Post office interest rate: Recently, we have discussed the list of Chapter-VIA (Sections 80C to 80U) deductions available in computing taxable income of a tax payer for Assessment Year 2021-22. Under section 80C of the Income Tax Act, 1961 there is an option for depositing amount in a post office and claim deduction for financial year 2020-21. Accordingly, today we shall discuss about the term deposit under Post Office Saving Scheme.
Did you know? The first post office was set up in Kolkata back in the year 1727. Thereafter, General Post Offices (GPOs) were also set up in the then three Presidencies of Kolkata (1774), Chennai (1786) and Mumbai (1793). The Indian postal network is governed by the Indian Post Office Act, 1898. Additionally, Indian Post Office Rules, 1933 serve as subordinate legislation.
Post Offices in the country are categorized as Head Post Offices, Sub-Post Offices and Branch Post Offices. India has the largest postal network in the world with 1,55,015 Post Offices as on 31st March, 2015, of which 1,39,222 (89.86%) are in the rural areas. But, it has been reduced to 154,965 Post Offices as on 31.03.2017, of which 139,067 are in the rural areas.
The Post Office Savings Bank operates Savings Accounts, Recurring Deposit (RD), Time Deposit (TD), Monthly Income Scheme (MIS), Public Provident Fund (PPF), National Savings Certificate (NSC), Kisan Vikas Patras (KVP), Senior Citizens Savings Scheme (SCSS) and Sukanya Samridhi Accounts (SSA).
Post Office time deposit account is 100% risk free investment which is similar to a bank fixed deposit, where you can deposit money for a fixed period and earn a guaranteed return through the tenure of the deposit. This is because the capital in the Post Office Time Deposit Account is completely protected as the scheme is backed by the Government of India, making it totally risk-free with guaranteed returns.
Some most relevant facts are mentioned below which may help you to decide whether you should invest in Post Office TD Account or not.
- For Individuals: Post Office TD Account may be opened by any individual.
- Cash/Cheque: Post Office TD Account can be opened by cash/cheque and in case of cheque the date of realization of cheque in Government account shall be date of opening of account.
- Nomination: Nomination is a facility that enables you to nominate an individual, who can claim the proceeds of the Post Office TD account. Nomination facility is available at the time of opening as well as after opening of Post Office Time Deposit Account.
- Transferability: You can transfer your Post Office TD account from one post office to another post office.
- Maximum No. of Account: You can open any number of accounts in any post office.
- Account for Minors: Post Office TD Account can be opened in the name of minor and a minor of 10 years and above age can open and operate the account. However, minor after attaining majority has to apply for conversion of the account in his name.
- Joint Account: Two adults may open joint TD account. Single account can also be converted into Joint and Vice Versa.
- Tenure: Post Office TD account is available for tenures of 1, 2, 3 and 5 years.
- 80C Deduction: The investment under 5 Years TD qualifies for the benefit of Section 80C of the Income Tax Act, 1961. That means if you want to claim deduction under section 80C then you have to invest for a tenure of 5 years.
- Amount Limit: There is no limit of maximum deposit under Post Office TD Account. However, you have to invest minimum of ₹1000/- and in multiples of ₹100/- thereafter.
Post Office Interest Rate for TD Account
The best part of opening a Time Deposit (TD) account in a Post Office is that you will enjoy higher interest rate than usually provided by any banks in India. Additionally, you shall also eligible for claiming deduction upto ₹1,50,000 under section 80C of the Income-tax Act, 1961.
The post office interest amount shall be calculated on quarterly basis but the same shall be paid annually. There is no tax benefit on deposits with less than five-year tenure. Lock-in-period is 5 years for claiming deduction under section 80C. The 5-year deposit currently offers an interest rate of 6.7 per cent per annum.
Your time deposit account shall automatically be renewed at the time of maturity for the period for which the account was initially opened in CBS Post Offices. In that case, interest rate applicable on the maturity date will be applied to your renewed time deposit account.
However, you should also note that the returns earned from time deposit account are taxable at maturity. That means interest income from your TD Account is taxable but there is no TDS certificate issued by Post Office.
| Period of Time Deposit Account | Interest Rate (2023-24) |
|---|---|
| 1 Year TD Account | 6.6% p.a. |
| 2 Year TD Account | 6.8% p.a. |
| 3 Year TD Account | 6.9% p.a. |
| 5 Year TD Account | 7% p.a. |
Open Post Office Time Deposit Account
As per Annual Report 2018-2019, there are more than 212 Lakhs Post Office Time Deposit (TD) Account wherein outstanding amount is more than 124,000 Crores. Moreover, this deposit will be risk free because it governed by Indian Government itself.
Opening a Post Office time deposit account is very simple. Just visit your nearest head post office or any post office branch and fill up the simplified deposit opening form provided by the post office to open a Post Office Time Deposit Account. You have to write a name of nominee in the form and witness signature to complete the formalities to start the deposit.
Documents for Opening Post Office Time Deposit Account
Following documents are required at the time of opening your Post Office Time Deposit Account:
Identity Proof
You may show Aadhar Card, PAN Card, Passport, Driving License, Voter Card as proof of identity.
Address Proof
You may provide address proof documents such as copy of the passport, driving license, Adhaar Card, voter’s ID or ration card or PAN (Permanent Account Number) card or declaration in form No 60 or 61 as per the Income Tax Act 1961.
Please, carry the original identity and address proof documents for verification at the time of opening time deposit account in a post office.