Features of Post Office Time Deposit

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Post Offices have been working in India for a long time, and their reach is far and wide. They can reach even the farthest of rural areas where banks fail to operate. In addition, the government has made small savings schemes available via post offices. These small saving schemes provide a safe investment avenue to the public by giving the investors good returns while keeping their money safe.

Also, read about the features of post office recurring deposit.

What Is a Post Office Time Deposit?

Post Office Time Deposit (POTD) is more suitable for those individuals who are highly conservative about the safety and risk involved in fixed deposits. At times, post office time deposits provide higher interest rates than bank fixed deposits. Post office time deposit scheme is one of the savings account schemes offered by the post offices to the general public. It provides the option to the account holder to invest their extra and surplus money to the post offices at higher interest rates. The Government of India backs the scheme. Thus, the capital in the POTD is wholly protected. The POTD is not inflation-protected. This means that the returns from these post office deposit money are affected by inflation rates.

Age and other Requirements                           

  • No age limit is mentioned for opening a time deposit. The account can also be opened in the name of a minor.
  • A minor of 10 years and above age can open the account. A child of or above the age of 10 years can manage this account.
  • Non-resident Indians are not permitted to open Post Office term deposit accounts.
  •  Any single adult of Indian nationality can open an account
  • An adult guardian can also open this type of account on behalf of the minor
  • Group, as well as institutional accounts, are not permitted

Investment Conditions

Post office recurring deposit has some investment conditions:

  • The minimum amount required to be deposited to the post office to open this account is Rs.200.
  • There is no such limit on the maximum amount that can be deposited. But the amount must be in multiples of Rs. 200.

Interest Rates

​The government sets the interest rate of POTD at the start of each quarter in a financial year. Interest is payable annually but is calculated quarterly. If one doesn’t wish to withdraw the annual interest, they can instruct the post office to re-direct it into the savings account or a 5-year recurring deposit account.

There are 2 conditions –

1. The savings account has to be in the same post office

2.  This facility will not be available at sub-offices and branch offices but only at Head or Departmental Sub Offices.

The rate of interest on deposits is payable every year. The following are the different interest rates for different durations:-

Interest Rates on Post Office Schemes September 2018

·  1 year – 6.9% per annum.

·  2 years – 7.0% per annum.

·  3 years – 7.2% per annum.

·  5 years – 7.8% per annum.

Tenure of Deposit

Tenure of the deposit is the time duration for which an investor deposits/invests their funds. For this tenure, the funds remain locked in (early withdrawal subject to conditions). Some of the important points related to tenure of deposit are as follows:

  • The deposits made by the account holders under post office time deposit schemes have a minimum tenure of 1 year and a maximum term of 5 years.
  • Only one guarantee can be made in one duration of the deposit.
  • The account holder can enjoy the privilege to extend their deposits upon the time of account maturity.
  • In the case of 2 years, 3 years, 5 years accounts, the amount will be paid either in cash or by cheque. However, if the maturity amount, including interest, earned is more than Rs 20,000, the payment cannot be made by money; it can only be made by cheque.
  • When the deposit account is matured, it gets automatically renewed for the initially opened term. For example,​  2 years time deposit account will be automatically renewed for 2 years. The interest rate applicable on the day of maturity will be applied.

Nomination Facility

Post office time deposit provides nomination facility. Nomination is a facility that enables deposit account holders to nominate an individual who can claim the proceeds of the deposit accounts or contents of the safe deposit lockers post the death of the original depositors. There can be only one nominee per deposit. But, different deposits can be nominated in favour of other individuals.

Taxation Benefits Under The Scheme

If you deposit small savings in your post office account, there is no tax deducted at source (TDS), but interest earned on the investment is added to your total annual income, and you are subject to taxes according to your income tax bracket. If you invest for a period of 5 years or more, it may qualify for a tax deduction under Section 80C of the Income Tax Act.

Premature Withrdawals of POTD Deposits

The POTD meaning is Post Office Time Deposit. A post office time deposit account allows its account holders to withdraw their funds before the maturity date. In order to be able to do this, however, a minimum of 6 months must have passed since the time of first deposit. The following are conditions for premature withdrawal:

  • If you decide to withdraw your money after having it in a Post Office Account for between 6 and 12 months, simple interest will be paid according to Post Office Savings Account interest rate.
  • If you choose to withdraw your funds from the 1/2/3 or 5-year term deposit after 1 year from the date of account opening before maturity, the interest rate will be 1% lower than the interest rate that corresponds to your original term.

Advantages of POTD

Here are some of the advantages of POTD:

  • The Post Office Time Deposit Scheme will earn you guaranteed interest on your investments.
  • You can benefit from a tax deduction if you open a 5 year time deposit under Section 80C of the Income Tax Act.
  • Minors aged 10 and up can operate this account by themselves.
  • Investments can be made with as little as Rs. 200 and no upper limit.
  • The nomination process is available
  • You can easily transfer your accounts from one post office to another.
  • Deposits can be withdrawn before maturity.
  • POTD investments are considered to be more secure compared to FDs
  • There is no limit to the number of accounts that can be opened in a post office.

Who All Can Look For Investing In POTD?

Investors seeking an alternative to bank deposits may consider investing in Postal Time Deposit Schemes. Post Office Time Deposits offer higher interest rates than bank fixed deposits. If you are ultra-conservative and risk-averse and want a guaranteed return, Postal Time Deposit Schemes may be right for you.

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