National Savings Time Deposit Account: How to get Rs 45K interest on Rs 1 lakh investment in post office FD

Did you know that you can open a fixed deposit account at the post office? India Post, which has a network of more than 1,55,000 post office branches, offers fixed deposit accounts, in fixed maturity options of one, two, three and five years, Known as the Post Office Time Deposit Scheme, the government-backed small savings scheme offers returns to the tune of 6.9-7.5 per cent per annum for the fourth quarter of the current financial year, which ends on March 31, 2024.

Here are some of the key things to know about the Post Office Time Deposit scheme, as per the India Post website:

Types of account

The scheme is available in four investment term options, ranging from one to five years.

Who can open the account?

Adults can open and operate the Post Office Time Deposit account singly or jointly (up to three individuals).

The post office also allows accounts in favour of minors, with a legal guardian operating the account till the minor attains the age of 18 years.

Investment limit

One can set up a Time Deposit Account at the post office against a minimum deposit of Rs 1,000.

While there is no upper limit applicable to the deposit, the amount has to be in multiples of Rs 100.

Post Office Time Deposit interest rate

Tax benefit

Investments made in the five-year Time Deposit account qualify for deductions in taxable income up to Rs 1.5 lakh a year under Section 80C of the Income Tax Act, 1961.

However, interest payments above Rs 50,000 for senior citizens and Rs 40,000 for other depositors attract tax deducted at source (TDS).

Premature closure

Depositors are allowed to close the Time Deposit account prematurely after completing six months from the date of investment.

Any premature withdrawals, however, attract penalty.

The interest rate applicable to the Post Office Savings Account will apply to premature withdrawals made after six months but before completing one year since the opening of the One-Year Time Deposit account.

In two-, three- and five-year Time Deposit Accounts, premature withdrawals lead to deduction of 2.0 per cent in the interest rate for the gap from the maturity period.

Here are a few examples to give you a better understanding of how your money will grow in the Post Office Time Deposit account:

One-Year Time Deposit

Since the interest rate on 1-year time deposit is 6.9 per cent and the interest is compounded quarerly, a Rs 1 lakh investment in it will give you interest of Rs 7,080, and the maturity amount of Rs 1.07 lakh.

2 Year Time Deposit

If you invest Rs 1 lakh in the 2-year time time deposit scheme, you will get an interest of Rs 14,888 in two years and the maturity amount will be Rs 1,14,888. The interest rate for the 2-year time deposit stands at 7.0 per cent.

3 Year Time Deposit

On a Rs 1 lakh investment in a 3-year time deposit scheme, at a 7.1 per cent annual interest rate, the total interest that you get will be Rs 23,508, and total returns after three years will be 1,23,508.

5 Year Time Deposit

Since the 5-year time deposit scheme provides the highest interest of 7.5 per cent among all Post Office TD schemes, a Rs 1 lakh investment for five years will give you interest of Rs 44,995, and the total maturity amount on the completion of the scheme will be Rs 1,44,995.