Post Office Fixed Deposit : Interest Rates, Opening Procedure and Premature Withdrawal

Post-Office-Fixed-Deposit

Post Office Fixed Deposit is one of the safest and most stable investment avenues as it acts as an asset for fulfilling financial goals. Numerous Non-Banking Financial Companies (NBFC) and banks offer fixed deposit accounts with attractive post office FD interest rates. Moreover, senior citizens get an additional interest in the post office FD. 

Individuals can deposit an amount for a tenure ranging from 1 to 5 years and call for a renewal of the FD upon tenure completion. Post office fixed deposits are ideal for individuals willing to invest capital with a lower risk of loss. This article will walk you through the post office FD interest rates, procedures, eligibility, and more. 

Post Office Fixed Deposit

Fixed deposits are among the safest investment opportunities offered by Non-Banking Financial Companies, post offices and banks. It is also known as a Post Office Term Deposit. 

The Government of India’s Posts Department and Ministry of Communication offer a fixed deposit account with several benefits. They also offer higher interest rates with a tenure ranging from 1 to 5 years, and a minimum post office term deposit of INR 1,000 is required on the fixed deposit. However, there is no cap on the maximum deposited amount.

Post Office FD Interest Rates 2024

The interest rates that the Government provides are subject to change as they regularly update the FD rates. A glance at the below-mentioned table will give a better understanding of the Post Office FD interest rates:-

TenureFor General PublicFor Senior Citizens
1 year6.90%6.90%
2 years7.00%7.00%
3 years7.10%7.10%
5 years7.50%7.50%

Features and Benefits of Post Office FD Interest Rates Scheme

There are multiple features and benefits of the post office fixed deposit scheme. Some key features and benefits are mentioned below:-

  • A Post Office FD account can be converted into a joint account of 3 members. On the contrary, a joint account can also be converted into a single account
  • An individual can open a post office fixed deposit account for a tenure of 1 to 5 years
  • Both online and offline facilities are available for opening a post office fixed deposit account 
  • The accounts are operable on cash and cheques
  • Six months is the minimum tenor for making a premature withdrawal
  • The post office fixed deposit accounts credit the annual payable interest into the depositors account directly
  • The account holder of a 5-year tax-saving account is eligible for deduction under the IT Act of 1961 with a limit up to INR 1.5 lakh in a financial year

Required Documents for Post Office FD Interest Rates

The following documents are required to open a post office FD interest rates account:-

  • 2 photographs (passport size)
  • PAN Card
  • Identification documents such as Voter ID, Passport, Aadhaar Card, and Driver’s License, to name a few.
  • Proof of Address such as electricity bill, water bill, ration card, and property papers, to name a few. 
  • Bank account details such as a statement of account, passbook, and account number 
  • Age proof such as birth certificate 

Who can Open a Post Office Fixed Deposit Account?

The below-mentioned category is eligible to apply for a post office fixed deposit account:-

  • Single adults who are older than 18 years of age can apply for a post office FD account.
  • Minors who are above the age of 10 years can apply for a post office FD account with the help of their legal guardian.
  • Resident Indians, Persons of Indian Origin, and Non-Resident Indians are eligible to book an FD
  • Hindu Undivided Families (HUFs), clubs, associations, partnership firms, and family trusts are also eligible for an FD account 

Procedure to Open a Post Office Fixed Deposit Account

There are both online, and offline facilities available to open a post office fixed deposit account. The following steps are available:-

Online Method:

The open post office fixed deposit facility is available via Intra Operable Net Banking and Mobile banking. Requirements to open an online fixed deposit account include the following:-

  • PAN Card
  • A valid savings account
  • A valid email address and mobile number
  • A valid DOP (Department of Post) or an active debit card
  • Verified KYC documentation

Offline Method:

Follow the step-by-step process to open a post office fixed deposit account:-

Step 1: Go to the nearest post office branch of Indian Post and carry all the required KYC documents.

Step 2: Educate yourself about the latest schemes and interest rates the post office provides, as it is subject to change.

Step 3: A post office executive will guide you through the process of opening a post office fixed deposit.

Step 4: You need to open a term deposit account and collect the receipt for later purposes. 

Why Should You Invest in Post Office Fixed Deposit?

Opening a post office fixed deposit account is ideal for those looking to invest smaller amounts. The saving amount is the best for opening a post office account as there is no TDS deduction on this type of investment. This kind of fixed deposit account is ideal for individuals who want to save money for an extended period of time, as these savings can be used for any future goals.

However, to get the utmost benefit of a post office fixed deposit, an individual must invest for a tenure of 3 to 5 years.

Premature Withdrawal of Post Office FD

The minimum tenure for a premature withdrawal is six months from the date of the inception of the account. If the individual makes a closure before the maturity of the deposit, they may be liable to pay the penalty on the interest earned. If the individual withdraws between 6 and 12 months from the inception of the fixed deposit, then the interest will be payable as per the Post Office Savings Account Interest Rate.

