The Central Govt of India offers attractive interest rates to Indian citizens via Post office Saving Schemes. Post Office FD Interest Rates are also quite interesting and it ranges from 6.5% to 8%. Post Office FD comes in various tenures of 1 to 5 years.
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What is Post Office Time Deposit( TD)?
TD stands for Time Deposit. Post Office Fixed deposit is referred to as time deposit Post Office.
TD is nothing but a Fixed Deposit or Term Deposit account. Post office fixed Deposit or time deposit pays annual interest.
How Post Office TD/ FD works
- Deposit a lump sum amount for a chosen duration.
- You will receive interest every year till the end of the tenure
- At the end of the tenure, you will get your deposit amount back
What are the benefits of Post office Fixed deposit
- Backed by the Government of India
- Safe investment option
- Guaranteed returns
- One can invest as little as Rs. 1,000 thus encouraging people to save more.
Taxation
Effective 01-Apr-2020, The income tax benefits will depend upon whether you choose the old tax system or the new tax system.
Old Tax System:
The deposit amount (up to Rs. 1.5 Lakhs) under 5 Years TD will qualify for tax deduction under Section 80C of the Income Tax Act.
Please note, that there will be no tax deduction benefit for deposits under 1 year, 2 years or 3 years TD account.
TDS (Tax Deducted at Source) is NOT applicable under Post Office Fixed Deposit.
Interest received under this scheme is taxable. You need to declare the interest income under “Income from Other Sources” during tax returns and pay the income tax as per your income tax slab.
New Tax System:
No income tax benefits. The deposit amount won’t get any deduction benefit under Section 80C of the Income Tax Act.
No TDS (Tax Deducted at Source) under this scheme by Post Office.
Interest received under this scheme is taxable. You need to declare the interest income under “Income from Other Sources” during tax returns and pay the income tax as per your income tax slab.
Who can open the Fixed Deposit post Office?
Only Indian residents can open Fixed Deposits. NRI (Non-Resident Indians) and HUF (Hindu Undivided Family) can not open the account.
Post Office FD can be opened by
- an adult for himself
- an adult on behalf of a minor or a person of unsound mind of whom he is the guardian
- a minor who has reached the age of 10 years
- joint account by up to 3 adults
- a minor above 10 years in his name.
- You can open more than one account in your name or jointly with another person.
How to open the Post Office FD?
Offline Mode
- Account can be opened by cash or cheque.
- In case of cheque, the date of realisation of cheque in the account will be the date of account opening.
- Any number of accounts can be opened in any Post Office.
Online Mode
- Download IPPB App
- Start your Post Office Bank Account
- Or else link your Post Office Saving Account with IPPB
- Start your Fixed Deposit or TD
Deposit limit
- The Minimum deposit amount is Rs. 1,000.
- No maximum limit for deposit.
- The deposit amount should be in multiples of Rs. 100.
Deposit term
You can choose from the 4 options- 1 year, 2 years, 3 years & 5 years.
Post Office Fixed Deposit Interest Rates 2024
What is the interest rate for the Post Office in 2023 -24? The current annual interest rates for various tenures are given below.
| Duration of Fixed Deposit | Interest rates |
| 1 year | 6.90% |
| 2 year | 7.00% |
| 3 year | 7.10% |
| 5 year | 7.50% |
The interest rate (on the day of account opening) will remain the same throughout the tenure of the Fixed Deposit. It will not change even if there are changes to the interest rate thereafter.
Compound frequency
POTD is Quarterly compounding. But, the interest amount will be paid to you every year.
Auto renewal facility
In CBS (Core Banking Solution) Post Offices, when the TD account is matured, it will be automatically renewed for the period for which it was initially opened.
For example, 2 Years TD account will be automatically renewed for 2 Years. 1 year TD account will be automatically renewed for 1 year.
The interest rate for the auto-renewed TD account will be the interest rate on the day of maturity.
Pre mature closure
- Pre-mature closure is allowed only after 6 months from the date of deposit.
- If withdrawn before 1 year, PO Savings Account interest rate is applicable.
- For 2/3/5 year Fixed Deposit, if withdrawn before the said duration 2% lower interest is paid for (1/2/3 year interest rates).
- TD account can be closed prematurely by submitting a prescribed application form with pass book at the concerned Post Office.
Suppose Bestii closes his 2 year Fixed deposit after 1 year then he will get interest rate of 1 year minus 2%.
If he closes his 3 year Fixed deposit after 2 years then he will get an FD interest rate of 2 years minus 2%.
If he closes his 5 year Fixed deposit after 3 years then he will get an FD interest rate of 3 years minus 2%.
SBI FD rates vs Post Office term deposit rates
SBI Fixed deposit interest rates verses Post office Fixed Deposit Rates
| Time Duration | SBI FD rates | Post office Fixed deposit rates |
| 1 Year | 6.80% | 6.90% |
| 2 year | 7.00% | 7.0% |
| 3 year | 6.75% | 7.10% |
| 5 year | 6.50% | 7.50% |
What is the interest of 1 lakh FD in the post office?
| Time Duration | Fixed Deposit Amount | Post office Fixed deposit rates | Yearly Interest Amount |
| 1 Year | Rs. 1,00,000 | 6.90% | Rs. 7080 |
| 2 year | Rs. 1,00,000 | 7.0% | Rs. 7185 |
| 3 year | Rs. 1,00,000 | 7.10% | Rs. 7291 |
| 5 year | Rs. 1,00,000 | 7.50% | Rs. 7713 |
Is Post Office 5 years FD tax-free?
No, Post Office 5 year FD is not tax free. The gain from post office fixed deposits is taxed as income from other sources. However, if under old tax system one gets tax deduction U/S 80C for up to Rs 1.5 lac.
How to Plan Your Investment?
You can always work with a Certified Financial planner and plan your finances, including Emergency funding, building a corpus for house purchase, and taking care of your health needs so that you can plan a better retirement income in your second inning, leading to a more secure and financially stable retirement.
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