Post Office Time Deposits

Definition: The Post Office Time Deposits are a saving scheme offered by the Indian Postal Service on which a fixed interest is paid. Often, the investors deposit a good chunk of their financial assets with a view to earning a fixed interest on it.

The Post Office Time Deposits are similar to the fixed deposits of commercial banks (a saving or term deposit account opened in a bank on which fixed rate of interest is paid). It offers the following features to the investors:

1. The interest is calculated quarterly but is credited annually. The annual interest rate effective from 1 April 2016 are:

• For a Tenure of 1 year- 7.1% p.a.
• For a Tenure of 2 years- 7.2% p.a.
• For a Tenure of 3 Years- 7.4% p.a.
• For a Tenure of 5 Years- 7.9% p.a.

2. The minimum deposit to open an account is Rs. 200, and there is no limit on maximum deposits.
3. The account can be opened individually or jointly by two adults. Also, an account can be opened in the name of a minor or a minor of the age of 10 years or above can open and operate the account. Once the minor attains the age of 18 years, he/she has to apply for the conversion of the account in his/her name.
4. Any number of accounts can be opened in any post office. Also, the accounts can be transferred from one post office to another.
5. In the case of a CBS (Core Banking Solutions) post offices, if the time deposit account matures then it will be automatically renewed for the same time period for which it was initially opened. The rate of interest as applicable at the time of the maturity of the account will be applied.
6. An investment for a 5-year time deposit qualifies for the tax deductions under section 80 C of the Income Tax Act, 1961.

Note: A single account can be converted into a joint account, and also the joint account can be converted into a single account.