Post Office FD Calculator

The Post Office FD has become a credible investment model for many Indians. It has become the preferred choice of people interested in investing in smaller portions but want considerably better interests. It also enjoys the backing of the Government of India. Today, Post Office FD has found acceptance from specific categories of investors. This group includes:

• Housemakers

• Children 

• People from the low-income group

The scheme has a unique feature: it allows you to buy FD from any of the 100,000 plus Post Offices across India. All you’ll need is a minimum investment amount of Rs 1,000 to get started. This FD option is best suited for individuals looking for safe investment avenues. 

Customers get guaranteed returns which is why it is considered safe. Also known as POFD schemes, investors make contributions for a predetermined tenure and take home a fixed interest rate. 

The rule is simple – the higher the investment tenure, the higher will be the interest. 

As Post Office Fixed Deposit (POFD) has the Government’s backing, the rate of return offered is very lucrative, starting at 5.50% p.a. In case you are interested to open a POFD, you will need to fulfil two criteria:

• Make a minimum investment of Rs.100; there is no restriction regarding the upper limit.

• Choose a tenure between 1 to 5-years. 

It is the flexibility in opening the FD that has found many takers of this scheme. The low-income earners are the ones who vehemently agree to this as the best investment opportunity.

Depending upon your needs and requirements, you enjoy the facility of converting your FD account from a joint to a single and vice-versa. 

This flexibility is not limited to account transferability, though. You can also transfer an existing FD account from any Post Office to another in the entire country.

Examples of Post Office FD and its returns on different investment amount

Presently, India Post–as the governing body of India’s post offices is called–offers several FD schemes. The Public Provident Fund or PPF scheme is the best in terms of security and returns.

You have the freedom either to make one lump sum payment or do the same in 12 monthly instalments. It is perhaps the best FD scheme that offers an interest rate of 7.1%.

Post Office FD interest rate

India Post allows its customers to earn guaranteed interest from a Post Office FD. The interest rates are desirable, starting at 5% p.a. The low-income group is further benefited since the interest earned from POFD is exempted from TDS.

This has made it the most favoured investment option offered by India Post services.  

The interest rates of FD offered by the Post Office are one of the most secured and attractive ones available in the current inflationary market. This is reflected from the FD interest rate offered in different kinds of schemes:

Furthermore, if you are looking forward to opting for them from a tax-saving point of view, you can go for a Tax-Saving Post Office 5-year Fixed Deposit. 

There is one special requirement to comply with this scheme before claiming the tax benefits. This is prescribed under Section 80C of the Income Tax Act, 1961. The requirement is – you have to open the FD for 5-years. 

The following are some of the most important information about Post Office Fixed Deposit interest rates: 

• The highest interest rate for  Post Office TD: 6.70% p.a. for a TD with tenure of 5-years. 

• Interest rates range between: 5.50% p.a. to 6.70% p.a. 

• The interest rate for an FD with a period of 1-year: 5.50% p.a.

• The interest rate for an FD with a period of 2-years: 5.50% p.a.

• The interest rate for an FD with a period of 3-years: 5.50% p.a.

Features and benefits of Post Office FD

A quick look into the features and benefits of Post Office FD and why it makes a lucrative deal:

Features of Post Office FD

Some of the spectacular features of Post Office FD are: 

• You can open the FD in various tenures of 1, 2, 3, and 5-years.

• The interest you receive is calculated quarterly but paid out annually.

• This investment alternative is ideal for two different types of individuals: 

1. People with a low-risk appetite

2. Anyone interested in having a guaranteed return on their investment.  

• The interest rate applicable for FD with a 5-year tenure is notified before April 1st every year.

• You can open the FD accounts for both individuals as well as joint account holders.
   

• An investor is required to make a minimum deposit of Rs. 1,000. There is no restriction regarding the maximum amount. The only condition is you have to make the following deposit in multiples of Rs 100 only.
  
