Post Office Time Deposit Scheme

Post Office Savings Scheme India: Post office Time Saving Account/Deposit (RDA)

A Post-Office Time Deposit Account (RDA) is a banking service similar to a Bank Fixed Deposit offered by Department of post, Government of India at all post office counters in the country. The scheme is meant for those investors who want to deposit a lump sum of money for a fixed period; say for a minimum period of one year to two years, three years and a maximum period of five years. Investor gets a lump sum (principal + interest) at the maturity of the deposit. Time Deposits scheme return a lower, but safer, growth in investment.

The Post Office Time Deposits are small savings schemes of India. The issuer of POTD is the Government of India. These investment options are amongst the most lucrative schemes and are available in various versions.

How to Open Account
Time deposit account can be opened at any post office with a minimum deposit of Rs. 200. There is no maximum limit for the account.
Who Can Open Account

• An adult
• A minor with minimum age of 10 years.
• A guardian on behalf of a minor / a person of unsound mind.
• Two adults can go for joint account

Time and Amount of Deposit
The amount can be deposited for 1year, 2year, 3year, and 5years. The deposited amount is repayable after expiry of the period for which is of 1 year, 2 years, 3 years or 5 years. One has to deposit minimum amount of Rs 200 while there is no cup on maximum limit.

Interest Paid -

Returns:
This investment option pays annual interest rates between 6.25 and 7.5 per cent, compounded quarterly. Time deposit for 1 year offers a coupon rate of 6.25%, 2-year deposit offers an interest of 6.5%, 3 years is 7.25% while a 5-year Time Deposit offers 7.5% return.

Duration of Account    Quarterly Compound Interest

1 year                         6.25%

2 years                       6.5%

3 years                       7.25%

5 years                       7.5%

Income Tax Benefit

• Tax exemption on Five Years Time Deposit Account can be availed under U/S 80C of the IT Act.
• There is no deduction of income tax at source.

Premature Withdrawals
Premature withdrawals from all types of post office time deposit accounts are permissible after expiry of 6 months with certain conditions. Principal amount cum accumulated interested is paid only at maturity. If a person withdraws after six months, amount is returned without interest. On withdraw after one year, interest is paid, but it is two per cent less.

Deposit Limits of Post Office Time Deposits (POTD)

The lower limit of the money that may be invested in a Post Office Time Deposit (POTD) account is Rs. 200. However, there is no upper limit to the money that can be invested in a Post Office Time Deposits (POTD).

Comparison Between Post office Time Deposits and Banks' Fixed Deposits

• Post office Time Deposits are of 1 year, 2 year, 3 year and 5 year tenures and the minimum investment is Rs 20. Bank fixed deposits have ranging from 15 days to 10 years and the minimum amount is higer as compared to post office time deposits.
• Postal time deposits can be closed after 6 months but before one year of opening the account. On such closure, the amount invested is returned without interest. If a time deposit of more than a year is closed prematurely, post office will pay interest only for the completed year or years. For example if a time deposit of 3 years is withdrawn after 30 months, interest will be paid only for the two full years completed and the depositor will lose interest for the remaining 8 months. In case of bank FD is closed prematurely, banks have the discretion to charge penal interest.