The post office fixed deposit scheme offers higher returns as compared to public sector banks. You can select a tenure type ranging from 1 year to 5 years for your fixed deposit.
The post office gives you a 5.5% interest rate for 1 year FD and a 6.7% interest rate for a 5 year FD.
You can see the year-wise interest rates that the post office offers on fixed deposits in the table below.
|5 years||6.7 %|
The post office department has also started the net banking or mobile banking services like FD, RD, PPF contribution and loan repayment. You can get more details at ebanking.indiapost.gov.in.
In case, you need to close your FD prematurely. You can even close your fixed deposit account prematurely any time after 6 months of the account activation date. You will get savings account interest rates on the withdrawn money.
You can compare 3 investment scenarios to understand the best fit for you.
How to Earn 5.74 Lakh Interest
Let’s calculate how you can earn more than Rs 5 lakh interest in five years in the above post office scheme.
If you invest Rs. 15 lakh in Post Office Term Deposit Scheme for five years, you would earn interest at 6.7% per year for 5 years.
You will get a total amount of Rs. 20,74,499 at the maturity of FD and the interest earned during the 5 years is Rs. 5,74,499. See the calculation below.
Earn Rs. 3.83 Lakh Interest in 5 Years
You can invest Rs. 10,00,000 for 5 years in the same Post Office Time Deposit Scheme to earn an interest of Rs. 3.83 lakh in just 5 years.
The total maturity value would be Rs 13.83 lakh.
You can see the calculation below-
How Senior Citizens Can Earn More
If you are a senior citizen, you can generate even more corpus on your idle money. There are two investment options you can compare to get maximum benefits on your funds.
#1. Senior Citizen can earn 7.4% interest
You can invest your money in the post office’s Senior Citizen Savings Scheme (SCSS) that comes with a lock-in period of 5 years but yields 7.4% annual interest.
If you invest Rs. 10,00,000 in SCSS for 5 yeas the maturity amount & interest you would earn as below.
You have accumulated Rs. 4.28 lakh as interest in 5 years.
#2. Earn 5 lakh Interest by investing less
If you increase your principal amount to Rs. 12,00,000, you can earn more than Rs. 5 lakh interest in the given period.
That means senior citizens have to invest Rs. 3 lakh lesser amount than a regular investor to earn 5 lakh interest.
Here’s the calculation.
Another benefit of opening a fixed deposit (time deposit) in the post office is the tax exemption on the invested amount.
You get the benefits of tax rebate under Section 80C of the Income Tax Act, 1961. However, interest paid by the post office is subject to TDS.
From 1 April 2018 onwards, senior citizens are exempted from the TDS on interest earned up to Rs. 50,000 per annum.
You can avail of tax exemption on the 5-year time deposit investment only.
The best part is that your money is safer in the post office than banks as post offices are backed by the government itself.
Be aware of better, safer investments and keep on investing.