Post office FD interest rates are currently in the range of 6.8% to 7.5% for the quarter ending June 30, 2023. India Post offers various Fixed Deposit (FD) schemes, also called Time Deposits (TD), as part of the National (Small) Savings Schemes programme of the government. While it was designed as a simple investment medium aimed at promoting savings among small investors, accessibility to post offices, the low minimum investment limit (of ₹1,000), and flexible tenure alongside assured returns have made it a popular investment vehicle.
The Post Office timed deposits can be opened for tenures of 1 year, 2 years, 3 years or 5 years. Investment in the 5-year FD qualifies for tax deduction of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act.
Read on as we take a closer look at the Post Office FD interest rate 2023, among other details like types, benefits and features of different FD schemes.
|Interest Rate||6.8% – 7.5%|
|Tenure||1 year – 5 years|
|Maximum Deposit||No Upper Limit|
|Lock-in Period||1 year (5 years for Tax Saver FD)|
The interest on fixed deposits can be calculated via two methods – the simple interest method and the compound interest method. Simple interest is the interest earned on the principal amount invested at the predetermined interest rate during the investment tenure.
Formula for simple interest calculation is as follows:
Simple Interest = (P * R * T)/100, where
Let’s say you have invested ₹1000 for a tenure of 3 years at 7% p.a. interest rate. In this case, P = ₹1000, R = 7% and T = Tenure.
Simple Interest = (1000 * 7 * 3) /100 = ₹210
Maturity Value = Principal Amount + Simple Interest = ₹1000 + ₹210
So, at the time of your FD maturity, you will get ₹1210
The other method is the calculation of FD maturity via compound interest. Compound interest is the interest earned on interest. When you earn compound interest on an investment, the interest you earn is added to the principal amount, and the total amount then earns interest again in the next period. This cycle continues, and over time, the interest earned can become significant.
For compound interest calculation, the formula applicable is:
A = P (1+r/n) ^ (n * t), where
Let’s say you have invested ₹1000 for 5 years at an interest rate of 7.5% p.a. compounded quarterly
In this case, P = Rs.1000
Interest Rate = 7.5%
Number of compounding in a year is 4 (quarterly compounding)
Number of years of investment is 5 years
A = 1000 (1+0.075/4) ^ (4*5)
A i.e. maturity amount = ₹1450
Interest amount = ₹1450 – ₹1000 = ₹450
That said, manually calculating FD returns could be time consuming and also prone to errors. A more accurate and convenient way would be to use an online Post Office FD Calculator, like the one mentioned below. Just enter your FD amount, rate of interest (p.a.) and tenure (in years), and the calculator would show the FD maturity amount instantaneously!
Rate of Interest (P.a)
Time Period (Years)
Post Office fixed deposit interest rates are reviewed by the government on a quarterly basis. Here are some of the factors that can have an impact on Post Office FD interest rates:
The monetary and fiscal policy along with the prevailing economic conditions in the country such as GDP growth, unemployment rates, and the state of the economy can impact the Post Office FD rates.
Interest rates on FD deposits vary based on tenure. A long-term FD generally has a higher interest rate than a short-term FD.
The Post Office FD rate is also influenced by the prevailing yields on government bonds. If the yield on government bonds is low, the Government may tweak Post Office FD interest to higher rates.
|Tenure||Interest Rate (p.a.)|
It’s important to note that the interest rates on post office fixed deposits are subject to change from time to time based on various factors such as market conditions, inflation, and government policies. Investors should check the latest rates before investing. Additionally, interest earned on post office fixed deposits is taxable, and TDS (Tax Deducted at Source) may be applicable if the interest income exceeds ₹40,000 (₹50,000 for senior citizens) per annum.
Senior citizens having an FD account with the Post office (under Senior Citizens Savings Scheme Account(SCSS)) can earn an interest rate of 8.2% on their deposits with the interest payable quarterly and applicable from the date of deposit to 31st March/30th June/30th September/31st December.
