The name of this scheme is Post Office Time Deposit Scheme (POTD). This scheme is accessible to everyone, it is especially well-liked in rural and remote parts of the nation where there are few banks and few investment options. Here are the features of this scheme.
Eligibility of this scheme
- All citizens of India can open this account.
- The benefit of this scheme can be availed individually or jointly.
- Minors aged 10 years or above can also open an account and operate this scheme.
- Parents can open a Post Office Time Deposit Account on behalf of a minor.
- Non-Resident Indians cannot open Post Office Time Deposit Accounts.
Interest rate
For one year: 5.5%
For two years: 5.7%
For three years: 5.8%
For five years: 6.7%
The aforementioned interest rates are applicable from 1st October 2022 to 31st December 2022, the Finance Ministry reviews interest rates every three months.
If you don't want to take the interest out every year, you can tell the post office to put it in your post office savings account, which pays 4% interest per year. However, if the POTD has a one-year tenure, this is not possible.
Instead of paying the interest in 12 monthly instalments, you can also decide to direct it to a 5-year recurring deposit account at the same bank or post office. In this situation, the depositor will need to submit a new application to the office or bank before the deadline for paying interest.
Features
- Deposits in this scheme can be for a tenure of 1, 2, 3 or 5 years.
- This account can be easily transferred from one post office to another post office.
- Time Deposit Account can be operated individually or jointly.
- The term of the time deposit account can be extended on maturity.
- If the amount in the matured account is not withdrawn, the account is renewed and interest rates as of the date of maturity are applicable.
- There is no limit to opening a time deposit account. You can open any number of accounts.
- You can invest in this scheme for a minimum of Rs.200, there is no maximum investment limit.
Advantages
- Post Office Time Deposit Scheme offers guaranteed return on investment.
- If the money is kept in it for five years, it qualifies for tax deduction under section 80C.
- Minors are allowed to open accounts.
- Premature withdrawal is allowed.
Benefits from Taxation under POTD
Small savings investments made in post offices don't involve source-based taxation (TDS). It is important to keep in mind that the interest received on these investments is added to the depositor's annual income total in the year of receipt and is subject to taxation at the investor's marginal tax rate.
However, under Section 80C of the Income Tax Act, deposits made for a 5-year tenure are eligible for tax benefits.
Who should invest in POTD
Post Office Time Deposit Schemes are an option for investors looking for a bank fixed deposit substitute because they offer higher interest rates than fixed deposit options do.
You may also choose to invest in these schemes if you are an ultra-conservative investor with zero tolerance for risk and a desire for guaranteed returns.
You can compare it with other schemes at your convenience and decide whether to invest.