The post office fixed deposit offered by India Post is a savings scheme where individuals can invest a lump sum of money for a fixed tenure at a predetermined interest rate. This scheme is specially designed to provide a secure investment option to those who do not have access to banks.
The scheme requires a lower minimum deposit amount, which investors can get returns at competitive interest rates. The current interest rate for post office fixed deposits for regular and senior citizens is 6.90% to 7.5%. Making it an accessible and high yielding investment opportunity.
Post Office vs Other Banks' FD Interest Rates
Post office FDs and other Bank FDs share many similarities, however, the interest rates differ from one another. Given below is a table of the fixed deposit rates in the post officeand those provided by different banks:
For regular citizens:
| Post office/ Banks | Tenure | Interest Rate |
|---|---|---|
| Post Office FD | 1 - 5 years | 6.90% - 7.5% |
| State Bank of India FD | 7 days - 10 years | 3.00% - 7.10% |
| Union Bank of India FD | 7 days - 10 years | 3.00% - 7.00% |
| ICICI Bank FD | 7 days - 10 years | 3.00% - 7.10% |
| Axis Bank FD | 7 days - 10 years | 3.00% - 7.10% |
| Canara Bank FD | 7 days - 10 years | 4.00% - 7.25% |
| Punjab National Bank | 3.50% - 7.25% | 4.00% - 7.75% |
| UCO Bank FD | 7 days - 5 years above | 2.90% - 6.50% |
| HDFC Bank FD | 7 days - 10 years | 3.00% - 7.20% |
| AU Small Finance Bank FD | 7 days - 10 years | 3.75% - 8.00% |
| Indian Bank FD | 7 days - 5 years above | 2.80% - 7.10% |
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For senior citizens:
| Post office/ Banks | Tenure | Interest Rate |
|---|---|---|
| Post Office FD | 1 - 5 years | 6.90% - 7.5% |
| State Bank of India FD | 7 days - 10 years | 3.50% - 7.60% |
| Union Bank of India FD | 7 days - 10 years | 3.25% - 7.25% |
| ICICI Bank FD | 7 days - 10 years | 4.75% - 7.25% |
| Axis Bank FD | 7 days - 10 years | 3.50% - 7.75% |
| Canara Bank FD | 7 days - 10 years | 4.00% - 7.75% |
| Punjab National Bank | 3.50% - 7.25% | 3.15% - 6.75% |
| UCO Bank FD | 7 days - 5 years above | 3.50% - 7.75% |
| HDFC Bank FD | 7 days - 10 years | 4.25% - 8.50% |
| AU Small Finance Bank FD | 7 days - 10 years | 3.30% - 7.20% |
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Eligibility to Open a Post Office FD Account
The eligibility requirements to open a post office FD scheme account are very inclusive, providing accessibility to a wide range of individuals. These requirements are:
- All Indian citizens are eligible to open a post office fixed deposit account.
- Minors are eligible to open a post office FD account, provided that it is managed by the parents or guardians.
- Non-residential Indians (NRIs), companies, trusts, and other organizations are not eligible to open an FD account at the post office.
Documents Required to Open Post Office FD
Minimal documents are required for proof of identity and address, the required documents are:
- Identity proof: Voter ID, PAN card, Aadhaar Card, Driving Licence, Photo ration card or Passport.
- Address proof: Telephone Bill, Electricity Bill, Bank statement and cheque, Post office issued ID or certificate, Passport
Features & Benefits of Post Office FD
Post office fixed deposits offer a wide range of features and benefits which makes the scheme a reliable and attractive option for both urban and rural investors. These features and benefits are:
- Government-backed: The scheme is backed by the government, which provides a high level of security for the deposited amount. Making it a safe and secure investment option.
- Predictable returns: The interest rates on fixed deposits offer predictable returns to your investment as they are not affected by market fluctuations. This will provide you with the security of assured returns.
- Wide accessibility: The FD account can be opened anywhere in any Post Office branch in the country making it widely accessible to all individuals.
- Flexible tenure option: The tenure for a post office fixed deposit is 1 year to 5 years, providing you with a good range of options to choose from.
- Interest payout: The interest is compounded quarterly, but paid annually to the investor.
- Flexible deposit amount: In the post office FD, the minimum deposit amount is ₹200 and there is no limit on the maximum amount. So, you can choose to deposit any amount you are comfortable with.
- Nomination: The FD also offers nomination facilities that allow the nominee to receive funds in case the account holder dies.
- Premature withdrawal: Premature withdrawal is allowed however, the penalty will be applicable on the interest payout.
- Minors and joint accounts: Minors above the age of 10 years are allowed to open their accounts. At the same time, joint accounts are also allowed if the account holders are both adults.
- Tax benefits: Tax benefits apply to the deposits that are held for a tenure of 5 years under Section 80C of the Income Tax Act, 1961.
- Auto-renewal: Auto-renewal option is available where the FD account gets renewed on the maturity for the same tenure as the previous account. However, the interest rate for the renewed account will be as per the rates upon maturity.
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Understanding Risks Associated with Post Office FD
The post office fixed deposit is generally a low-risk investment option, however, it also carries certain risks that you must be aware of and take into consideration while making important decisions. One risk associated with post office FD is
- Interest rate risk: The interest rate is fixed by the government for a fixed tenure, however, if market interest rates rise, the post office FD interest rates may become less competitive compared to other investment opportunities.
- Inflation risk: The interest rate is not affected by market conditions, however, it may still be affected by inflation. If the rate of interest is not keeping pace with inflation, then the returns may be considerably lesser.
- Reinvestment risk: If you opt for auto-renewal make sure you check the interest rate. The interest rate for the renewed account will depend on the interest rate at the time of maturity. So, if the interest rate at maturity is less than the previous investment, then reinvesting the amount may result in lesser returns.
- Issuer risk: The post office fixed deposits are backed by the government, however, there is some minimal level of issuer risk. Therefore, it is crucial to stay informed about the various changes in financial policies of the government that can affect the investment.
- Tax implication: The interest acquired from the investment is still taxable even though the investment is subject to tax benefits under Section 80C of the Income Tax Act, 1961.
Premature Closure of Post Office Fixed Deposit
Premature closure of a post office FD account is allowed 6 months after account opening. The interest for early closure will apply only for the completed months.
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Frequently Asked Questions
A post office fixed deposit is a savings scheme offered by India Post that offers fixed interest rates, flexible tenures, and low-risk investment options.
The post office fixed deposit is backed by the government and has fixed interest rates and tenures of only up to 5 years while the bank fixed deposits have variable rates, longer tenures of up to 10 years, and can be influenced by market conditions.
The key features of the fixed deposit scheme are that it is government-backed, has flexible tenure, with no maximum limit, has tax benefits and minors are eligible to open an account.
The minimum investment for a post office FD is ₹200. There is no maximum investment for POFD.
The tenure period for a post office FD ranges from 1 year to 5 years.
The interest rate on post office fixed deposits is determined by the performance of government bills or securities.
Yes, you can prematurely withdraw funds from post office fixed deposits.
The interest rates on post office FDs are fixed.
Yes, the interest earned on bank FDs is taxable.
Yes, the interest earned on Post Office FDs is taxable.
Yes, you can take up to 90%-95% of the fixed deposit amount. The interest rate is relatively low with it being only 2% - 3% higher than the FD interest rate.
You can open a post office FD account at any post office branch in India or online. To open the account, fill up the post office FD opening form, submit the form along with the required documents, make the deposit and your account will be opened.
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