Post Office Time Deposit Scheme: Anyone can open a Post Office Time Deposit account at any post office in the country, both offline and online. Post Office Time Deposit accounts are easily transferable from one post office to another across India.
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Post Office Time Deposit Scheme: Similar to fixed deposits (FDs), the Post Office Time Deposit Scheme is a fixed-income small savings scheme offered by the Indian Post Office. Investors can invest a lump sum for a fixed period and earn guaranteed interest income. This scheme is backed by the Ministry of Finance, making it a completely safe investment. Stable returns, flexible investment options, and competitive interest rates make this scheme popular among investors. Currently, the Post Office Time Deposit Scheme offers interest rates ranging from 6.90% to 7.50%.
These interest rates are applicable for different tenures, from 1 year to 5 years.
Key Features of the Scheme
It offers guaranteed and secure returns. It offers an investment option similar to a bank FD. It is backed by the Central Government. Investment options are available for 1, 2, 3, and 5-year periods. It is suitable for medium- and long-term investors. You can open a time deposit account with a minimum deposit of ₹1,000. Additional deposits can be made in multiples of ₹1,000, with no upper limit. Premature withdrawals are also permitted after 6 months, providing depositors with liquidity in case of a financial emergency.
Calculating Returns on a ₹700,000 Investment
When you deposit ₹700,000 in this 5-year Post Office scheme with an interest rate of 7.5 percent, upon maturity, i.e., after 60 months, you will receive ₹314,964 in interest alone, guaranteed. Thus, after five years, you will have a total corpus of ₹1014,964. This means you will receive a guaranteed return without taking any market risk.
Tax Benefits Also
The 5-year time deposit scheme is eligible for tax deduction under Section 80C, with a limit of ₹1.5 lakh per year. However, the interest earned is fully taxable, and if the interest exceeds the annual exemption limit, TDS will apply. Interest on the Post Office Time Deposit Scheme is calculated quarterly with compounding, while interest is paid annually. This arrangement is particularly beneficial for investors who seek better returns through compounding over the long term, while also receiving regular interest income every year.
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