What is a Post Office Term Deposit?

Do you have a Fixed Deposit (FD)? Or have you ever invested in FDs? Well, Post office Term Deposits (POTD) is similar to fixed deposits, with one slight difference being the location. As an investor, you are investing in fixed deposit schemes started by Indian postal services, where you can earn an assured return on the money deposited in fixed deposits, just like any banking GFD schemes.

However, the scheme is not popular in urban cities but is used by many in rural areas. From opting for tenures ranging from 1 to 5 years to interest rates being better than other government-led schemes, Post Office Term Deposits suits the conservative mindset of investors more who don’t want to undertake risk but want returns.

From investing a minimum of Rs 1000 to converting your account to a joint account, POFD offers many benefits, which makes it better than Banking Fixed Deposits schemes. Such as:

  1. Tax Benefits

Under section 80C, you can claim tax benefits on the deposits made in the 5 years fixed deposits account.

  1. Interest

Offering better interests than other schemes, an individual can earn a return on maturity period with less risk.

  1. Withdrawals

When the account matures after the set tenure, you can withdraw or renew your account according to your wish.

  1. Multiple accounts

You can open multiple FD’s for multiple tenures under the POFD and handle your investments systematically.

Key take aways:

  • Deposits under the Post office term deposits vary in tenure from 1, 2, 3, 4, or 5 years.
  • You can easily transfer time deposit accounts from one post office to another.
  • With respect to multiple-time deposit accounts, there is no cap. You can open as many as you want.
  • Other than post offices, now the central government has allowed public banks such as ICICI, HDFC, Axis bank to open the POTD account.
  • The scheme is not only low risk but also offers high capital protection in that it is backed by the government. The investment, therefore, grows at a pre-determined rate with assured returns.
  • If inflation is above the interest rate offered, there are no high returns. The scheme is, therefore, not insulated from inflation.
  • The interest rate for a five-year deposit will be notified before April 1 every year. It is usually aligned with G-sec rates of similar maturity with a spread of 0.25%.
  • An individual can borrow against the deposit or withdraw the deposit prematurely.
  • Since the scheme is offered by the government of India, it does not require any commercial rating.
  • If a deposit is split across varying tenures, only a few deposits will lose interest in case of any premature withdrawal

Though the schemes are available in all the post offices across the country, it is especially known in rural areas where the investment options are less in comparison to cities.

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Pooja Sharma

Pooja is a digital nomad and founder of HotMail Log. She travels the world while freelancing & blogging. She has over 5 years of experience in the field with multiple awards. She enjoys pie, as should all right-thinking people.

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