Post Office FD in India

What is a Post Office FD? 

A Post Office FD is a kind of fixed deposit that you can invest in if you have an account with the Department of Posts and Ministry of Communications of the Government of India. Like all fixed deposits, a Post Office FD also offers interest on the amount deposited at a guaranteed rate of interest. You can choose from different investment tenors and earn FD interest during the tenor chosen. All in all, a Post Office FD offers a safe and secure avenue for investment. 

Post Office Fixed Deposit Calculator

If you want to know the maturity amount and the returns you will earn on your deposit at the prevailing post office FD rates, you can make use of a Post Office FD calculator to find out these details. Using this online tool is fairly easy. All you will need to do is enter your investment amount, the Post Office FD rate and tenor applicable. The calculator will then display the details online instantly. 

Post Office FD Interest Rate  

As is the case with all fixed deposits, the Post Office FD rate of interest on Post Office FDs are also periodically revised. Currently, the rates of interest prevailing on Post Office FD plans for the period from October 1, 2022 to December 31, 2022 are given below. 

Features and Benefits of the Post Office Fixed Deposit Scheme

Investing in a fixed deposit plan offered by the Indian Postal Department has many advantages. Check out the top features and benefits of Post Office FDs below. 

• Low Minimum Investment Limit

You can start investing in a Post Office FD with as little as just ₹1,000. This makes postal fixed deposits extremely affordable investment options.

• Tax Benefits 

The amount that you invest in a Post Office FD for 5 years is also eligible for deduction up to ₹1,50,000 from your total taxable amount under section 80C of the Income Tax Act, 1961. 

• Attractive Interest Rates

The rates of interest on Post Office fixed deposits are periodically revised by the government. Currently, the interest rates can go up to 6.7% p.a., making them attractive investment avenues. 

• No Limit on the Number of Accounts

There is no limit on the number of fixed deposit accounts that you can hold with the Post Office. So, you can plan your investments as per your requirements and open multiple FD accounts if needed.

• Premature Withdrawal

You can also withdraw your deposit and close your Post Office FD account prematurely after the expiry of 6 months from the date of deposit. Keep in mind that you will be charged a penalty for the same. 

• Easy Accessibility 

The eligibility criteria for opening a Post Office FD account are quite relaxed. This makes the scheme accessible to people from different demographics. 

Eligibility Criteria to Open a Post Office Fixed Deposit

The eligibility criteria for opening a Post Office FD account are relatively simple. Here is a list of the categories of persons who are eligible to invest in a Post Office fixed deposit. 

• A single adult (for a single account)

• Up to 3 adults (for a joint account)

• A guardian or a parent on behalf of a minor

• A guardian on behalf of a person of unsound mind

• A minor who is above 10 years of age (in their own name)

Post Office FD Interest Rate  and Interest Earned for Different Tenors 

If you decide to make a deposit in your Post Office fixed deposit account, you can choose from the following tenor options:

• 1-year FD

• 2-year FD

• 3-year FD

• 5-year FD

The table above shows you the rates of interest on the Post Office fixed deposit amount for these different tenors. Let us check out how much interest you can earn on a deposit of ₹1,00,000 over these different time periods if you are aged below 60 years. 

Post Office FD Interest Rates and Interest Earned for Different Tenors - Senior Citizens

The interest rates on Post Office FDs are the same for senior citizens as well as for citizens below the age of 60. So, the interest rates and the interest earned across different tenors will be the same as shown above for deposits held by senior citizens.

How is the Post Office FD Maturity Amount Calculated?

The maturity amount for your Post Office fixed deposit is calculated using the formula shown below. 

Here, r is the rate of interest, t is the investment tenor and n is the number of times the interest is compounded annually. 

Here is an example to show you how this formula works. For instance, let’s say you invest ₹5,00,000 in a Post Office FD for a tenor of 3 years. The interest rate on this deposit will be 5.8% per annum, and the interest will be compounded on a quarterly basis. Putting all these values in the formula, we get the following equation.

Maturity Value 

= Principal amount x (1 + r/n)(nt)

= ₹5,00,000 x (1 + 0.058/4)(4x3)

= ₹5,00,000 x (1 + 0.0145)12

= ₹5,00,000 x (1.0145)12

= ₹5,00,000 x 1.1886

= ₹5,94,285

Making a calculator like the Post Office fixed deposit calculator once may be easy. But doing this on a regular basis can be quite cumbersome. Here is where a Post Office FD calculator can help. You can make use of a nifty online tool like the Post Office FD calculator to plan your fixed deposit investment easily and for free. 

How to Open an FD in Post Office

To invest in a fixed deposit plan offered by the Indian Postal Department, you need to follow the steps outlined below. 

• Step 1: Find the Post Office branch nearest to you. 

• Step 2: Visit the branch in person and ask for the FD account opening form.

• Step 3: Fill in the form and attach any supporting documents and photographs that may be required.

• Step 4: Submit the form along with a cheque or Demand Draft for the sum that you wish to deposit. 

That’s all you need to do. Your FD account will then be opened and your deposit will be made for the tenor chosen by you. 

Documents Required to Open an FD in Post Office

To open an FD in any Post Office, you will have to submit the following documents along with the application form:

• A Proof of Identity such as your PAN, Aadhaar, voter ID, or passport

• A Proof of Address such as your Aadhaar, passport, driving license or utility bills

• 2 passport size photographs 

Different Types of Post Office Tax Saving Schemes

The 5-year Post Office FD option qualifies for deduction u/s 80C up to an investment amount of ₹1,50,000. Aside from this, there are many other Post Office tax-saving schemes too that you can consider for your investment portfolio if you want to reduce your tax burden. Here is a list of some such plans.

• Senior Citizens Savings Scheme (SCSS)

• Sukanya Samriddhi Account

• National Savings Certificate (NSC)

• Public Provident Fund (PPF)

TDS on Post Office Fixed Deposit

Like in the case of bank fixed deposits, your Post Office FD will also fall under the purview of tax deduction at source. TDS on Post Office FD will be deducted on the interest you earn from your Post Office fixed deposit if the total annual interest earned during the financial year exceeds ₹40,000 (or ₹50,000 if you are a senior citizen).

The rate of tax deduction is as follows:

• 10% for resident Indian depositors

• 20% if you have not provided your PAN details

• 30% for non-resident Indian depositors 

However, if your total annual income does not exceed the basic exemption limit, you can submit Form 15G (or Form 15H if you are a senior citizen) to ensure that tax is not deducted at the source. 

Premature Withdrawal of Post Office FD 

Premature withdrawal of funds from your Post Office FD account is permitted only after the expiry of 6 months from the date of your deposit. In case of any premature account closure, interest/penalty will be applicable as follows.

• If the deposit is closed after 6 months but before 1 year from the date of deposit: 

Interest will be levied at the Post Office Savings Account interest rate 

• If the deposit is closed after 1 year from the date of deposit: 

Interest will be levied at 2% less than the Post Office FD interest rate applicable for any completed years, and at the Post Office Savings Account interest rate for any partial period that is less than a year

Extension of Post Office Fixed Deposit account 

You can also extend your Post Office fixed deposit investment for a tenor equal to the period for which you originally opened the deposit. The Post Office FD interest rate prevailing at the time of original maturity will be applicable on the extended deposit. 

Your Post Office fixed deposit account can be extended from the date of maturity within the prescribed period, which is shown below.

• For 1-year deposits: Within 6 months of maturity

• For 2-year deposits: Within 12 months of maturity

• For 3-year and 5-year deposits: Within 18 months of maturity