If you take your invested funds out of a post office FD before the maturity date, a 1% penalty will be assessed. While premature FD withdrawal is not advised, it is permissible in unforeseen situations.

TDS Deduction on Post Office FD

Is the Post Office’s FD taxable? It is, indeed. As per the Post Office TDS regulations, the TDS on Post Office FDs is applied based on your interest earned for the financial year.

Post Office FD TDS is only applicable if the interest earnings for normal investors exceed 40,000 yearly, in accordance with Section 80TTB of the Income Tax Act. However, the TDS on Post Office senior citizens programmes is applied if the interest earnings surpass Rs. 50,000.

For clients who are Indian residents, the Post Office FD rate for TDS is 10% of the interest received above the exemption amount. The post office TDS rate will be 20% if PAN Card information is not provided.

Types of Post Office FD Schemes

The below-mentioned table will provide a better understanding on the new interest rates on post office schemes:-

InstrumentsInterest RateCompounding Frequency*
Post Office Savings Account​​4.00%Yearly
1 Year Time Deposit6.90% (Annual Interest Rate 677 on INR 10,000 deposit)Quarterly
2 Year Time Deposit​​7.00% (Annual Interest Rate 697 on INR 10,000 deposit)Quarterly
3 Year Time Deposit​​7.10% (Annual Interest Rate 708 on INR 10,000 deposit)Quarterly
5 Year Time Deposit7.50% (Annual Interest Rate 718 on INR 10,000 deposit)Quarterly
5 Year Recurring Deposit Scheme​​6.70% 5 Year – 6969.67 INR, 6 Year – 8620.98 INR, 7 Year – 10370.17 INR, 8 Year – 12223.03 INR, 9 Year – 14185.73 INR, 10 Year – 16264.76 INRQuarterly
Senior Citizen Savings Scheme​​8.20% (Quarterly interest INR 200 on INR 10,000 deposit)Quarterly & Paid
Monthly Income Account​​7.40% (Monthly instalment INR 59 on INR 10,000 deposit)Monthly & paid
National Savings Certificate (VIII Issue)7.70%Yearly
Public Provident Fund Scheme​​7.10%Yearly
Kisan Vikas Patra​​7.50% (maturity period 120 months)Yearly
Sukanya Samriddhi8.20%Yearly

Post Office Senior Citizen FD Rates

The senior citizen saving scheme is designed especially for any citizen over the age of 60 years. The maturity period of such accounts is usually 5 years. Moreover, the deposit must be made at once with multiples of INR 1,000, and the maximum limit for the deposited amount is INR 30 lakhs. 

Tenure for Senior Citizen Fixed DepositYearly Interest Rate 
10 years9.50%

Additional Features of Post Office Fixed Deposit Scheme

The below-mentioned schemes are a few additional features of the post office fixed deposit scheme:- 

Post Office Time Deposit Scheme

  • INR 1,000 is the minimum deposit amount.
  • The deposit tenure ranges between 1 and 5 years.
  • Under the Income Tax Act, 1961 section 80C individuals can avail of tax benefits in case the tenure is 5 years. 

Saving Scheme for Senior Citizens

  • INR 1000 is the minimum amount individuals can deposit.
  • This scheme is flexible, and you can extend the tenure up to 3 years from the maturity date.
  • The interest is paid on a quarterly basis.

Post Office Monthly Income Scheme

  • INR 1,000 is the minimum amount individuals can deposit.
  • INR 4.5 lakh and INR lakh are the maximum amounts an individual can deposit in a single and joint account, respectively.
  • The interest gets paid on a monthly basis.

Different Types of Forms for Post Office Fixed Deposit Account

The below-mentioned table highlights the different types of forms an individual needs to present to the Indian Post Office for various purposes:-

FormThe Intention of the Application
Form-1Opening an account
Form-2Closure of the account
Form-3Extension of an account
Form-4Premature closure of the account
Form-5Pledging of an account

Post Office Loan Against Fixed Deposit

The investment that an individual makes isn’t just a reliable investment, but it also acts as an asset against which you can apply for a loan. The Indian Post Office allows individuals to secure a loan against the post office fixed deposit. The loans offer several advantages mentioned below:-

  • The Indian Post Office allows you to borrow up to 90-95% of the fixed deposited amount.
  • Lower interest rates are levied on such loans, which are about 2-3% higher than the interest rate provided on the fixed deposit.
  • The best advantage is that there is no such thing as a loan processing fee on loan against a post office fixed deposit.
  • The repayment option on the loan amount is more flexible than other loan types.
  • This type of loan does not require the depositor to pre-close the fixed deposit, which makes it a hassle-free loan.

How to Claim FD Deposit after the Account Holder’s Death?

