Post Office Time Deposit Account (POTD): Interest Rate,

The post office offers several deposit schemes for investors. These investments are commonly known as small savings schemes. These schemes carry the sovereign guarantee of the Indian Government. In this post, I will discuss all about the Post Office Time Deposit Account (POTD).

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Post Office Time Deposit Account (POTD)

POTD scheme is a popular investment scheme offered by the India Post. The post office term deposit is similar to the fixed deposits (FDs) provided by banks.

In this scheme, you deposit a lump sum of money for a fixed period and earn a guaranteed return on it. The POTD scheme offers four maturities: 1 year, 2 years, 3 years, and 5 years.

Post Office Time Deposit Interest Rate

The Ministry of Finance reviews the Post Office Term Deposit Interest Rate at the beginning of every quarter of the financial year. The interest rate is decided based on the yield on government securities.

The following interest rates apply to term deposits from April 1, 2020, to June 30, 2020.

Account Period	Applicable Interest Rate
1 Year	5.50%
2 Years	5.50%
3 Years	5.50%
5 Years	6.70%

Interest shall be payable annually but calculated quarterly. Note that there is no additional interest payable on the amount of interest that has become due for payment but not withdrawn by you.

The annual interest may be credited to the post office savings account of the account holder at his option.

Features & Benefits of Post Office Time Deposit Account

The following are the key features of the POTD scheme.

1. The POTD scheme offers four tenures: 1 year, 2 years, 3 years, and 5 years.

2. This scheme provides guaranteed returns on the investments for the tenure you opt for.

3. The scheme is backed by the government of India. Therefore, investment in the POTD scheme completely protected.

4. This scheme can be opened by cash or cheque. If you deposit a cheque, the date of realization of cheque in government account shall be the date of opening of TD account.

5. The minimum deposit required for opening POTD is Rs.1000 and in multiples of Rs.100. However, there is no maximum limit.

6. Only one deposit can be made in one account.

7. Nomination facility is available. You can nominate a person at the time of opening and also after opening of POTD account.

8. This account can easily transferred from one post office to another.

9. You can open any number of accounts in any post office.

10. A single account can converted into a joint and vice versa as per the need.

11. Minors after attaining the majority have to apply for conversion of the account in their name.

12. You can extend your TD by giving an application in the post office.

13. Online Account Opening facility is available through Intra Operable Netbanking/Mobile Banking.

14. The investment in this scheme is risk-free and you will get complete returns on maturity.

Eligibility Criteria for Post Office Term Deposit Account

POTD Account may be opened by

1. A single adult

2. Joint Account with a maximum of three adults.

3. A minor aged 10 years or more.

4. A guardian on behalf of a minor or person of unsound mind.

Tax Implications under POTD Account

The investment under 5 years term deposit qualifies for income-tax deduction under Section 80C of the Income Tax Act, 1961. However, there is no tax benefit on the investments with less than 5 years of tenure.

Premature Withdrawal of Post Office Term Deposit Account

Withdrawal of funds before the maturity called premature withdrawal. Note that premature withdrawal not allowed before the expiry of 6 months.

If you close your TD between 6 months to 12 months from the date of opening, Post Office Saving Accounts interest rate is payable.

Premature withdrawal after a year earns 1% lower than the interest rate the deposit for that specific tenure earns.

Final Thoughts

Post Office Time Deposit Account (POTD) is an alternative to Bank FDs as it offers higher interest rates. Moreover, there is no risk associated with this term deposit and you will get complete returns on maturity.

Post Office Term Deposit Account is a suitable investment option for those individuals who are ultra-conservative. Therefore, if you are a conservative investor then you may choose to invest in these schemes.