A Rs 5 lakh investment in a Post Office Time Deposit can produce different maturity values depending on the selected tenure. The approximate maturity amount ranges from Rs 5,35,403 for a 1-year deposit to Rs 7,24,974 for a 5-year deposit.
Also known as a National Savings Time Deposit, the Post Office Time Deposit is supported by the central government and is considered by investors seeking a low-risk option. The government reviews interest rates for these deposits and other small savings schemes every quarter.
Maturity value by tenure
The applicable rates and approximate returns on a Rs 5 lakh deposit are:
| 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 is estimated to earn around Rs 35,403, taking the maturity value to approximately Rs 5,35,403. At 7.0% for 2 years, the estimated interest is around Rs 74,441 and the amount payable at maturity is approximately Rs 5,74,441.
An infographic explaining the key facts in Post Office TD: Returns on Rs 5 lakh across 1, 2, 3 and 5 years.
The 3-year option carries an interest rate of 7.1% per annum. On a Rs 5 lakh investment, the estimated interest over the tenure is around Rs 1,17,538, resulting in an approximate maturity amount of Rs 6,17,538.
The 5-year deposit offers an interest rate of 7.5% per annum. The estimated interest is around Rs 2,24,974, taking the total maturity amount to approximately Rs 7,24,974.
Deposit and interest details
An account can be opened with a minimum investment of Rs 1,000, in multiples of Rs 100. There is no maximum investment limit stated for the account.
Interest is compounded quarterly and paid annually. The annual interest can be credited to either the post office savings account or the customer’s bank account when a written mandate, such as a standing instruction or ECS mandate, is provided.
Tax treatment
Tax benefits do not apply to 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
Deposits cannot be withdrawn before completing six months from the date of deposit. The applicable treatment after that point depends on the account 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 the completed months is paid at the post office savings account rate.
For a 2- or 3-year account 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 interest rate applies.
A 5-year TD cannot be closed before completing four years from the date of deposit. If it is closed after four years, interest is paid at the post office savings account rate.
Any interest already paid on the deposit is recovered from the repayment amount and the interest payable.
