Fixed Deposits are the instrument which provides us with the opportunity to park our money for the specific time period and get it back with the accumulated interest on our fund. Whenever we have liquid money with us, we always end up spending that money into some or the other not so necessary purpose. So in India, having a fixed deposit is very famous and we often experience it in our families, that our parents do have at least one fixed deposit for themselves.
Now if you ask me, I would also prefer to do that but instead of choosing a regular bank fixed deposit, I would go for Post office time deposit scheme. Well the reason is very simple and I think that it is also a well-known fact now that in regular bank fixed deposits the TDS is deducted on the income and we do not get tax deduction in Sec 80 C of Income Tax Act 1961. But in the case of Post office Time Deposit, the tax deduction under section 80C can be availed for the investment done under 5 years and yes the income factor, post office offers better rate of interest as compared to regular bank fixed deposits.
Post office time deposit scheme was introduced by the Post office of India to provide an easy way to the investor to earn interest on their idle money and at the same time it also offers liquidity to the post office when such amount comes to the post office, just like banks. Post office offers many other products also which are fulfilled by these medium to long term deposits. Post office is one such stop which is available in every part of India, and has access to millions of people living in Urban, Semi-Urban or Rural areas. Mainly this is famous among the semi-urban and rural areas where access of banks is not available as much as it is in urban areas. Since it is the oldest means so, people have different and quite reliable approach towards it.
Post of office Time deposit can be availed by any Indian national on single as well as on joint holding basis. It can be also opened and managed by a minor (of 10 years age), which shall be converted once he or she attains majority. It is very easily available with the minimum documentation needed. You have to fill the opening form and provide your valid ID and Address Proof to the post office in photocopy as well as in original as the verification is needed to be done at the time of opening of the account. After that you have to mention the nominee of your account and one witness signature is needed. Once this is done you are all set to enjoy the benefit of your Post Office time Deposit Account.
Now after opening a time deposit account comes the matter of deposition of money into the account. Well you have been offered to pay your money through cash or by cheque. If you are paying through cheque then, the date at which your amount get credited in the post office time deposit account will be treated as your fixed deposit date. You are free to open as many accounts as you want and can easily transfer your account from one post office to another without any charges. Let’s understand the technical part now for this scheme like what are the minimum and maximum investment amount and the interest rate for different period.
This scheme is available for the tenure of 1, 2, 3 & 5 years. As per the data of Indian Post office and as on 1st Oct 2016 the interest rates for different deposit tenure are as follows
| Period | Rate |
| 1 year | 7% |
| 2 years | 7.1% |
| 3 years | 7.3% |
| 5 years | 7.8% |
**source- www.indiapost.gov.in
The interest is compounded quarterly and remains fixed for the tenure for which the deposit is made.
The minimum amount of deposit which can be made under this scheme is Rs 200 up to any maximum limit in the multiple of Rs 200.
Let’s suppose that an investor invests Rs 100000 in this account for 5 years then at the rate of 7.8% applicable for this tenure the maturity proceeds which he will get at the end of 5 years will be Rs 147145. So you can see that you have earned Rs 47145 on your investment of Rs 100000. This income is assured and guaranteed as this is backed by government of India and do not require any credit rating for the same. As mentioned earlier the rate of interest provided in this scheme is way better than the regular bank fixed deposit rates.
In case of any uncertainty or an urgent financial requirement, you can always prematurely withdraw your amount and can take loan against your time deposit. The procedures for the same can be enquired from your financial planner or the concerned post office through which you have made this deposit.
In regular fixed deposit it is always seen that whenever your fixed deposit gets matured you have to run to your bank, in case, if you want to renew it for further period. However, in the case of post office time deposit, once your account gets matured it will get automatically renewed for the tenure for which the account was initially opened. For example, if you have opened your time deposit account with 2 year deposit plan. Then, once the account gets matured it will automatically get renewed for further 2 years. The interest rate for the renewal period will be the rate applicable on the date of maturity. Once your account gets matured, you can withdraw your amount but in case if you did not do it then, for the period of 2 years your accumulated balance will earn rate of interest as per the saving account rate and after that no interest will be earned.
Now you can see and compare by yourself the benefits of having a fixed deposit in post office rather than having it any bank, as it provided much better returns and tax deduction is also available. However the TDS will be deducted on interest but if you are getting good returns as well as liquidity and guaranteed returns then you shall be not bothered about this mere deduction of tax on interest income.
