and for a part period less than a year, PO Savings Interest rates will be applicable.
Account opening rule
The minimum amount for opening of TD account is Rs. 1000 and in multiple of Rs. 100 with no maximum limit for investment. One can open the account for 1 year, 2 years, 3 years, and 5 years. Any person above 18 years can open a TD account with a nominee, but a parent can also open an account on behalf of a child above 10 years. A joint account can be opened with either 2 persons' names or 3 persons' names, with the nominee. However, if the investor is a senior citizen, he/she can invest in the Senior Citizen Savings Scheme that will fetch around a 7.4% interest rate.
SBI interest rates for comparison
SBI's interest rate of Fixed Deposit (FD) scheme for 3 years to less than 5 years is 5.30%, while for 5 years to less than 10 years SBI will give 5.40% interest (source: sbi.co.in/web/personal-banking/investments-deposits/deposits/fixed-deposit). One should also remember that SBI SB Deposit accounts present interest rate (w.e.f May, 31, 2020) is 2.70% p.a. (source: sbi.co.in/web/interest-rates/savings-bank-deposits). Hence, the Post Office National Savings Time Deposit (TD) Scheme is a highly appreciated scheme for common Indians.