Post Office Scheme: The Post Office Time Deposit Scheme is a reliable option for investors seeking fixed returns without risk. This scheme works like a bank fixed deposit but offers the added assurance of government security. This small savings scheme, run by India Post, falls under the Ministry of Finance, making the invested money completely safe. Its stable interest rate, various tenure options, and easy investment process make this scheme quite popular among medium and long-term investors.
What is the Post Office Time Deposit Scheme?
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This is a fixed-income savings scheme where investors deposit a lump sum for a fixed period. Upon maturity, the principal amount, along with guaranteed interest, is received. Currently, this scheme offers interest rates ranging from 6.90 percent to 7.50 percent for tenures of 1 to 5 years.
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Investment Tenure and Interest Rates
This scheme offers options for 1 year, 2 years, 3 years, and 5 years. Longer tenures offer relatively higher interest rates. The 5-year Time Deposit Scheme currently offers the highest annual interest rate of 7.50 percent, making it attractive compared to other safe investment options.
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Who can invest, and what is the minimum investment amount?
Any Indian citizen can open a Post Office Time Deposit account. A minimum of ₹1000 is required to open an account. After that, you can deposit any amount in multiples of ₹1000. There is no maximum limit for investment in this scheme.
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How much return will you get on an investment of ₹7 lakh?
If an investor deposits ₹7,00,000 as a lump sum in the Post Office’s 5-year Time Deposit Scheme and the interest rate remains at 7.50 percent, they will receive approximately ₹3,14,964 as interest alone after 60 months. This way, the total amount at maturity will be approximately ₹10,14,964. This return is completely guaranteed and is not subject to market fluctuations.
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Premature Withdrawal Facility
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This scheme allows for premature withdrawal after completing 6 months. However, withdrawing the amount before the stipulated period may result in a slight reduction in the interest rate. Nevertheless, this facility provides relief to investors in case of emergencies.
Tax Rules
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The Post Office 5-Year Time Deposit Scheme offers tax benefits under Section 80C of the Income Tax Act. The maximum limit for this exemption is ₹1.5 lakh per annum. However, the interest earned from this scheme is taxable. If the annual interest exceeds the prescribed limit, TDS (Tax Deducted at Source) may also be deducted.
How Interest is Calculated
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In this scheme, interest is calculated on a quarterly basis with compounding, while the payment is made annually. This allows investors to benefit from compounding over the long term, resulting in better overall returns.