ITR Filing FY 2023-24 (AY 2024-25) live

File your ITR Hassle-Free and Maximise your Refunds

File Today
  • TrustedTrusted by 1 Million+ Users
  • User Rating4.8 Star User Rating
  • SecureAuthorized by Tax Department
ITR Filing
linkedin
whatsapp

Post Office Fixed Deposit: Interest Rates & Benefits

Updated on: 12 Jun, 2024 02:40 PM

The Post Office Fixed Deposit (POFD) is a deposit scheme that is offered by Indian Postal services. This is also known as Post Office Time Deposit. This is a sort of investment through which an individual can earn a guaranteed return on the amount he or she deposited for a fixed period of time. Depositors get benefits of tax deductions on the interest they earn from this investment. In this article, we will learn more about the Post office fixed deposits, interest rates, eligibility criteria, and benefits. The post office FD rates can range from 6.9% to 7.5% p.a and the FD tenure can range from 1 to 5 years.

What is a Post Office Fixed Deposit?

A Post Office Fixed Deposit is an investment that can be deposited in a post office to earn interest. The time period for these fixed deposits are one year, two years, three years and five years. This scheme of post office is utilized more as compared to bank deposits in rural areas. The interest rates under this scheme currently varies from 6.9% to 7.7%. By investing in this deposit scheme one can get taxation benefits under section 80C. The interest that is paid is charged with Tax Deduction at Source (TDS).


Tax Benefits of Post Office Fixed Deposit

The major benefit of the post office deposit scheme is saving tax. Tax deductions are allowed under section 80C of the income tax act for the interest from the post office deposit scheme. The deductions are only allowed on the investments if they are made for a time period of five years. The maximum of Rs 1,50,000 can be claimed as a tax deduction by the taxpayer under this section. The interest that is paid in this scheme is subject to tax deduction at source. If TDS is not deducted, it is to be clearly declared in the return of income filed by the taxpayer.


Tax Benefit of Post Office Fixed Deposit for Senior Citizens

For senior citizens of India, the interest received from post office fixed deposits will be tax-exempt. The interest income that is exempt from taxation for them is a maximum upto Rs. 50,000 under section 80TTB of the Income Tax Act.


How to Invest in Post Office Fixed Deposit

Post Office Fixed Deposits are ideal for those who are risk-averse in nature. Individuals who have a low risk-taking ability can invest in post office fixed deposits and earn handsome interest. The rates of this fixed deposit is sometimes higher than that of bank fixed deposits. The rate of interest in this scheme depends on the time period for which the investor chooses to invest. The longer the time period the higher will be its rate of interest. So, the major decision for opening a fixed deposit in the post office is to decide the amount as well as the time period for which the amount is to be invested in the post office. The interest somewhere comes in between a bank's fixed deposit rate and a company’s fixed deposit rate.

In the era of the internet, the application of Post Office Deposit Scheme can be done online easily. The steps of application of this scheme offline are as follows:

  • Selection of post office where you want to open the post office deposit account.
  • Fill the opening form of fixed deposit in the branch.
  • Furnish relevant documents such as address proof, ID proof, and so on, and complete the formalities.
  • Decide the amount to be deposited and the time period for which you want to open a fixed deposit account.

Post Office Fixed Deposit Interest Rates 2024

The government keeps on revising the rate of interest for the post office fixed deposit scheme. The Post Office Fixed Deposit interest rates as of June 1 2024, are given below -

Time period Rate of interest (%)
One year
Two years
Three years
Five years
6.9%
7.0%
7.1%
7.5%

Eligibility to Invest in Post Office Fixed Deposits

Any individual who is a resident of India can open a fixed deposit account in a post office. Non-Resident Indians are not allowed to open a fixed deposit account in post office. The depositor can open a fixed deposit account by cash or cheque. The date on which the cheque is realized is the date of the opening of the account in Government records. This investment features low risk and steady incomes. This also gives protection to the capital and ideal for people who are retiring or retired.

To summarize, the following can invest in an FD -

  • Any individual
  • Guardian on behalf of a minor
  • Minor above 10 years in his/her own name
  • NRIs cannot open a fixed deposit account

Individuals can open a post office fixed deposit account by cash or cheque. If you want to know how much returns to expect, you can also consider using a post office fixed deposit calculator.


Features and Benefits of Post Office Fixed Deposit Scheme

Here are the features and benefits of the post office fixed deposit scheme -

Features

  • The minimum deposit amount is Rs.1000 and there is no maximum limit.
  • Tenure of a fixed deposit can be 1, 2, 3, or 5 years.
  • Interest is paid annually and calculated quarterly.
  • It also allows pre-mature withdrawal after 6 months and a nomination facility.

Flexibility

  • Minimum Amount: Rs. 1,000 to open an account, with no maximum limit.
  • Account Conversion: Convert from single to joint account and vice versa.
  • Multiple Accounts: No limit on the number of FD accounts you can open.
  • Minor Accounts: Can open in the name of a minor, managed by a parent or legal guardian.
  • Account Transfer: Transfer FD account between post offices.

Nomination

  • Initial Nomination: Nominate a person when opening the account.
  • Subsequent Nomination: The nominee can nominate another person even with an existing account.

Interest

  • Payout: Earn interest annually, calculated quarterly.
  • Rates: Attractive interest rates, often higher than bank FDs.

Maturity

  • Term Deposits: Options include One-year, Two-year, Three-year, and Five-year TDs.
  • Post Maturity: Withdraw or renew the deposit upon maturity.

Premature Withdrawal

  • Partial Withdrawal: Allowed after six months from the deposit date.

Premature Closure

  • Closure Terms:
    • After 6 months but before 1 year: Interest at the PO savings account rate.
    • After 1 year for 2, 3, or 5-year TD: Interest calculated at 2% less than the TD rate for completed years.
  • Procedure: Submit the application form with the passbook at the concerned post office.

Tax Implications

  • Deduction: Claim under Section 80C for deposits in the 5-year FD account.
  • TDS: Tax deducted at source if interest exceeds Rs. 40,000 per financial year for regular customers.

For a safe and secure investment, individuals can opt for a post office fixed deposit scheme. This deposit scheme is offered by the post office for various time periods at ideal interest rates. Under section 80C of the Income Tax Act, the interest received is exempt from taxation with certain terms and conditions and maximum limits. The post office fixed deposit is risk-free and mostly opted for by rural area people. However, in order to claim this exemption it is mandatory to file your ITR on time.

If you want to claim all your tax exemptions and deductions for FY 23-24, file your ITR ASAP to get faster refunds. With Tax2win, you can file your ITR yourself in under 4 minutes. And if you need assistance with filing your ITR and have any tax-related query you can also hire an online CA. File ITR Now!


Frequently Asked Questions

Q- Is Post Office FD taxable?

Yes, the post office fixed deposits are taxable for the interest paid, but the tax deduction at source is not done by the post office. One can save the tax by opting maturity period of five years for the deposits and get an exemption from taxation maximum upto Rs 1,50,000.


Q- Who can open a post office fixed deposit account?

All the residents of India except NRIs (Non Resident Indians) can open a post office deposit account.


Q- What is the limitations of amount under the scheme of fixed deposits in post office?

The fixed deposit account of the post office can be opened with a minimum of Rs 200, and there is no limitation of maximum amount for the same.


Q- For how long the amount can be deposited in fixed deposit of post office?

The depositor can opt for various tenures for depositing money in fixed deposits of post office. It can be deposited for one year or two year or three year or five years as per the convenience.


CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.