Want To Set Up A Post Office FD? Investment Limit, Tax Benefit And Other Details Here

Want To Set Up A Post Office FD? Investment Limit, Tax Benefit And Other Details Here

Post office FD: India Post offers four maturity options for its time deposit small savings scheme

India Post offers a range of maturity options under its time-deposit small savings scheme. India Post – which operates a network of more than 1.5 lakh post offices across the country – provides four different lock-in periods for time deposit – or fixed deposit – accounts, and pays interest to the tune of 7-7.8 per cent per annum on such accounts, according to its website, indiapost.gov.in. While the fixed deposits of one-year, two-year and three-year maturities have no upper investment limits in place, the five-year time deposit allows a maximum investment of Rs. 1.5 lakh a year.

Here are the interest rates, investment limits and income tax benefits applicable to the post office fixed deposit accounts:

Post office fixed deposit investment limits

The post office allows a minimum investment of Rs. 200 in any of its time-deposit products.

Post office fixed deposit interest rates (rate of return)

Maturity period Annual return (interest rate) Investment limit 80C tax benefit
One year 7.00% Minimum Rs. 200, no upper limit No
Two years 7.00% Minimum Rs. 200, no upper limit No
Three years 7.00% Minimum Rs. 200, no upper limit No
Five years 7.80% Minimum Rs. 200, maximum Rs. 1.5 lakh a year Yes
(Source: indiapost.gov.in)

Interest rates applicable to small savings schemes are revised by the government on a quarterly basis. For the quarter ending June 30, investment in fixed deposit accounts of one-three year terms fetches interest at the rate of 7 per cent per annum.

Post office five-year fixed deposit income tax benefits under Section 80C

Investment in the five-year time deposit account qualifies for income tax benefit under Section 80C of the Income Tax Act, according to the India Post website.

Section 80C provides for a reduction of up to Rs. 1.5 lakh in taxable individual income in a year under certain conditions. In other words, eligible income tax assessees can claim a tax benefit worth up to Rs. 1.5 lakh – in the form of deduction from gross income to arrive at taxable income – in a financial year using Section 80C rules.