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Introduction

Post Offices in India play a crucial role in connecting the remotest parts of the country, for decades. Even today the network of post offices in India is so extensive and imperative in reaching the remotest parts of the country.

Post offices in India have evolved significantly over the years. Today, besides providing mail and other communication services, post offices also offer a huge array of savings schemes options to the citizens of the country. These options are particularly important for the rural parts of the country where the banking services are not widely available. Post Office schemes offer stable investment options at attractive interest rates that are usually higher than the rate of interest on conventional investment options like mutual funds or shares, etc.

One popular savings scheme offered by India Post office is the Post Office Time Deposit Scheme. This scheme is exclusively offered by post offices all over the country. These schemes are supported and have the backing of the Government of India. The intention of the scheme is to inculcate the habit of savings among the citizens of the country and ensure that the citizens get risk free returns on their investments. Given below are the details of the Post Office Time Deposit Scheme.

Eligibility for Post Office Time Deposit Schemes

Post Office schemes are open for all the citizens of the country. The specific eligibility required under the scheme is mentioned below.

  • As mentioned above, any Indian Citizen over the age of 18 years is eligible to invest in the Post Office Time Deposit Scheme.
  • A Post Office Time Deposit Scheme can be opened in the name of a minor above the age of 10 years too.
  • The account can be opened by the parent or legal guardian of the minor child. 
  • An account can also be opened in the name of a person of unsound mind by the parents or legal guardian of such person.

The scheme also has certain exclusions who are not allowed to invest in the Post Office Time Deposit scheme. These persons are mentioned below.

  • Non-Resident Indians (NRIs)
  • Trust funds
  • Regimental funds
  • Welfare funds
  • Any institutional account holders
  • Hindu Undivided Families (HUFs)

Documents Required for Opening a Post Office Time Deposit Scheme

The scheme requires a specific set of documents to be submitted along with the application. This makes the application complete and eligible for further processing. These documents are basic KYC documents. The list of documents to be submitted for Post Office Time Deposit Schemes is mentioned below.

  • Identity Proof of the Applicant (or parent or legal guardian of the minor applicant or of the person of unsound mind)
  • Address Proof of the Applicant (or parent or legal guardian of the minor applicant or of the person of unsound mind)
  • Any of the following documents can be submitted for the above purposes
    • Aadhaar Card
    • Ration Card
    • Drivers License
    • Passport
    • Voter Id Card
  • PAN Card or Form 60 or Form 61 as per the Income Tax Act, 1961
  • Passport Size Photograph of the applicant
  • Application form for Deposit scheme.

Salient Features of the Post Office Time Deposit Scheme

There are various features and benefits of the Post Office Time Deposit Scheme. These Features are mentioned below.

Tenure

Post Office Time Deposit scheme or more commonly known as POTD is offered in four types of tenures namely, 1 year, 2 year, 3 year and 5 year. This offers the investor to invest in the scheme for short term or long term depending on their preference. The rate of interest also differs depending on the tenure of the deposit scheme.

Investment Amount

Investment in POTD does not have any upper limit or ceiling for the total amount that can be invested under the scheme by an investor. The minimum amount that can be invested under the scheme is Rs. 1000 and an investor can keep investing in the scheme in multiples of Rs. 100.

Rate of Interest

The rate of interest of the Post Office Time Deposit Scheme varies periodically. It is reviewed by the Ministry of Finance in each quarter of the financial year. Such interest is calculated on a quarterly basis and is paid to the investor on an annual basis. The current interest rates for each tenure of the Deposit Scheme are tabled below.

Tenure of the Scheme

Rate of Interest

1 Year Account

5.5%

2 Year Account

5.5%

3 Year Account

5.5%

5 Year Account

6.7%

Facility to transfer the Post Office Account

Post Office Time Deposit Scheme allows the investor to transfer the deposit account to another post office whether within the same city or state or otherwise. This can be done through a simple application which has to be submitted at the post office where the account is held originally.

Facility to nominate a person

This scheme also allows the investor to nominate a person that can receive the benefits of the scheme in the event of death of the original account holder. Nomination facility is available at the time of opening the deposit account or at any later point as well.

