FD in Post Office: Benefits for Seniors and Interest Rates in 2024
Updated: 5 days ago
A practical substitute for bank fixed deposits is the Post Office Fixed Deposit (POFD), also referred to as the "Post Office Time Deposit." A person can receive a guaranteed return on their money placed for a predetermined amount of time by using the Indian Postal Services' fixed deposit system. Additionally, POFD offers you a number of benefits, including premature withdrawal, extension, pledging, and flexibility. A new regulation that applies to matured, unclaimed FD accounts has been notified by RBI. The interest rate applied to the funds in an unclaimed, matured fixed-rate deposit (FD) account will be the contracted rate of the matured FD, whichever is lower. In this article, we will highlight the benefits of this investment option for seniors and explain the interest rates applicable to it in 2024.
Table of content
Latest Updates and Benefits for Seniors
Notably, after the banks have subtracted the TDS at the rate determined by Section 194P, qualifying older citizens will not have to file the ITR. The exclusion does not apply to tax payments; rather, it only applies to return filing. To be exempt from filing an ITR, qualifying senior persons must submit Form 12BBA, a declaration form, to the designated banks, according to notification from the CBDT. The proposed Budget 2021 would exempt senior citizens from filing income tax returns if their sole sources of annual income are interest and pension income. In order to mandate that banks withhold tax from senior people over 75 who receive pensions and interest income from the bank, Section 194P has been added.
Post Office FD Interest Rates for 2024
Every quarter at the start of the fiscal year, the government adjusts the POFD interest rate. Based on the yield on government securities, it is computed. The following table shows the interest rates effective from 1st January, 2024:
Period of FD | Interest Rate for Q4 of Financial Year 2023-24 |
1 year | 6.9% |
2 years | 7.0% |
3 years | 7.1% |
5 years | 7.5% |
Post Office Fixed Deposits: Features and Benefits
Before discussing the features and benefits of POFD in detail, let us share a quick snapshot as follows:
Particulars | POFD Features |
Minimum deposit | Rs. 1,000 |
Maximum deposit | No maximum limit |
Tenure | 1, 2, 3 and 5 years |
Interest calculation | Quarterly |
Interest payout | Annually |
Premature withdrawal | Permitted after 6 months |
Nomination facility | Available |
Now let us explain these features and benefits in detail.
Flexibility of investment: There is no maximum restriction and a minimum opening deposit of Rs. 1000 for POFD accounts. It is possible to change your POFD account type from single to joint, and vice versa. You can open an unlimited number of FD accounts at the post office. If the youngster is older than ten, you can even register a POFD account in their name, which will be managed by their parent or legal guardian. The ability to move an FD account from one post office to another is another advantage.
Maturity timeline: One-year Term Deposit (TD), Two-year TD, Three-year TD, and Five-year TD are the four varieties of POFD. Depending on the kind of TD you open, the maturity varies. You have the option to withdraw the deposit amount or keep the account open for an additional year once it matures. After six months from the deposit date, you can take a partial withdrawal of the deposit amount even before it matures.
Interest: Every year, you receive interest along with the refund at maturity. The best part is that POFD accounts have a very appealing interest rate, which can occasionally be more than that of a bank savings account.
Nomination: Not only can you register a POFD account, but you can also nominate someone if you want. Moreover, even if the nominee already has a POFD account, they may still nominate someone else.
Tax Implications: Under Section 80C of the Income Tax Act of India, 1961, you are only eligible to deduct income taxes on deposits placed into five-year fixed deposit accounts.
TDS in Regard to POFD Interest: If, for regular customers, the interest earned on your FD account exceeds Rs. 40,000 each financial year, the Post Office may deduct the tax at source.
Premature Closure: There are a few conditions that must be met before you can close your POFD before the account's tenure. These are as follows:
The PO savings account interest rate is applied if the POFD account is closed after six months but before a year.
The interest rate on a two- or three-year POFD account that is prematurely closed after one year will be two percent lower than the TD interest rate for completed years, and the interest rate for incomplete year PO savings accounts will apply.
It is not possible to withdraw a 5-year POFD before the full four years have passed. Moreover, the PO savings account interest rate will be paid if it is withdrawn after the four-year period but before maturity. (Relative to five-year POFDs submitted after November 9, 2023)
The required application form and pass book must be submitted to the concerned post office to prematurely end the POFD account.
