Post Office FD Scheme: If you want to park your money where there is no risk of stock market fluctuations and the interest rate is already fixed, you can consider Post Office Time Deposit Scheme (POTD). In this scheme known as Post Office FD, you can deposit money for 1, 2, 3 and 5 years. Currently, different interest rates are being offered on this FD scheme according to the tenure.
If you deposit ₹5 lakh for 3 years in a post office time deposit scheme, how much will you get on maturity at an interest rate of 7.10% per annum? Let’s understand its complete calculation.
What is the interest rate in post office FD?
Post Office Time Deposit (POTD) has different interest rates depending on the investment period. As per currently issued rates:
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On 1 year deposit: 6.90% annual interest
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On 2 year deposit: 7.00% annual interest
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On 3 years deposit: 7.10% annual interest
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On 5 years deposit: 7.50% interest per annum
(Note: These interest rates may change from time to time by the government, so check the current rates before investing.)
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Calculation of return on FD of ₹5 lakh for 3 years
If you deposit ₹5,00,000 in a lump sum in a post office time deposit with 3 years, the amount at maturity based on 7.10% annual interest rate will be as follows:
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Total investment: ₹5,00,000
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Annual Interest Rate: 7.10%
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Duration of stay: 3 years
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Estimated Total Interest: ₹1,18,304
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Total Amount on Maturity: ₹ 6,18,304
According to this calculation, after three years, your ₹5 lakh will grow to around ₹6.18 lakh, of which around ₹1.18 lakh will be received as interest only.
How is interest calculated in Post Office FD?
Interest in Post Office Time Deposit is calculated on quarterly basis on compounding basis, but interest payment is made annually. That is, the interest account is added to the amount every three months, but the money is paid every year. This scheme offers the option to choose different tenors just like bank FDs.
With how much rupees can an account be opened?
Investments can be started from a minimum of ₹1,000 in Post Office Time Deposit. There is no maximum investment limit in this. That’s why it’s a great option for both those who start saving with a small amount and those who want to keep a large sum in a safe place.
Is money safe in Post Office FD?
Post Office Time Deposit is a part of the Small Savings Schemes of the Government of India. The amount deposited in this gets a government guarantee (Government Backing). So it is completely safer than stock market linked investments. This involves no stock market risk and the interest rate is already fixed.
Which FDs get tax exemption?
Post office time deposit does not get tax benefit on every period:
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5 Years Time Deposit: According to the rules, under Section 80C of the Income Tax Act, an investment of up to ₹1.5 lakh can be exempted from tax.
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3 years time deposit: This tax benefit is not available on FD of 3 years.
Account can be transferred or extended further
Post office time deposit account can be easily transferred from one post office to another post office as per rules. Also, the option to extend the account for further period is also available after completion of maturity.
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