Post Office Time Deposit – Scheme, Features & Interest Rates

What is a Time Deposit?

A time deposit (TD) is an investment tool that has a fixed interest rate on the deposited amount for a specific term. Depositors invest a lump sum and they cannot withdraw this fund from the time deposit account for a specific period. If they do so they have to pay a penalty fee.

Time Deposit with Post Office

Post Office Time Deposits (POTDs) can be started with a minimum amount of INR 1000/- and there is no maximum limit to open a TD account. Depositors have to invest in the multiple of 100 only for 1 – 5 years. They can open any number of accounts they want. 

Features of Time Deposit

  • Capital protection: National Savings Time Deposit (TD) Accounts are  Government-backed schemes that are considered to be safe. 
  • Modest returns: They offer assured but modest returns. 
  • Non-inflation beating returns: Post-tax TD returns fail to beat inflation and your money loses its value over a long period. 
  • Deposit extension: On maturity, a depositor is allowed to extend the tenor of his TD account further.
  • Premature closing: Depositors cannot withdraw the funds before six months from the opening date of the deposit account. 
  • Income tax: Investors of 5 year TD accounts are eligible to take advantage of section 80C of Income Tax Act, 1961.
  • Pledging: A depositor can pledge a TD as security against loans.
  • Nomination facility is available.

Term Deposit Interest Rates

Government reviews and fixes time deposit interest rates every quarter. Interest rate from Oct 1, 2020, is 5.50-6.70% that will be applicable as per the amount deposited and deposit term. Interest on TD accounts is calculated quarterly but is paid annually.

Interest Rates on Premature Withdrawal 

  • If a depositor closes his 1 year TD account after 6 months and before the completion of a year from the deposit date, he will be entitled to receive savings account interest rate only on his deposited funds. 
  • If he withdraws his investment in the second, third or fifth year, the interest rate penalty will be reduced by 2%. 

How To Invest In Post Office Time Deposit?

To open a TD account, depositors have to go to any branch of the post office, fill the required form and submit along with KYC documents and photos of each member in case of joint account.


  • Indian Citizen 
  • A single adult
  • Up to 3 adults in a joint TD account.
  • A natural guardian or court-appointed guardian on behalf of a minor or a person of unsound mind.
  • A minor 10 years old or more in his/her own name.
  • No maximum age defined.

Other Investment Alternative

A better investment alternative for you is Bajaj Finance Fixed Deposit where you can grow your savings up to 6.85%. Here are some distinguished benefits of investing in Bajaj Finance FD:

  • Higher Interest Rates for Sr. Citizens than post office TDs. 
  • Hassle-free 100% online account opening process. The quickest way to book an FD.
  • High stability and credibility ratings from CRISIL and ICRA.
  • More flexibility in case of premature withdrawals as compared to post office time deposit.
  • Flexible tenors ranging from 12-60 months, unlike post office TDs.
  • Loan against FD 
  • The multi-deposit facility allows you to invest in multiple FDs using a single payment cheque.
  • Fixed Deposits for NRIs are available.
  • Additional 0.10% interest on an online FD account. 
  • Free online FD Calculator with a user-friendly interface.
  • The option of investing in a Systematic Deposit Plan wherein you can invest a small amount starting from Rs. 5,000 per month.  

Author Bio:

Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at Highlight Story.

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