Extension of POFD
One year, two years, three years, or five years are the available investment terms for POFD. After the TD matures, you can keep it for the additional term you deposited. Your TD's maturity might be extended within the following time frame:
Within six months of maturity, one year of TD
Two-year TD, due within a year of maturity
Three- and five-year TDs; maturities within 18 months
After the account matures, you can keep it open longer by bringing the passbook and the required application form to the relevant post office. The interest rate that is in effect for the specific TD account on the maturity date will be carried over to the extended term when the TD is extended.
Pledging of Term Deposit
By submitting an application and an acceptance letter from the pledgee to the relevant post office, you can pledge or transfer a TD account as security. The following authorities may receive the transfer or pledge:
Governor of a State or President of India
Cooperative society, scheduled bank, RBI, or cooperative bank
Public or private corporation, government agency, or municipal government
Home finance provider
Opening a Post Office Fixed Deposit: Eligibility and Process
The following are the eligibility criteria for opening a post office fixed deposit:
An individual
Joint account
A guardian acting on behalf of a juvenile or mentally ill individual
A minor under the age of ten in their own name
A fixed deposit account cannot be opened by an NRI
You can use cash or a cheque to open a fixed deposit at the post office. The day the cheque is realised will be recorded as the account opening date in government records. Those who are extremely conservative with their money are best suited for POFD. It is best suited for low-risk people seeking capital preservation and a consistent income, such as pensioners or those approaching retirement.
Documents Required for POFD
Post Office FD application form
Proof of identity (Aadhaar card, Voter ID card, PAN card, driving license, etc)
Proof of address (telephone bill, electricity bill, passport, etc.)
Steps to Open a Post Office Fixed Deposit
Mobile Banking Method
Step 1: Get the India Post Mobile Banking app from the Google Play Store for your smartphone.
Step 2: Enter your login information to access the app.
Step 3: To open a POFD account, click the "Requests" button on the home screen and choose the "Open Time Deposit Account" option.
Step 4: Fill in the information to open the account, including the nominee, duration, amount to be deposited, and the account from which you wish to deposit the funds.
Step 5: Deposit the money online using the amount specified in Step 4 above.
Offline Method
Step 1: Complete the application by providing all necessary information. The Post Office website also has the form available.
Step 2: Enclose the application form with the necessary supporting documentation.
Step 3: Go to the post office location where your savings account was kept. Visit the branch that is closest to you if you do not currently have an account.
Step 4: To open an account, present the necessary paperwork to the appropriate branch employee.
Conclusion
People can choose a post office fixed deposit plan for a risk-free and secure investment. The post office offers this deposit plan at optimal interest rates for a range of durations. The interest received is tax-free under section 80C of the Income Tax Act, subject to a few restrictions and upper bounds. People who live in rural areas like to choose post office fixed deposits since they are low risk. Nevertheless, you must file your ITR on time to be eligible for this exemption.
FAQ
Q1. Can I close my Post Office Fixed Deposit before the maturity period?
Yes, however in that instance, you will forfeit a portion of your fixed deposit's interest advantage.
Q2. Is there any change in premature POFD withdrawal rules?
Yes, with a five-year term deposit, withdrawals are prohibited before the fourth year and interest will be charged at the rate on a post office savings account if a withdrawal is made after the fourth year.
Q3. What are the periods for which I can open a POFD?
Post Office Fixed Deposits are available for opening for one, two, three, and five years.
Q4. Is Post Office FD taxable?
Yes, the interest paid on post office fixed deposits is taxable; nevertheless, the post office does not handle the tax deduction at source. By choosing a five-year deposit maturity period, one can avoid paying taxes on deposits up to a maximum of Rs 1,50,000.
Q5. Who can open a post office fixed deposit account?
A post office deposit account can be opened by any Indian citizen, with the exception of non-resident Indians (NRIs).
Q6. What are the limitations of amounts under the POFD scheme?
There is no maximum amount that can be deposited into a post office fixed deposit account; it can be started with as little as Rs 200.
Q7. What is the highest interest rate Post office fixed deposit offers?
The maximum interest rate now available on post office fixed deposits is 7.50% for a five-year term.
Q8. What are the post office FD rates for senior citizens?
The POFD rate for senior citizens is 6.9% to 7.5% per annum, based on the FD tenure.. It should be noted that India Post does not give higher interest rates on its Post Office FD schemes for senior individuals, in contrast to banks and the majority of NBFCs. The Senior Citizens Savings Scheme is an option for senior citizens looking for better interest rates.
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