The following criteria may be used to make the payment for the account holder’s death:-

  1. Nomination – The nominee(s) must submit the documentation mentioned below to the relevant Post Office.
  • Claim Form
  • Account holder’s Death certificate.
  • Passbook or certificate.
  • Nominee’s Identification and Address Proof
  • ID and address proof of two witnesses.
  1. Legal Proof (Legal will, Administration Letter, Succession Certificate)
  • Claim Form
  • Original/certified copy of legal evidence.
  • Account holder’s Death certificate.
  • Passbook or certificate.
  • Claimant’s Identification and Address Proof
  • ID and address proof of two witnesses
  1. Up to Rs. 5 lakhs can be claimed, considering no account nomination or legal document exists. The following documents need to be submitted – 
  • Claim Form
  • Account holder’s Death certificate
  • Passbook/certificate
  • Affidavit (Form-13)
  • Letter of disclaimer (Form-14)
  • Letter of indemnity (Form-15)
  • Claimant’s Identification and Address Proof
  • Self-attested copy of ID and address proof of two witnesses.

How to Close the Post Office Fixed Deposit?

Closing your post office fixed deposit account before the maturity date is not recommended, as you may be liable to pay the penalty on the interest earned. After six months of maturity, you will be allowed to withdraw the amount deposited. Closing your account sooner will not benefit an individual, as they will receive limited interest on the deposited amount. However, if the individual wishes to pre-close the fixed deposit, they will be required to fill the Form SB-07 to close the post office deposit amount.

Wrapping Up

The post office fixed deposit is one of the safest forms of investment. It acts as an asset against which individuals can get loans and save their finances for future use. The loan offered by the post office charges lower interest rates than several banking institutions. The interest rate offered by the post office is subject to change, so it is important to research the current rate of interest provided by the Indian post office. The fixed deposit has a minimum requirement of deposit of about INR 1,000, but there is no cap for the maximum deposit amount. 

In addition, six months is the minimum tenure for withdrawing the deposited amount since the inception. Premature withdrawal is not recommended, as it may cause a penalty on the interest amount. One of the features of this term deposit is that even juveniles under the guidance of a legal guardian can avail of a fixed deposit account in the post office. 

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Frequently Asked Questions

Q1. Can we take a loan against the fixed deposit from the Indian Post Office?

Ans. Yes, it is wise to get a loan against the fixed deposit amount from the Indian post office as the repayment options are more flexible compared to other loans. The interest rate that is charged on the loan amount is relatively lower than other such institutions or banks.

Q2. Which is the best-fixed deposit scheme in the post office?

Ans. Public Provident Fund (PPF) is one of the best-fixed deposit schemes that the post office offers. Individuals can make deposits either at once or in 12 monthly instalments.

Q3. What is the investment tenure for a post office fixed deposit?

Ans. The investment tenure for a post office fixed deposit is 1 year, 2 years, 3 years, and 5 years.

Q4. What is the Interest of 3 Lakh FD in Post Office?

Ans. The interest rate is 6.9% for Rs. 3 lakh in Post Office FD for 1 year.

Q5. Is there any penalty if an individual makes a premature withdrawal?

Ans. Premature closure and withdrawals are allowed for post office fixed deposits after the completion of 6 months from the date of inception of said account. However, the closure of the account before maturity will be liable to pay a penalty.

Q6. Can an individual apply for a renewal of an investment made in a post office fixed deposit account?

Ans. Yes, individuals can apply for a renewal of an investment made in a post office fixed deposit account.

Q7. Which Post Office Scheme gives 8% Interest?

Ans. Post Office saving schemes such as the Senior Citizen Savings Scheme (SCSS) now offer an interest rate of 8.2%​​. Additionally, the Sukanya Samriddhi Account has been updated to an interest rate of 8.2%​.

Q8. Which is better, Post Office fixed deposit or a bank fixed deposit?

Ans. Apart from banks, India Post Office offers the scheme of fixed deposit accounts. Post Office schemes offer a better rate of interest in comparison to bank fixed deposit investors. If you are looking to save money only in deposits providing a fixed rate of interest in a period of one to ten years, small savings could be a better option to explore.

Q9. What is the Tax Deduction at Source (TDS) deduction on the post office term deposit?

Ans. No amount is deducted in the form of TDS from the interest earned on the post office term deposit. Additionally, individuals can claim tax benefits in case the tenure is 5 years in the Income Tax Act 1961 under section 80C.

Q10. Is the post office 5-year FD tax-free?

Ans. The interest earned on the Post Office 5-Year Fixed Deposit is not entirely tax-free. However, investments made in the 5-Year Time Deposit qualify for a tax deduction under Section 80C of the Income Tax Act up to a limit of INR 1.5 lakh per financial year​​.

 

Zilpha Rodrigues Baker by day and writer by night, Zilpha enjoys tackling the unknown and simplifying the complex. A voracious reader with keen attention to detail, she hopes to fulfil her dream of publishing a cookbook and meeting her idol, Shah Rukh Khan. With a heart of gold and the right amount of spice, she is a force to be reckoned with. Also, she makes bomb cheesecakes.
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