Department of Post, considered the backbone of India’s communications fabric, with 154866 post offices in the country, is the the largest in the world. With around 1,39,040 post offices in rural areas alone, the department is further widening its reach and functioning by diversifying into several domains such as insurance, money transfer and retail services among others.
The Post Office Savings Bank (POSB) is the oldest and largest banking institution in the country. It operates over 238 million savings accounts. The Post Office Savings Bank schemes are a function performed by the Department of Posts on behalf of the Ministry of Finance.
The eight savings schemes offered by the department are savings accounts, recurring deposits, time deposit, monthly income scheme, public provident fund, Kisan Vikas Patras (KVP), National Savings Certificate (NSC) and Senior Citizens Savings Scheme (SCSS).
India Post Office Time (Fixed) Deposit Scheme
- There are currently over 93,55,825 time deposit accounts across the country. Owing to the benefit of assured returns on the deposit and the low risk factor, it is one of the sought-after schemes in the country.
- The scheme offers several benefits including portability of account from one post office to another and option of extending the deposit on maturity. Also, maturity proceeds not drawn are eligible for savings account interest rate for two years.
- The tenures for fixed deposit offered range from one, two and three years to five years with the facility to draw yearly interest at compounded rates.
- Automatic credit facility of interest to the savings bank account is available.
- Group accounts, institutional accounts, Trust, regimental fund or welfare fund are not permissible.
- Although interest income is taxable, TDS certificate is not issued under the scheme.
Benefits of Post Office Fixed Deposit
Some of the benefits of Post Office Fixed Deposit are given below:
- You need a minimum of Rs.200 only to open a Post Office Fixed Deposit account, while there is no cap on the maximum amount.
- You can earn interesting rates of interest on the amount deposited by you. Currently, under a Post Office Fixed Deposit scheme, you can earn up to 7.7% on the amount deposited.
- You can nominate a relative, family member, or a friend on opening a Fixed Deposit account.
- Once your account matures, you have the option of withdrawing the amount or renewing it. You can also withdraw the amount before your account matures, however, you will have to pay certain charges in order to do so.
- You will enjoy tax benefits if you did not select the new tax regiment plan. The tax deductions will be applicable under Section 80C of the Income Tax Act, 1961. Senior Citizens will stand to enjoy tax exemption of up to Rs.50,000 under Section 80TTB.
India Post Office Fixed Deposit Features
- Offers 1, 2, 3 and 5 year time deposits. A single adult or two adults can open an account.
- Interest is payable annually but calculated quarterly. Interest income is taxable.
- Minimum investment is Rs. 200 and its multiples. Offers facility of extending on maturity of an account.
- Post office time deposits are meant for investors who can deposit a lump sum for a fixed period.
- The scheme is not only low risk but also offers high capital protection in that it is backed by the government. The investment, therefore, grows at a pre-determined rate with assured returns.
- If inflation is above the interest rate offered, there are no high returns. The scheme is, therefore, not insulated from inflation.
- The interest rate for a five-year deposit will be notified before April 1 every year. It is usually aligned with G-sec rates of similar maturity with a spread of 0.25%.
- An individual can borrow against the deposit or withdraw the deposit prematurely.
- Since the scheme is offered by the government of India, it does not require any commercial rating.
- If a deposit is split across varying tenures, only a few deposits will lose interest in case of any premature withdrawal.
Post Office Fixed Deposit Eligibility Criteria
Given below are the eligibility criteria you will have to fulfill in order to open a Post Office Fixed Deposit account:
- You must be a resident of India.
- Minors can also open an account. However, the account will be managed by their parents or a legal guardian.
Given below are the documents you will have to provide in order to open a Post Office Fixed Deposit account:
- Proof of identity such as PAN Card, Aadhar, Passport, etc.
- Proof of address such as Utility bills, Passport, Aadhar, ID, or certificate issued by Post Office, Bank Statement inclusive of cheque.
If you are nominating someone then you will have to provide the details of the nominee as well.
How to Open a Indian Post Office Fixed Deposit Account
- Account may be opened by individual by cash or cheque. If the account is opened by cheque, the date of realization of cheque will be considered as the date of opening of account.
- Nomination facility is available at the time of opening of the account.
- Account can be transferred from one post office to another.
- Account can be opened in the name of any minor of 10 years and above. The minor after attaining majority can apply for conversion of the account in his name.
- A joint account can be opened by two adults. A single account can be converted into joint account and vice versa.
Post Office Monthly Income Scheme
In terms of investments that offer assured returns, fixed deposits and recurring deposits from banks as well as the postal department might be well known to people from across India. Another lucrative scheme that offers similar rates and a lot of flexibility is the Monthly Income Scheme (MIS) from India Post and is available for opening across all post offices.
With a rate of interest as high as 7.70%, this interest is calculated on an annual basis and payable every month, allowing the account holder to avail a monthly income on his/her investment. The interest payable can be withdrawn into savings account at the same post office or if the account is at a CBS post office, the monthly income can be auto credited into any savings account at any CBS post office. The interest, if not withdrawn, will not accrue any additional interest though. The MIS account itself is transferrable to any post office across India. The account can have a maximum of Rs. 4.5 lakh as individual investment and Rs. 9 lakh as joint account investment. The maturity period of the account is five years.
Frequently Asked Questions (FAQs)
- Who can open a fixed deposit account with India Post Office?
Any individual (a single adult or two adults) can open a term deposit account.
- Is the fixed deposit scheme offered by India Post available online?
No. The scheme is not available online.
- What is the minimum amount required to open a FD account with India Post Office?
The minimum amount needed to open a fixed deposit account is Rs. 200.
- What is the maximum amount that can be deposited in a FD account with India Post Office?
There is no limit to the maximum amount which can be deposited in the account.
- Does India Post offer tax saver fixed deposits?
There are no specific tax saver deposit schemes. There is no tax benefit on deposits under five years. The five-year deposit is, therefore, deductible under section 80C.
- Are loans provided against FDs at India Post Office?
Yes. FD account can be pledged as security against a loan.
- Does India Post Office offer senior citizens any special rates on their fixed deposits?
No. Senior citizens do not get any special rates for FD schemes.
- Does India Post impose any penalties for premature withdrawal of FD deposits?
Premature withdrawal or closure is permitted after completion of six months of opening the deposit. The account can be closed after 6 months and before one year of opening the account, in which case, the amount invested is returned sans interest to the depositor.
- Can NRIs open a FD account in India Post?
No. Only residents of India preferably with a post office savings bank account can open a fixed deposit account under the scheme.