Post Office Time Deposit Scheme

Note: Interest rates are subject to quarterly review by the Finance Ministry. 

If you prefer not to withdraw the interest annually, you can request the post office to transfer it to your Post Office Savings Account, which earns 4% interest per annum. However, this option is not available for one-year POTD accounts. 

Alternatively, you can opt to redirect the interest to a five-year recurring deposit account at the same post office or bank as payment for 12 monthly instalments. To do so, you must submit a fresh application to the post office or bank before the interest payment due date. 

Features of the Post Office Time Deposit Scheme 

Here are the key highlights of the Post Office Time Deposit Scheme: 

1. Flexible Tenures: Deposits can be made for tenures of one year, two years, three years, or five years, with only one deposit allowed per account. 

1. Assured Returns: The scheme guarantees fixed returns on the investments made by account holders. 

1. Transferable Accounts: Accounts can be easily transferred from one post office to another. 

1. Single Account or Joint Accounts: Accounts can be operated individually or jointly. 

1. Renewal Option: Account holders can extend the tenure upon maturity. 

1. Automatic Renewal: If the maturity proceeds are not withdrawn, the account is automatically renewed for the original tenure at the prevailing interest rate. 

1. No Limit on Accounts: There is no restriction on the number of time deposit accounts an individual can open. 

1. Minimum Deposit: A minimum deposit of Rs. 1,000 is required, and subsequent deposits must be in multiples of Rs. 100. Excess amounts not in multiples of Rs. 100 are refunded without interest. 

1. Bank Authorisations: The central government has permitted all public sector banks and select private banks, including ICICI Bank, Axis Bank, and HDFC Bank, to open POTD accounts. 

1. Alternative to Fixed Deposits: POTD investments can serve as a viable alternative to traditional bank fixed deposits. 

Advantages of Post Office Time Deposit Schemes 

Here are the key benefits of investing in a National Savings Time Deposit Account: 

1. Guaranteed Returns: The scheme ensures a fixed and reliable return on investment. 

1. Tax Benefits: A five-year time deposit qualifies for tax deductions under Section 80C of the Income Tax Act. 

1. Accessibility for Minors: Minors aged ten years and above can independently operate their accounts. 

1. Nomination Facility: Account holders can nominate beneficiaries for their deposits. 

1. Flexible Investments: Investments can start with as little as Rs. 1,000, with no upper limit on the amount. 

1. Transferable Accounts: Accounts can be easily transferred between post offices. 

1. Premature Withdrawal: The scheme allows the withdrawal of deposits before maturity under certain conditions. 

1. Sovereign Guarantee: Both the principal amount and the interest earned are secured by a sovereign guarantee, making it safer than bank fixed deposits. 

1. Unlimited Accounts: There is no restriction on the number of accounts one can open at any post office. 

Eligibility Criteria for Post Office Time Deposit Account 

To open a Post Office Time Deposit Account, the following conditions apply: 

1. Resident Indians: The account can be opened and operated by any resident Indian, either individually or jointly (up to three adults). 

1. Minors: Minors aged 10 years or older can independently open and operate the account. 

1. Accounts for Dependents: A parent or guardian can open the account on behalf of a minor or a person of unsound mind. 

1. Non-resident Indians (NRIs): NRIs are not eligible to open a Post Office Time Deposit account. 

1. Ineligible Groups: The following are not permitted to avail of this scheme: 

• Institutional account holders
•  Trust funds
• Regimental funds

Aadhaar and PAN Now Mandatory for Post Office Time Deposit Accounts 

According to a recent notification from the Ministry of Finance, providing both PAN and Aadhaar numbers is now mandatory to open a new Post Office Time Deposit (POTD) account. If you do not have an Aadhaar number, you must submit proof of Aadhaar enrolment or the enrolment ID at the time of opening the account. Additionally, you are required to provide your Aadhaar number to the accounts office within six months from the account's opening date. 

For existing National Savings Time Deposit account holders who still need to submit their Aadhaar number, it must be provided within six months, effective 1 April 2023. If you did not submit your PAN during account opening, you are required to do so within two months of the earliest occurrence of any of the following events: 

1. The account balance exceeds Rs. 50,000 at any point. 

1. Total credits in the account during a financial year exceed Rs. 1 lakh. 

1. Total withdrawals and transfers from the account in a month exceed Rs. 10,000. 

Failure to submit the Aadhaar within six months or the PAN within two months of the specified events will render the account inoperable until the required details are furnished to the accounts office. 

Documents Required to Open a Post Office Time Deposit Account 

To open a term deposit with India Post, the following documents are needed: 

1. Form SB3 

1. Form SB13 (Pay-in Slip) 

1. Specimen Signature Slip 

How to Apply for the Post Office Time Deposit Scheme 

Online Process 

You can open a Post Office Time Deposit Account online if you already have a Post Office Savings Account and are registered for India Post internet banking. Follow these steps: 

1. Step 1: Visit the India Post eBanking website. 

1. Step 2: Log in using your registered 'User ID' and captcha code. 

1. Step 3: Navigate to the General Services tab and select the Service Request option. 

1. Step 4: Follow the on-screen instructions to complete your Post Office Time Deposit account opening request. 

Offline Process 

To open a Post Office Time Deposit Account offline, follow these steps: 

1. Step 1: Obtain the POTD application form by downloading it online or collecting it from your nearest post office. 

1. Step 2: Fill out the form and submit it, along with the required documents and a minimum deposit of Rs. 1,000, at the post office to open your account. 

Taxation Benefits of Post Office Time Deposit 

Investments in post office small savings schemes are not subject to tax deduction at source (TDS). However, the interest earned on these deposits is considered part of the depositor's total annual income for the year in which it is received and is taxable according to the individual's applicable tax rate. Deposits with a five-year tenure, however, qualify for tax benefits under Section 80C of the Income Tax Act. 

Premature Withdrawal of Post Office Time Deposit Funds 

Post Office Time Deposit accounts allow account holders to withdraw funds before the maturity date, provided that at least 6 months have passed since the initial deposit. The following terms and conditions apply for premature withdrawals: 

1. If the premature withdrawal is made after 6 months but before 1 year from the account opening date, the interest paid will be at the Post Office Savings Account rate. 

1. If the premature withdrawal is made after one year but before the completion of the full tenure (2 years, 3 years, or 5 years), the interest will be 2% lower than the applicable Time Deposit rate for the completed years. For any part of the year less than a full year, the Post Office Savings Account interest rate will apply. 

Who Should Invest in Post Office Time Deposit (POTD) 

Investors seeking alternatives to Bank Fixed Deposits may find Post Office Time Deposit Schemes attractive, as they offer higher interest rates compared to traditional fixed deposits. Moreover, if you are a risk-averse investor seeking guaranteed returns with minimal risk, this scheme could be a suitable investment option for you.