Post Office Time Deposit is not just a safe investment, but with the right strategy, it is also a powerful wealth creator. If you can stay invested for the long term and allow the magic of compounding to work, this simple scheme can give you extraordinary results.
Post Office TD Scheme: When it comes to investments with safe and guaranteed returns, crores of Indians trust the schemes of banks and post offices the most. Here your money is 100% safe and the returns are also pre-determined. One such superhit scheme of post office is Time Deposit, which we also call FD (Fixed Deposit) of post office in common language.
If you are also such an investor who does not want to take market risk, but also wants to see your money grow rapidly, then this scheme of post office can be helpful for you. You can also earn more interest than the principal through this scheme. Meaning if you invest 5 lakhs, then you can earn 10 lakh rupees in interest. You just have to adopt a special method for this. Know about this.
What is Post Office Time Deposit (POTD)?
It works just like a bank FD. You deposit a lump sum amount for a fixed period and get a fixed interest rate on it. You can open a time deposit account in the post office for 1 year, 2 years, 3 years and 5 years. The interest rate is different for each period.
Current interest rates (July-September 2025 quarter)
- 1 year TD: 6.9%
- 2 year TD: 7.0%
- 3 year TD: 7.1%
- 5 year TD: 7.5%
- Apart from this, by investing in 5 year TD of post office, you also get tax exemption of up to Rs 1.5 lakh under section 80C of Income Tax Act.
How will the money more than double? Know the power of ‘extension’
Most people withdraw money when their FD matures. But the post office also gives you the option to extend your time deposit after maturity. And when you do this, the real power of compounding starts showing its magic. To earn double the interest from the original, you have to extend it twice.
Let’s understand this with calculation:
Suppose, you have made a 5-year TD of ₹5,00,000 in the post office.
Maths for the first 5 years
Investment amount: ₹5,00,000
Interest rate: 7.5% (annual compounding)
Interest you will get after 5 years: ₹2,24,974
Total amount on maturity: ₹5,00,000 + ₹2,24,974 = ₹7,24,974
Everything is fine till here. Now most people will withdraw this ₹7.25 lakh. But you don’t have to do this. You have to extend this FD for the next 5 years.
Magic of the next 5 years (total math for 10 years)
- Now your new principal will be: ₹7,24,974 (old principal + interest)
- For the next 5 years, this entire amount will earn interest at the rate of 7.5% (assuming the interest rate remains the same).
- After 10 years, your total interest will be: ₹5,51,175
- Total amount on maturity after 10 years: ₹5,00,000 + ₹5,51,175 = ₹10,51,175
Should I get an extension again?
You are not allowed to withdraw money in the 10th year as well. You will have to extend it once again, meaning you will have to continue it for 15 years.
Now look at the math for 15 years
- Now your new principal will be: ₹10,51,175 (old principal + interest)
- For the next 5 years, you will get interest at the rate of 7.5% on this entire amount (assuming that the interest rate remains the same).
- After 15 years, your total interest will be: ₹10,24,149
- Thus, the total amount on maturity after 15 years: ₹5,00,000 + ₹10,24,149 = ₹15,24,149
- It means you invested 5 lakh rupees, but earned 10,24,149 rupees on it only from interest. In this way, you have created a fund of 15,24,149 rupees from 5 lakh.
What are the rules of account extension?
There are some simple rules to follow to extend the account:
You can request for an extension at the time of opening the account or you can extend it even after maturity.
Time Limit
- 1 year TD can be extended within 6 months from maturity.
- 2 year TD can be extended within 12 months from maturity.
- 3 and 5 year TD can be extended within 18 months from maturity.
Interest Rate: When you extend the account, the same interest rate is applicable on it which is applicable on TD of that period on the day of maturity.
