Post Office Time Deposit: If you are considering opening a bank Fixed Deposit (FD), hold on for a moment. You might find a better interest rate elsewhere. The Post Office Time Deposit (TD) scheme is currently offering excellent returns to investors. Therefore, it is important to understand whether to invest in a bank FD or a post office TD. Let’s explore this topic in detail.
Learn about the Post Office TD scheme:
This scheme functions much like a bank FD, where you deposit money for a fixed period and receive guaranteed returns. You can invest for tenures ranging from 1 year to 5 years. Currently, it offers interest rates between 6.9% and 7.5%, which is higher than the FD rates of many major banks. A key feature of this scheme is that you can open an account with just ₹1,000, and there is no upper limit on the investment amount.
Understand the ‘Rule of 72’:
The ‘Rule of 72’ is a method for determining how long it will take for an investment to double. You simply divide 72 by the interest rate to find the time required. For instance, if the TD interest rate is 7.5%, the calculation is 72 ÷ 7.5 = 9.6.
This means it would take slightly more than 9 years and 7 months for your money to double at this rate. In contrast, if you apply this formula to a standard bank FD, it would take more than 10 years for the money to double.
Where do you get tax benefits?
If you opt for a 5-year TD, you also receive tax benefits. You can claim tax benefits on investments of up to ₹1.5 lakh under Section 80C of the Income Tax Act. This means your total taxable income decreases, resulting in a lower tax liability. In contrast, for Fixed Deposits (FDs), tax is payable based on the applicable income tax slab.
Who can open this account?
Any citizen of the country can open this account at a post office. Any adult can open either a single or a joint account. Children over 10 can operate an account in their name, or their parents can open one for them.