**Note that rates are subject to change every quarter
We have considered deposits below Rs.2 crore based on the common threshold in India. The upper limit for interest rate includes interest rate on senior citizen FDs.
|Bank Name||Tenure||Interest Rate|
|Post office Fixed Deposit||1 year to 5 years||6.8% to 7.50%|
|Kotak Bank Fixed Deposit||7 days to 10 years||2.75% to 7.70%|
|ICICI Fixed Deposit||7 days to 10 years||3% to 7.60%|
|Axis Bank Fixed Deposit||7 days to 10 years||3% to 7.26%|
|Yes Bank Fixed Deposit||7 days to 10 years||3.25% to 8.25%|
|Bandhan Bank Fixed Deposit||7 days to 10 years||3.75% to 8.50%|
|IDFC Bank Fixed Deposit||7 days to 10 years||3.50% to 8.25%|
|HDFC Fixed Deposit||7 days to 10 years||3% to 7.75%|
|Bank of Baroda Fixed Deposit||7 days to 10 years||3% to 7.55%|
|Bank of India Fixed Deposit||7 days to 10 years||3% to 7.80%|
|Union Bank Fixed Deposit||7 days to 10 years||3% to 8.05%|
Here are some of the features and benefits of Post office FD:
Post office offers various fixed deposit schemes for Indian residents and NRIs. Each scheme is designed to serve a specific purpose. The types of FD schemes offered by the bank are:
*Post office FD rates are effective from April 1, 2023, to June 30, 2023.
Follow the steps below to open an Post office FD account:
Step 1: Visit the nearest post office branch and request the application form for opening a fixed deposit account.
Step 2: Fill in the application form with your personal and financial details, including your name, address, PAN card details, and the amount you wish to invest.
Step 3: Submit the required documents, such as your PAN card, Aadhaar card, and a passport-sized photograph.
Step 4: Choose the tenure and interest rate for your fixed deposit account.
Step 5: Deposit the amount you wish to invest through cash, cheque, or demand draft.
Step 6: Receive a receipt from the post office as proof of the deposit.
Step 7: Collect the deposit certificate that contains all the details of your fixed deposit account, such as the amount invested, the tenure, the interest rate, and the maturity date.
Step 8: Keep the deposit certificate safe as it serves as proof of your investment
To open a Post office FD account, you may need the following documents:
You may need to meet the following eligibility criteria to open Post office Time Deposit (TD) account:
However, if you have a tax-saving FD account with the Post office, you can claim tax deduction benefits of up to ₹1.5 lakh under Section 80C of the Income Tax Act. Note that Post office tax saving FD comes with a lock-in period of 5 years.
India Post Office provides loans against Public Provident Fund Account (PPF) after the expiry of one year from the end of the FY in which the initial subscription was made.
The loan amount can be 25% of balance to the credit at the end of the second year immediately preceding the year in which loan is applied. Further, if the loan is repaid within 36 months of the loan taken, a 1% per annum interest rate is applicable. In case, the loan is repaid after 36 months, a 6% per annum interest rate is applicable.
Investing in Post Office FDs can be a good option for investors who are looking for a low-risk investment with guaranteed returns. The current Post Office FD interest rates are in the range of 6.8% to 7.5% p.a., which is among the highest in the country. That said, FD returns are fully taxable (as per the investor’s tax slab rate), and hence, the real rate of returns could be low. As such, always consider your financial goals, risk tolerance and liquidity needs before finalizing any investment decision.
The minimum deposit amount for Post Office FDs is ₹1,000, and there is no maximum limit on the deposit amount.
The tenure of Post Office FDs ranges from 1 year to 5 years. The tenure of the FDs may be extended for another period upon maturity if the investor does not want to withdraw the amount. However, this will be considered as a fresh investment and the existing interest rate at the time of new deposit will apply to the fixed deposit.
Yes, a penalty is applicable for premature withdrawal of Post Office FDs. The penalty depends on the tenure of the FD and ranges from PO Savings Account Interest rate with a tenure of up to one year to interest calculated at 2% less than of TD interest rate for completed years for a 2/3/5 year TD account prematurely closed after 1 year.
Yes, senior citizens are eligible for higher interest rates (currently 8.2% p.a.) on Post Office FDs under the Senior Citizen Savings Scheme (SCSS).
Yes, loans can be availed against Post Office FDs in the form of loan against Time Deposit (TD) and loan against National Savings Certificate (NSC).
The interest earned on Post Office FDs is taxable as per the income tax slab of the investor.
You can open a Post Office FD account by visiting your nearest post office branch and submitting the required documents and deposit amount.
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
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