Liquidity

Post Office Time Deposit is considered to be a liquid investment even during the lock-in period. The scheme allows the account holder to borrow against deposits or even avail the facility of premature withdrawal under certain specified conditions.

Flexibility 

Post Office Time Deposit (POTD) scheme provides a great deal of flexibility to the investors. Investors can open multiple deposit accounts on being eligible and such accounts can be opened at any branch of the post office. The scheme also allows POTD accounts to be switched from a single holding account to a joint account at any point during the tenure of the account.

Withdrawal Faculty

Investors get the facility to withdraw from the POTD account prior to the maturity of the deposit. This facility is available only after a period of 6 months from the time of opening the deposit account. The factors involved for such premature withdrawal are mentioned below.

  • Interest applicable on PO Savings account is payable on all POTD accounts made in the period of 6 months or 1 year from the date of opening the account.
  • If the withdrawal is made after a period of 1 year from the date of opening the account, the rate of interest applicable is 1% lower than the prescribed rate.

Tax Benefit

Post Office Time Deposit Scheme is eligible for tax benefits under section 80C of the Income Tax Act, 1961. This benefit is available for deposits of tenure of 5 years. Tax is deducted on the interest paid on time deposits of the post office. If TDS is not deducted on the interest paid, such declaration is essential in the return of income.

Maturity

The scheme allows the investor to either renew the deposit at the time of maturity or withdraw the amount accumulated including the interest earned thereon. If the amount is not withdrawn at the time of maturity, such account will be eligible for interest at the rate applicable on tenure of 2 years.

Limitations of Post Office Time Deposit Scheme

Investment in the Post Office Time Deposit Scheme is considered to be a risk free investment. However, investors have to keep in mind the following points while investing in this scheme.

  • Investment in this scheme does not factor in the inflation. If the rate of inflation exceeds the rate of interest then the investor will not earn any real return on investment in this scheme.
  • The investment in this scheme although being safe and backed by the Government of India, the rate of interest is lower than other available options like Public Provident Fund, NSC, Fixed Deposits of many banks, etc.

Application Process for Post Office Time Deposit Scheme

Application for Post Office Time Deposit Scheme can be made either through the online mode or offline mode. Application process for this scheme is very easy and is explained below.

Online Mode

Application for this scheme can be made through mobile banking or Intra operable net banking options available for online application mode. The process for the same is mentioned below.

  • First step is to log in to the Post Office e-banking site with a registered User ID and password.
  • Next step is to click on General Services.
  • After that click on ‘Service Request’
  • Finally, investor has to choose the Time Deposit opening request and proceed further

An account under this scheme can be opened in either of the following ways,

  • A single account can be opened.
  • A joint account can be opened which has an upper limit of 3 adult account holders.

Offline Mode

Offline application mode is when the applicant goes directly to the nearest post office to open an account for the time deposit scheme. The Application Form is available at every post office and applicants can seek the help of the officials there for any assistance in filling and submitting the application form or the documents required for the same.

FAQs – Post Office Time Deposit Scheme

1. Who can apply for the Post Office Time deposit Scheme?

Any Citizens of the country over the age of 18 years can apply for the Post Office Time Deposit Schemes. Minors or persons of unsound mind can also open an account under the scheme through their parents or legal guardians. However, following persons are not allowed to invest in this scheme

  • Non-Resident Indians (NRIs)
  • Trust funds
  • Regimental funds
  • Welfare funds
  • Any institutional account holders
  • Hindu Undivided Families (HUFs)

2. Is investment in the Post Office Time Deposit Scheme considered to be safe?

Yes. Investment in the Post Office Time Deposit Scheme is backed by the government and hence is considered to be very safe. Hence, it is highly preferred by risk averse investors.

3. What is the minimum amount that can be invested under the Post Office Time Deposit Scheme?

The minimum amount that can be invested under Post Office Time Deposit Scheme is Rs. 1,000. Investment can be made in multiples of Rs. 100.

4. What is the maximum amount that can be invested under the Post Office Time Deposit Scheme?

There is no cap on the maximum amount of investment that can be made under the Post Office Time Deposit Scheme.

5. Can a person open multiple accounts under the Post Office Time Deposit Scheme?

Yes, This scheme allows an investor to open multiple deposit accounts of varying tenures and earn interest on them.

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