A Rs 5 lakh investment in a Post Office Time Deposit can produce different maturity amounts depending on whether the deposit is held for 1, 2, 3 or 5 years. At the listed rates, the approximate maturity values range from Rs 5,35,403 to Rs 7,24,974.
The Post Office Time Deposit, also known as a National Savings Time Deposit, is supported by the central government. Its interest rates, along with those of other small savings schemes, are reviewed by the government every quarter.
Maturity comparison
| Tenure | Interest rate | Interest earned | Maturity amount |
|---|---|---|---|
| 1 year | 6.9% | Rs 35,403 | Rs 5,35,403 |
| 2 years | 7.0% | Rs 74,441 | Rs 5,74,441 |
| 3 years | 7.1% | Rs 1,17,538 | Rs 6,17,538 |
| 5 years | 7.5% | Rs 2,24,974 | Rs 7,24,974 |
A 1-year deposit at 6.9% per annum would earn approximately Rs 35,403, taking the total payable at maturity to about Rs 5,35,403. For a 2-year deposit, the 7.0% per annum rate would generate approximately Rs 74,441, resulting in a maturity amount of about Rs 5,74,441.
The 3-year option carries an interest rate of 7.1% per annum. On a Rs 5 lakh investment, the approximate interest is Rs 1,17,538 and the maturity amount is about Rs 6,17,538. The 5-year deposit offers 7.5% per annum, with approximate interest of Rs 2,24,974 and maturity proceeds of Rs 7,24,974.
An infographic explaining the key facts in Post office TD: Rs 5 lakh maturity compared across 1, 2, 3 and 5 years.
Deposit rules and interest payment
An account can be opened with a minimum investment of Rs 1,000, in multiples of Rs 100. There is no maximum investment limit. Interest is compounded quarterly and paid annually.
The annual interest can be credited to either the customer’s post office savings account or bank account when a written standing instruction or ECS mandate is provided.
Tax treatment
Tax benefits are not available on every Post Office Time Deposit. Only an investment in a 5-year TD qualifies for benefits under Section 80C of the Income Tax Act under the old tax regime.
Premature closure conditions
A deposit cannot be withdrawn before six months from the date of deposit. The applicable treatment after that point depends on the tenure and the timing of closure.
For a 1-, 2- or 3-year TD closed one year before maturity, but after six months, interest for completed months is paid at the post office savings account rate. If a 2- or 3-year account is closed after one year, interest for completed years is calculated at a rate 2% lower than the applicable TD rate for a 1-year or 2-year deposit, as applicable. For a period shorter than one year, the post office savings account rate applies.
A 5-year TD cannot be closed before completing four years from the deposit date. If it is closed after four years, interest is paid at the post office savings account rate. Any interest already paid is recovered from the repayment amount and the interest payable.
