All You Need to Know About the Post Office Fixed Deposit Scheme

For several years, fixed deposits (FDs) have been popular among Indian investors. It is because these instruments offer assured returns, as they have a predetermined rate of interest.

You invest a certain amount in the deposit for a specified duration. At the end of this period, you receive the principal and interest. You can also withdraw the interest at regular intervals to supplement your income. You can open an FD either with a bank or a non-banking financial company (NBFC) like Mahindra Finance.

The post office term deposit (POTD) is like a fixed deposit (FD), where you invest a certain amount for a certain tenure and get secure returns during its entire duration. On maturity, you receive the capital and interest.

Advantages of a POTD

1. Principal protection

The post office FD is completely safe, with no risk of losing your principal investment. The Government of India backs this investment avenue. So, you earn confirmed returns.

2. Risk-free returns

Irrespective of the change in the market interest rates, your POTD’s returns are guaranteed. However,remember that if the rate of inflation is high, your effective FD rate reduces and vice-versa.

3. Guarantee

The rate of interest is locked throughout the POTD’s investment term. Currently, it varies between 5.5% for a one-year deposit to 6.7% for a deposit of five years. The government quarterly notifies the interest rate based on the rates available for government securities of similar maturity. 

4. Liquidity

Although the capital is blocked throughout the duration of the deposit, it is still a liquid investment.You can either prematurely withdraw the funds anytime after six months from the date of opening the account or opt for a loan against the deposit.

5. Tax exemptions

No benefit is available if you invest in a deposit, which has a maturityunder five years. If your chosen deposit exceeds this period, you can avail of deductions according to Section 80C of the Income Tax Act, 1961. The income you earn based on the fixed deposit interest rate is taxable as per your tax slab.

You can hold an FD in any post office. Also, you have the facility of porting between post offices. The documents you need to submit while starting the deposit include identity proof, address proof, and the account opening form. Ensure you carry the original documents for verification, and do not forget to add the nominee-related details.

You can also invest in FDs offered by Mahindra Finance.These come at an attractive interest rate. Visit the issuer’s website to know more!