  
• There is a major distinction between Post Office FD and bank FD. The former does not permit you to invest your money in months or days.
  
  Similarly, you also do not have any say when it comes to choosing your investment maturity tenure. The only alternative available to you is to choose from tenures of 1-year, 2-years, 3-years, and  5-years.
  
  
• You can even receive your interest amount earned by getting in it directly credited to your savings account.
  
  
• Certain FD terms like 5-year Post Office FD allow you to claim tax deduction under the provision of section 80C of the Income Tax Act, 1961.
  
  
• You can claim a maximum deduction of up to Rs 1. 5 lakhs under section 80C of the Income Tax Act, 1961.
  
  
• When it comes to the tax liability, you will be taxable as a taxpayer if your age is less than 60-years. Nevertheless, senior citizens above 60 are exempted from interest income to the tune of Rs 50,000.

Benefits of Post Office FD

Talking about the benefits Post Office FD offers includes: 

Less Volatile: Market fluctuations and prevailing economic scenarios often have their repercussions on people’s fixed deposits and interests. For instance, a booming economy means high returns on investments and vice versa. 

However, as POFD is government-backed, your investment is safe, and so are the earnings from it. No matter how the market fluctuates, you can always expect to earn your slice of the interest due on your investment. 

Post Office FD investment rules

One of the noteworthy features of PostOffice FD is how it is governed by stipulated rules. Among the most noteworthy Post Office FD Investment Rules, includes: 

• You can start a POFD scheme with just Rs. 200. All subsequent contributions are necessary to be done in multiples of Rs 200.

• The said account can be opened in both capacities – individual or joint.

• This account can be opened in all private and public banks.

• Get your account transferred to any Post Office in a hassle-free process.

• Premature withdrawal is permissible on completion of 6-months from the date of opening.

• Every time you make a premature withdrawal, you will be imposed a penalty of 1%.

• On completing the maturity period, you are entitled to two alternatives:

1. Re-invest the said maturity amount in POFD again, or

2. Redeem the entire maturity amount to a bank account of your choice.

3. When you transfer the existing account to any other Post Office you prefer, you can also opt for the portability feature.

4. There is no restriction when it comes to the number of POTD (Post Office Time Deposit a.k.a POFD) accounts a customer can open provided the money is legal.

• You can avail of the nomination facility in both situations:

1. At the time of opening the account, and,

2. After opening the account.

3. The POFD account can be opened by:

• -Minor, and

• -Two adults.

You can even avail of the loan facility against such accounts. This is, of course, subject to fulfilment of certain conditions such as:

1. It is provided against secured loans.

2. You will have to bear the applicable processing fees.

3. When it comes to the permissible sanctioned loan amount, it stands between 90% to 95% of your POTD.

4. Similarly, you will need to pay an additional 2% to 3% of the interest rate that you are earning under your POTD account.

How is the Post Office FD maturity amount calculated?

Calculating your FD maturity amount is pretty easy. You will need certain pieces of information, like: 

• Investment amount

• Period for investment

• Rate of interest applicable 

With these details mentioned above, you are all set to arrive at the maturity amount and total interest you will earn.

Let us take an example to illustrate this: 

Suppose you invest Rs 1 Lakh in POTD for 5-years, and the rate of interest is 6.8%.

You can use the following formula to make the calculation: 

Maturity Amount = Amount deposited * ( 1+Interest Rate /4)^(n*4) 

Here, n = refers to the number of years, and interest rate is the annual rate.

Note: Here interest is compounded quarterly

In this case, your maturity amount will be:   

Maturity Amount= 100000*(1+.068/4) (5*4)

Maturity Amount= Rs.1,40,360

Interest you earn = Rs. 40,360 (Rs.1,40,360 – 100000)

Please note, though your interest gets calculated quarterly, you get paid only annually. In other words, you get your interest earned and the amount deposited when opening the account.

It is also worth noting such FD is cumulative. In other words, the interest rates are revised for every quarter. This is primarily done by the Government of India. 

