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The average Indian’s relationship with a Post Office has been deep and wholesome. Over the last few decades, it has transformed from letters to parcels and from buying stamps to investing in their Fixed Deposits (FDs). The Post Office FD has emerged as an institutional and lucrative investment option in the recent years. Before jumping to its calculations, let us know more about it in general.
Interest Rates
The interest rates fluctuate from 5.5% to 6.7% depending on different time periods but they don’t vary as per age. In simpler terms, the rate remains same for senior citizens too; unlike the policy followed by banks, etc.
How to invest in Post Office Fixed Deposits?
You can either use the online method or offline method to open a Post Office FD.
Mobile Banking Method
Step 1: Download the India Post Mobile Banking app on your mobile from Google Play Store
Step 2: Log into the app using your credentials
Step 3: Click on the ‘Requests’ tab on the home screen to open a POFD account
Step 4: Enter the details, such as the deposit amount, tenure, the account from which you want to deposit the money, nominee, and others to open the account
Offline Method
Step 1: Fill out the application form with relevant details. The form is also available on the Post Office website
Step 2: Attach all the supporting documents along with the application form
Step 3: Visit the post office branch where you have held your savings account. If you don’t already have an account, head to your nearest branch
Step 4: Submit the documentation to the relevant person at the branch to open the account
Why You Should apply for POFD?
The utilization of post office fixed deposits has been more in the rural areas as compared to banks’ fixed deposit schemes. You have the option to choose any tenure from 1-5 years for a POFD. Do note that the interest rate increases with the number of years you choose to apply for.
At times, post office fixed deposit interest rates can be higher than the rates offered on bank fixed deposit. It is likely, your Post Office Fixed Deposit interest rate will stand somewhere between a bank FD rate and a company FD rate.
POFD is most suited to those individuals who are highly conservative with regards to the safety and risk of their investments. At times, post office fixed deposit interest rates can be higher than the rates offered on bank fixed deposit. It is likely, your Post Office Fixed Deposit interest rate will stand somewhere between a bank FD rate and a company FD rate.
Who can invest in POFDs?
Any individual can open a fixed deposit in the post office by cash or cheque. In government records, the date of realization of the cheque will be taken as the date of opening the account. NRIs cannot open a fixed deposit account in the post office.
POFD is most suited to those individuals who are highly conservative when it comes to investments. Ideally, it suits low-risk individuals looking for a steady income as well as capital protection – like retirees or those nearing retirement.
Features & benefits of Post Office Fixed Deposits
Flexibility
The minimum amount to open a POFD account is Rs.1000 and there is no maximum limit. You can convert your POFD account from a single to a joint account and vice versa
There is no limit to the number of FD accounts you can open at the post office. You can even open a POFD account in the name of a minor and it will be operated by the parent or legal guardian. You also have the benefit of transferring an FD account from one post office to another.
Nomination
You can even nominate a person while opening a POFD account. Furthermore, the person you nominate can also nominate a person even with an existing POFD account.
Interest
Additionally, the individual also earns interest with the return during the maturity period. The interest rate on POFD accounts is quite attractive, sometimes earning a higher interest rate than a bank FD.
On maturity
Once the account matures, you can withdraw or renew the account for the same tenure.
Premature Withdrawal
You may withdraw the deposit amount even before maturity subject to certain terms and conditions laid by the post office.
Tax Implications
You can claim income tax deduction under Section 80C of the Income Tax Act of India, 1961, on the deposit you have made in the 5-year fixed deposit account.
TDS
If the interest you earn on the FD account exceeds Rs.40,000 per financial year for regular customers, the tax may be deducted at source by the Post Office.
Calculating the Post Office FD
If you are unsure of the future returns you can expect from a Post Office Fixed Deposit scheme, make use of an FD calculator. For example, the Bajaj Finance FD Calculator can be used. All you have to do is insert the Amount, tenor of investment and rate of return(interest). Then the tool displays the exact maturity amount alongside the earnings from interest alone.
Hence, it is clear that one must certainly invest in a Post Office FD and calculating the returns on it is also a rather simple process.
