What is Post Office Fixed Deposit

India Post offers a range of Government-backed savings schemes including the Post Office Fixed Deposit Account which is officially known as the National Savings Time Deposit Account. This investment can b

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What is the National Savings Time Deposit Account?

The post office fixed deposit account is officially known as the National Savings Time Deposit Account. This type of fixed deposit is offered by India Post and can only be availed at a post office branch. Similar to a bank FD, the Post Office FD also offers guaranteed returns to investors as per the prevailing interest rate and features fixed investment durations of 1 year ,2 years, 3 years and 5 years. However, unlike a bank deposit returns which are guaranteed by the bank, the post office FD is backed by the Government of India and its interest rate is announced by the Ministry of Finance. The current rules and regulations governing this type of fixed deposit account are as per the National Savings Time Deposit Rules, 2019.

Key Features of Post Office Fixed Deposit

The below table summaries some of the key features of the FD account offered by India Post:

Minimum Deposit	Rs. 1000 with no maximum limit
Minimum Tenure	1 Year
Maximum Tenure	5 Years (interim tenures of 2 and 3 years allowed)
Lock-in Period	No withdrawal allowed for 6 months
Compounding Method	Quarterly Compounding
Interest Credit	Annual Basis

Benefits of FD Account in Post Office

Guaranteed Returns

At the time of opening, the post office FD account, the interest rate offered is guaranteed by India Post. So, the pay out from your investment is assured and predictable at the time of your investment tenure.

Short Lock-in

Once a post office FD account is opened, you cannot close the account or withdraw your investment for 6 months. This is currently among the shortest lock-in periods for a guaranteed investment.

No Maximum Limit

Currently, there is no limit on the number of post office FD accounts that you can open or the total amount that you can invest in these term deposit accounts.

Tax Benefit

Investments in the 5-year post office FD account are eligible for the benefits of a tax saver FD account. This means annual deposits of up to Rs. 1.5 lakh made into post office FD for 5 years are eligible as tax saving investments under Section 80C of the Income Tax Act, 1961.

Premature Withdrawal Option

Once the initial lock-in period of 6 months is over, you can close your post office FD account prematurely i.e. before completion of the originally contracted tenure. This ensures you can access your money readily in the case of an emergency. However, a penal interest rate will be applicable if a premature withdrawal of FD is made.

Eligible as Security

Investments made in a post office FD account can be used as a security for a loan or transferred to eligible pledgees. As per current rules, these time deposits can be pledged to President of India/Governor of State, Scheduled/Co-operative Banks, Housing Finance Companies, Corporations, Government Companies, etc.

Extension Option

After maturity of an India Post FD account, it can be easily extended for a further tenure of 1 year, 2 years, 3 years or 5 years. The interest rate on extension will be as per the applicable rate at the time the extension request is submitted by the investor. The application for extension must be made within 6 months of maturity, if the original deposit tenure was 1 years. Whereas, if the original FD tenure was 3 or 5 years, the extension request can be made within 18 months of maturity.

Easy Transferability

The National Savings Time Deposit Account can be easily transferred from one location to another within the extensive national network of India Post.

Post Office FD Interest Rates in 2024

The current interest rate offered on post office fixed deposit accounts vary based on the tenure of the investment. The below table shows the post office FD interest rates that are applicable till December 2022:

Post Office FD Tenure	Post Office FD Interest Rates (p.a.)
1 year	5.5%
2 years	5.7%
3 years	5.8%
5 years	6.7%

The above mentioned FD interest rates from India Post are decided by the Ministry of Finance and are eligible for review on a quarterly basis. The post office FD account interest is calculated on a quarterly basis using the above interest rates but credited to the account on an annual basis.

Eligibility Criteria for Opening FD Account in Post Office

As per rules mentioned in the National Savings Time Deposit Scheme 2019, individuals who are allowed to open a post office FD account include:

Sole account by any adult individual
Joint Account by up to 3 adult individuals
Sole account by a minor aged between 10 years and 17 years
Joint Account by an adult individual as guardian along with a minor as joint holder

This type of fixed deposit account cannot be opened by HUF (Hindu Undivided Family) or by other non-individual depositor such as a corporation. However, a post office FD account can be opened by a NRI individual and there is no restriction on the number of account that an individual can hold singly or jointly.

How to Open a Post Office FD Account?

At present, the post office FD account can only be opened offline at an India Post Office branch. The application forms for opening a new account are available on the India Post website and also at any branch of India Post.

Once you have filled out the account opening form, you will need to attach supporting documents like passport-size photograph, Know Your Customer (KYC) documents like Aadhaar/Voter ID, etc.

You will then need visit an India Post Office branch in person to submit these documents along with the minimum deposit of Rs. 1000 or higher amount in multiples of Rs. 100 to open the time deposit account at the post office.

Once the account is opened you will get a passbook with details of your post office term deposit account including a/c number, date of deposit, investment amount, post office home branch details, etc.

However, do keep in mind that not every type of mutual fund is suitable for all investment goals. So, one should be careful before choosing a scheme to invest in.

Frequently Asked Questions

ARN: Aug23/PWFD/02I

Sources:

www.indiapost.gov.in/Financial/pages/content/post-office-saving-schemes.aspx

www.nsiindia.gov.in/InternalPage.aspx?Id_Pk=58

www.indiapost.gov.in/Financial/pages/content/post-office-saving-schemes.aspx

www.nsiindia.gov.in/InternalPage.aspx?Id_Pk=132

www.indiapost.gov.in/VAS/DOP_PDFFiles/Savings%20Bank/National%20Savings%20Time%20Deposit%20Scheme%202019%20English.pdf

www.indiafilings.com/learn/post-office-savings-account/

economictimes.indiatimes.com/wealth/invest/bank-fds-vs-post-office-term-deposit-which-offers-senior-citizens-higher-interest-rate-for-short-term/articleshow/94676444.cms

www.indiapost.gov.in/Financial/pages/content/post-office-saving-schemes.aspx

www.nsiindia.gov.in/InternalPage.aspx?Id_Pk=164

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