Normally, a spread of around 25 bps or 0.25% finds an addition to your 5-year deposits. This is a major gain for customers as this is often above the G-sec yield.

Likewise, Post Offices usually do calculations for post maturity interest. This is done for all POTD irrespective of 1, 2, 3, and 5-years. This is in total contrast to banks that normally do for tenures ranging from 7-days to 10-years.

Tax on Post Office FD scheme

More and more people are getting interested in POTD because of the tax benefits it offers, like:

• When you file your ITR or Income Tax Return you have the freedom of adding your POTD investments for claiming deductions under the section of the Income Tax Act, 1961.

• This deduction can be advantageous for you since you claim an amount to the tune of Rs. 1 lakh every year.

• It is important to note, you can claim deductions under this section provided your investments have been done for 5-years.

• If no TDS has been deducted, you are under legal compulsion to declare the interest amount in your ITR.

• No TDS is deducted on the interest that you earn. This is a major relief since it becomes additional earnings.
  
  
• There is some great news for senior citizens eyeing for POTD. Senior citizens are exempted from any tax implications as per the present rules framed under Income TaxAct, 1961. Section 80 TTB Income TaxAct, 1961 permits them to enjoy their interest earned up to Rs. 50,000

The Government is concerned about the welfare of those who choose POTD. Hence, it allows an investor to claim a maximum amount of Rs. 1.5 lakh deductions per annum. 

The tax-saving fixed deposit account is specially designed to address this need. These factors have made the POTD a hot favourite amongst investors looking for tax-free financial instruments. This way investors can have the cake and eat it too! 

Citizen welfare is one reason why the GOI has introduced the mechanism of TDS. In simple words, it is a method where tax is deducted at source by certain notified individuals and legal entities as per Income Tax Act, 1961. 

The Government will deduct the tax on the income you have earned from the FDs in the form of, say, interest. The amount deducted is deposited by India Post to the Government of India on behalf of you.

You can go ahead in adjusting this TDS amount to your total tax liability for a specific year. You are entitled to claim a TDS refund if your tax liability is less than the actual TDS deducted.

Currently, TDS will be deducted if your interest earning from POTD exceeds Rs 40, 000 in a financial year. Likewise, GOI may deduct TDS from senior citizens if the interest earned exceeds Rs 50,000.

Frequently Asked Question

Q1. How is Fd calculated in the Post Office?

The FD calculation involves a simple formula and you will need to put the right figure at the correct place.

The formula is:

MV = Principal * (1 + Interest rate / 4) ^ (n * 4)

Where,

MV = Maturity Value

n = Tenure of Fixed Deposit

Example: Mr. Sachin deposits Rs 1 Lakhs in Post Office Term Deposit for 5-years at 7.8% interest.

The calculation is made with the formula that appears like this:

Maturity Value = Rs. 1,00,000 * (1 + 0.078 / 4) ^ (5 * 4)

Maturity Value = Rs. 1,47,145

Q2. Is it good to invest in Post Office FD?

Normally, people view FD as the best alternative for the safety and security of the investment in question. In that perspective, POTD meets all such requirements.

The Post Office FD is ideal for people with a low-risk appetite. All they want from their investment is total safety and sizable earnings. The POTD adequately addresses these two conditions. 

You will earn fixed returns on your income at moderate rates. It is a wise choice as it safeguards your financial future tremendously. The fact that it has the proper backing and approval of the Government of India is the icing on the cake!

Q3. Is the Post Office FD safe?

The safety of your hard-earned money is of paramount importance to investors of POTD. A significant proportion of these customers belong to low-income groups. 

The thumbs up and nod of the Government of India gives you enough assurances in terms of safety and security. Guaranteed returns as the safest option make it extremely lucrative for people of all walks of life. 

It does not matter which part of the country you move to due to job compulsions; otherwise, your investment is safe. You can transfer your account to another Post Office in your new city or town.

Owing to such flexibility in operating the account, the safety of a financial instrument can not get better than this!

