Post office savings schemes have always been the first choice for people looking for safe investments and government guarantee. Under the Post Office’s National Savings Time Deposit Scheme (POTD)—commonly known as Post Office FD—7.1% annual interest is being offered for a tenure of 3 years. In this scheme of the post office, the interest is calculated by compounding on quarterly basis, while the payment is made annually. If you are planning to deposit a lump sum amount of ₹3,00,000 in this scheme for 3 years, then it is important to understand its financial mathematics.
Return conditions for depositing ₹3,00,000 in a Post Office 3-year time deposit account under quarterly compounding at 7.1% interest rate:
| Description | financial data |
| Principal Amount | ₹3,00,000 |
| Interest Rate | 7.1% per year (quarterly compounding) |
| Tenure | 3 years (36 months) |
| Total interest earned in 3 years | ₹70,980 |
| Total Maturity Amount | ₹3,70,980 |
If you transfer the interest to your post office savings account every year, the interest credit would be around ₹21,870 to ₹23,000 per year. At the same time, after completion of 3 years maturity, your total fund reaches around ₹ 3.71 lakh.
The Department of Posts offers 4 types of time deposit options for different tenures:
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1 year FD: 6.9% annual interest
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2 year FD: 7.0% interest per year
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3 year FD: 7.1% annual interest
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5 year FD: 7.5% annual interest (tax exemption also available under section 80C)
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Sovereign Guarantee (100% Protection): Only deposits up to Rs 5 lakh in banks are insured under DICGC, while post office time deposits are directly backed by the Government of India. In this, your entire deposited capital and interest remains 100% safe.
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No maximum investment limit: An account can be opened with a minimum of ₹1,000 and there is no limit on maximum investment. You can deposit ₹10 lakh or even ₹50 lakh without risk.
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Single or joint account facility: This account can be opened by any adult alone or as a joint account with maximum 3 adults. Apart from this, an account can also be opened in the name of a minor above 10 years of age.
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Account Extension Facility: After the expiry of the period of 3 years, if you wish, you can extend it for next 3 years by applying within 12 months from the date of maturity.
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Premature Closure: Withdrawal of money is not allowed for the first 6 months of account opening. If the account is closed between 6 months to 1 year, interest is available only at the rate of Post Office Savings Account (4%). On closure after 1 year, payment is made after deducting 2% from the applicable interest rate.
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Tax Rules: The benefit of Section 80C is not available on time deposits of 1, 2 and 3 years (this exemption is available only on FDs of 5 years). The interest received from FD adds to the total annual income of the investor and is taxable as per the respective tax slab.