The Post Office Fixed Deposit (POFD) (alternatively known as the post office 'time' deposit) is a reliable and secure alternative to fixed deposit schemes offered by banks. An investor can earn an assured return on the amount deposited for a given period.

The most suited POFD users are those who are conservative about their savings and prefer the security of their capital. It is important to note that the interest rates for post office fixed deposits are typically higher than that of a bank's fixed deposit.

BENEFITS OF POST OFFICE FIXED DEPOSITS

1. Interest Rate

A POFD can be availed for any period between 1-5 years. The rate of interest for POFD is revised at the beginning of every quarter of the final year. The interest rate is determined according to the yield on government securities. The current rates are as follows:

2. Tax Benefits

Post office fixed deposits offer tax savings like:

• Section 80C deduction is available. The annual deduction limit under 80C is ₹1.5 lacs. However, this is applicable only to the 5-year time deposits. TDS is applicable on the interest. However, if interest is less than ₹40,000 no TDS is to be deducted. Once the interest exceeds the above limit, tax is to be deducted on the entire amount of interest. This is beneficial to depositors with lower income that may not be in the taxable bracket. If you are a senior citizen, you can take advantage of even more POFD tax benefit.
• The principal amount deposited in SCSS ( Senior Citizen Saving Scheme ) is eligible for a tax deduction of up to Rs. 1.5 Lakh per annum under section 80C of the Income Tax Act, 1961
• Post office FDs are government schemes and are least affected by volatility in interest rates.

3. Additional Benefits

• The minimum amount needed to open an account is ₹1000. There is no upper limit.
• Further, your account can easily be changed from a single account into a joint one and vice versa. Additionally, you can open any number of POFD accounts.
• A minor's account can be handled by their legal guardian.
• In certain cases, you can also choose to move your fixed deposit from one post office to another.
• It can be opened with a maximum of 3 members.
• Nomination: When opening a POFD account, one can nominate their beneficiary. The person in question can then nominate yet another person.
• Premature Withdrawal: It is possible to withdraw an amount from your POFD account at any point after 6 months and before it reaches maturity.

Post Office FD schemes are somewhat similar to bank fixed deposits. You invest money at a fixed interest rate for a definite period and earn a pre-determined return. These are backed by the government, and as the money in the post office term deposit is completely protected, with guaranteed returns they are a good investment platform for conservative investors.