Post Offices have been working in India for a long time and their reach is far and wide. They are able to reach even the farthest of rural areas where banks fail to operate.
Government has made small savings schemes available via post offices. These small saving schemes provide safe investment avenue to the public. By giving the investors goods returns while keeping their money safe, these schemes are easy to manage.
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 as compared to bank fixed deposit.
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 scheme is backed by the Government of India. Thus, the capital in the POTD is completely protected.
The POTD is not inflation protected. This means that the returns from these deposits are affected by inflation rates.
No age limit is mentioned for opening a time deposit. Account can also be opened in the name of minor.
A minor of 10 years and above age can open the account. A minor of or above the age of 10 years can manage this account.
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.
The interest rate of POTD is set by the government 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 post office savings account or into a post office 5-year recurring deposit account.
There are 2 conditions –
- The savings account has to be in the same post office
- 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 on a yearly basis. 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 deposit is the time duration for which an investor deposits/invests his/her funds. The funds remain locked-in for this tenure (early withdrawal subject to conditions).
The deposits made by the account holders under post office time deposit schemes have minimum tenure of 1 year and maximum tenure of 5 years. Only one deposit can be made in one duration of deposit.
The account holder can enjoy the privilege to extend their deposits upon the time of account maturity.
In the case 2 years, 3 years, 5 years accounts, the amount will be paid either in cash or by cheque. If the maturity amount, including interest, earned is more than Rs 20,000, the payment cannot be made by cash; it can only be made by cheque.
When any time deposit account is matured the account gets automatically renewed for the term it was originally opened. For example, 2 years time deposit account will be automatically renewed for 2 years. Interest rate applicable on the day of maturity will be applied.
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 different individuals.
Non-resident Indians are not permitted to open Post Office time deposit accounts.
Not all are eligible to open a post office time deposit account. Following are the requirements to be eligible to open this account:-
- Any single adult of Indian nationality can open an account
- A minor of or above the age of 10 years can open and manage this account
- An adult guardian can also open this type of account on behalf of the minor
- Non-Resident Indians are not allowed to open this type of an account
- Group as well as institutional accounts are not permitted