Must Knows

Post Office Fixed Deposit: Is it a good option?

[] Post Office Fixed Deposit, or Post Office Time Deposit is a fixed deposit scheme provided by the Indian Postal Services. Read on to know about the benefits and procedure to invest in the scheme.

Known as ‘post office time deposit’, the post office fixed deposit is a convenient alternative to the fixed deposits offered by banks. Individuals can earn a guaranteed return on their money deposited for a fixed period of time through this fixed deposit scheme offered by the Indian Postal Services.

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Unclaimed, matured FD accounts are now subject to a new rule from the RBI. That is, funds in an unclaimed, matured FD account will earn interest at the savings account rate or the contracted rate of the matured FD, whichever is lower.

Post Office Fixed Deposits: Characteristics and advantages


There is no maximum amount for opening a POFD account, and the minimum amount is Rs 1,000. POFD accounts can be converted from a single to a joint account and vice versa.

A post office FD account can be opened at any age. A POFD account can even be opened in the name of a minor, and it will be maintained by the parent or legal guardian. FD accounts can also be transferred between post offices.


Even when you open a POFD account, you can nominate someone. A person with an existing POFD account can also be nominated by you.

Interest rate

During the maturity period, the individual also earns interest. POFD accounts offer quite competitive interest rates, sometimes earning a higher rate than bank FDs.

On maturity

Upon maturation, you have the option of withdrawing or renewing the account.

Premature withdrawal option

Depending on certain terms and conditions laid out by the postal service, you can withdraw the deposit amount even before maturity.


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For regular customers, if the interest on the FD account exceeds Rs 40,000 per financial year, the Post Office may deduct the tax at the source.

Tax benefit

If you have deposited money in the 5-year fixed deposit account, you can claim an income tax deduction under Section 80C of the Income Tax Act of India, 1961.

Post office fixed deposit: Who is it suitable for?

You can open a fixed deposit at the post office with cash or a cheque. For official records, the date of realisation of the cheque is regarded as the date of opening the account. Foreign nationals are not permitted to open post office fixed deposit accounts.

Post Office Fixed Deposits: How to invest?

If you want to open a Post Office Term Deposit or FD, you can either do it online or offline.

Through mobile banking

Step 1: Download the Indian Post Mobile Banking app from Google Play Store/ Apple App Store to your mobile device.

Step 2: Log in with your credentials.

Step 3: Click the ‘Requests’ tab to open a POFD account.

Step 4: Start the opening process by entering the account information, such as the deposit amount, the tenure, the account from which you want to deposit the money, the nominee, and other details.

Offline method

Step 1: Fill out the application form found on the Post Office website.

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Step 2: Attach all supporting documents to the application.

Step 3: Go to the post office branch where you hold your savings account. To open an account, go to your nearest branch.

Step 4: Submit the documentation to the relevant person at the branch for account opening.

Is investing in POFD a good choice?

As compared to banks’ fixed deposit schemes, post office fixed deposits are more prevalent in rural areas. You can choose any tenure between 1 and 5 years for a POFD. Keep in mind that the interest rate increases with the number of years you choose.

Post office fixed deposit interest rates are sometimes higher than those offered by banks. The Post Office Fixed Deposit interest rate is likely to fall somewhere between a bank’s FD rate and a company’s FD rate.

A POFD is best suited for those who are highly cautious about the safety and risk of their investments. The interest rates on post office fixed deposits can sometimes be higher than those on bank fixed deposits. Post Office Fixed Deposit interest rates typically fall between bank FD rates and company FD rates.

Should senior citizens opt for POFD?

Senior citizens who deposit money in Post Offices will be eligible for tax-free interest up to Rs 50,000 under Section 80 TTB.

Post Office Fixed Deposits: Rate of interest (Effective 1 July 2021)

The rate of interest for POFDs is revised every quarter of the final year by the government. Interest rates are determined by the yield on government securities. Post office FD interest rate in 2021-22 or the post office fixed deposit interest rates in 2021-22 are:

Period Interest Rate for Q2 of FY 2021-22*
1 year 5.5%
2 years 5.5%
3 years 5.5%
5 years 6.7%

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Category: Must Knows

Debora Berti

Università degli Studi di Firenze, IT

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