Q4. Does the Post Office deduct TDS on FD?

Two things stand relevant concerning the deduction of TDS on POTD. 

First, if the total earnings from the interest in a financial year exceed Rs 40,000, TDS will be dedicated at 10%. This applies only to regular taxpayers. 

Second, in the case of senior citizens, if the said interest income exceeds Rs 50,000, they come within the dragnet of TDS. Here too, TDS will be deducted at 10%.

You must note, that if in case the total tax liability for both categories of taxpayers is less than the TDS amount deducted, they can claim a TDS refund.

Q5. Which is better, Post Office FD or bank FD?

Well, both bank FD and Post Office FD do give a certain fixed earning throughout the said FD. Nevertheless, when you compare them in terms of financial security and earnings, the Post Office FD scores the brownie points.

The reasons are obvious:

1. Post Office FDs are backed by the Government of India and by no stretch of imagination can a bank compete with the Government’s infrastructure and resources.
   
   
2. There is an element of assured safety if you invest in Post Office FD which is not the case with Bank Fd.
   
   
3. Post Office FD is easily accessible for low-income groups which are not possible with Bank FD, especially the private sector banks which do not have a good rural presence.

Q6. What is the minimum amount to open an FD account in the Post Office?

Fortunately, a POTD account can be opened with a minimum of Rs. 200. This explains why it has found such a massive response from the low-earning members of society. 

This minimal amount makes it very convenient for people compelled to live with little earnings. In a way, they become capable of reaping twin benefits with a small amount:

1. Safety of your investment, and
   
   
2. Wide network of Post Offices in every remote corner has enabled them to cultivate the habit of making modest savings for their future. Association of the Government of India with the scheme gives them much-needed peace of mind as well.

Q7. Do the Post Offices allow premature withdrawal of the Post Office FD amount?

As per Post Office Fixed Deposit rules, investors can avail of the premature withdrawal facility. This is subject to the condition that 6-months have elapsed from the date the said FD was opened.

In addition, you will be imposed penal charges for such premature withdrawal.  

You will need to visit the concerned Post Office and inform the officials for any premature withdrawal. Apart from this, you will be required to furnish your address and identity proof.

In case you wish to close the account, you can do so after 6-months and just 1-year from the date of opening the account, the process is straightforward. The money you had deposited will be returned to you without any interest.

Q8. Is the interest earned by the Post Office FD taxable?

This question can be looked at from two different angles:

First, if you are a taxpayer whose total earnings from the POTD are less than Rs 40,000, there is good news: you will not be taxed any amount.

Second, both the withdrawal and interest accumulated on maturity are taxable.

Fortunately, since the annual interest gets reinvested for the first four years, it is recognised as a separate investment. Consequently, you do qualify to claim tax deduction under the provision of section 80C of the Income Tax Act, 1961.

In case your earnings from the interest in the POTD exceeds Rs. 40,000 in a financial year, TDS will be deducted.

Q9. Can I get monthly interest on FD in the Post Office?

Unfortunately, you are not entitled to receive monthly interest on your FD with the Post Office.

There are specific rules in place and interest is calculated accordingly. For instance, in case you are making an FD via cheque, your opening date of FD will be treated as the actual date of realisation of your cheque. 

For all calculation purposes, this date will be considered. 

This is in total contrast to Post Office MIS or Post Office Monthly Income Scheme. You get paid monthly at an interest rate of 7.3 percent per annum.

Q10. How much can be deposited in the Post Office FD?

The Post Office FD appreciated catering to all kinds of investors. Different rules apply for the maximum amount you can deposit in Post Office FD.

If you choose FD with 1-year, 2-year, or 3-year tenure, there is no restriction on the amount you can invest.

The only restriction that exists is with 5-year FD. In this case, your deposits can not exceed an amount of Rs. 1.5 lakh per year. These FDs are popular among investors wishing to derive tax savings and have a large sum of money at their disposal.