The Post Office Term Deposit (POTD) is similar to a bank fixed deposit, where you can deposit money for a fixed period and earn a guaranteed return through the tenure of the deposit. At the end of the deposit's tenure, the deposited amount and interest earned on it are returned to the depositor
The capital in the POTD is completely protected as the scheme is backed by the Government of India, making it totally risk-free with guaranteed returns.
The POTD is not inflation protected, which means whenever inflation is above the guaranteed interest rate; the return from the scheme earns no real returns. However, when the inflation rate is below the guaranteed return, it does manage a positive real rate of return.
The interest rate on the POTD is guaranteed for the tenure of deposit. The interest varies from 7.10 per cent for a year to 7.90 per cent for a five-year deposit.
The POTD is liquid, despite the deposit lock-in. One can borrow against the deposit or withdraw the deposit prematurely.
There is no risk associated with this investment and hence, it is risk-free.
As the POTD is offered by the Government of India, it does not require any commercial rating.
There is no tax benefit on deposits with less than five-year tenure. The five-year deposit qualifies for tax deductions under Section 80C on the sum deposited.
Where to open an Account
You can open the account at any head post office or general post office.
How to Open an Account
Once you have selected the post office, you can open a POTD for which you will need the following documents:
- A deposit opening form provided by the post office
- Address and identity proof such as copy of the passport, PAN (permanent account number) card or declaration in form No 60 or 61 as per the Income Tax Act 1961, driving license, Adhaar Card, voter's ID or ration card
- Carry original identity proof for verification at the time of account opening
- Choose a nominee and get a witness signature to complete the formalities to start the deposit
How to Operate the Account?
- You need a pay-in slip with the initial deposit opening sum to be credited into your account
- Payment can be made by cash or cheque
Points to Ponder
- Portability of the account from one post office to another
- Facility of extending the deposit on maturity
- Interest income is taxable but there is no TDS certificate issued
- Maturity proceeds not drawn are eligible to saving account interest rate for a maximum period of two years
You need to be a Resident Indian preferably with a post office savings bank account
- No age limit is mentioned
- A minor above age 10 years can open an account on their own name directly
- Minimum: Rs 200 and in multiples thereof
- Maximum: There is no upper limit
- Interest rate of 8.40 per cent to 8.50 per cent depending on the tenure of the deposit
- Interest payable annually but calculated quarterly
- 1,2,3 or 5 years
Account holding categories
- Minor through the guardian
- Facility is available
There is no online access to post office accounts as yet.
Time Deposit Interest Rates over the years
|1-year time deposit||7.1||8.4||8.4||8.2|
|2-year time deposit||7.2||8.4||8.4||8.2|
|3-year time deposit||7.4||8.4||8.4||8.3|
|5-year time deposit||7.9||8.5||8.5||8.4|
|All figures in per cent|