On the lines of Fixed Deposit (FD), Post Office Time Deposit Scheme is a fixed-income small savings scheme offered by India Post. In this scheme, investors can get guaranteed interest income by investing a lump sum amount for a fixed period. This scheme is supported by the Finance Ministry, due to which investment in it is considered completely safe. Stable returns, flexible investment options and competitive interest rates make this scheme popular among investors. Currently 6.90% to 7.50% interest is being given on Post Office Time Deposit Scheme.
These interest rates are applicable for different periods from 1 year to 5 years.
Main features of the scheme
In this you get guaranteed and secure returns. Investment option like bank FD is available. Supported by the Central Government. In this, investment facility is available for the tenure of 1, 2, 3 and 5 years. It is suitable for medium and long term investors. You can open a time deposit account by depositing a minimum of Rs 1000. Additional deposits can be made in multiples of Rs 1000, with no upper limit. Also, premature withdrawal of money is allowed after 6 months, which provides liquidity to the depositors in case of financial emergency.
Calculating return on investment of ₹7,00,000
When you deposit ₹ 7,00,000 in lump sum in this 5-year scheme of this post office with 7.5 percent interest rate, then on maturity i.e. after 60 months, according to the calculation, you will get ₹ 3,14,964 only as interest, that too guaranteed. In this way, according to the calculation, after five years you will have a total fund of ₹ 10,14,964. That means you will get sure returns without taking any risk from the market.
Benefits of tax exemption also
The 5-year time deposit scheme offers tax deduction under Section 80C, with a limit of ₹ 1.5 lakh per year. However, the interest earned is fully taxable, and if the interest exceeds the annual exemption limit, TDS will be applicable. In Post Office Time Deposit Scheme, interest is calculated on a quarterly basis with compounding, while interest is paid annually. This arrangement is especially beneficial for investors who want better returns through compounding over the long term and also want to receive regular interest income every year.
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