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Post Office Fixed Deposit Interest Rates

Updated on: 20 Dec 2023 | 10 min read

One of the largest postal service networks in the world, India Post, also functions as a bank. The Post Office’s savings products serve the investment requirements of millions of Indians. One of the most popular savings products that the Post Office offers is the fixed deposit scheme. Post Office FD or National Savings Time Deposit was introduced by the Government of India on 12th December, 2019. Being a government-backed scheme, it is considered to be one of the safest investment options.

However, many investors are unaware that the post office also offers two types of fixed deposits.

The National Savings time deposit and the National Savings Monthly Income Account have many features similar to fixed deposits offered by banks and NBFCs. You need to make a lump-sum deposit for a fixed tenure of time of your choice. You will receive interest as per a fixed income rate. In this blog, you will learn about the unique features, the Post office FD interest rate, and the benefits of this scheme.

Types of Post Office Fixed Deposit Schemes

  1. National Savings Time Deposit Account (TD)
    • The National Savings Time Deposit Account allows you to open a deposit for one, two, three, and five years. 
    • The fixed deposit interest rates offered by the post office vary based on your tenure. 
    • The five-year tenure fixed deposit offered by the post office also qualifies for a tax deduction of up to Rs 1.5 lakhs under Section 80C. 
    • You can also open a fixed deposit either as a single account holder or a joint account with up to three account holders.
  2. National Savings Monthly Income Account (MIS)
    • This fixed deposit allows you to earn a monthly income, and the tenure is for five years. 
    • The minimum deposit amount is Rs 1,000, and additional deposits can be made in multiples of Rs 1,000. 
    • The maximum deposit is Rs 4.5 lakhs for a single account and Rs 9 lakhs for a joint account. 
    • Interest is payable at the end of the month until maturity, and it is taxable as per the account holder’s tax slab. 
    • This type of fixed deposit is suitable for those who wish to earn a monthly income.

Post Office FD Interest Rates

Here is a snapshot of current interest rates (w.e.f 1 October 2023 to 31 December 2023) for the National Savings Time Deposit Account:

 

TenureInterest Rate
1 year6.9%
2 years7%
3 years7%
5 years7.5%

The current interest rate for the National Savings Monthly Income Account is 7.4%.

Features of Post Office Fixed Deposits

The interest on Post Office fixed deposits is predetermined and guaranteed. This implies that on the day of investment, you will know how much maturity and interest amount you will receive at the end of the tenure. Following is the list of the unique features of the post office FD.

  • Minimum Deposit: Rs 1000
  • Eligibility: One needs to be at least 10 years old to open a post office fixed deposit. However, minors need a guardian to open and manage Post Office FD accounts. Once they turn 18, the account can be solely managed by the individual.
  • Tenure: Time Deposits have a tenure of 1, 2, 3, or 5 years. There is no 4-year tenure. has a term of 5 years.
  • Premature withdrawal: Yes, premature withdrawal is possible after six months for National Savings Time Deposit Account and after one year for the National Savings Monthly Income account.
  • Joint Account Facility: It is possible to open a joint account with a maximum of three account holders.
  • Maximum deposit: No maximum limit for Time Deposits; POMIS have a maximum investment limit of Rs. 4.5 lakh in single account and Rs. 9 lakh in joint account.
  • Interest payout intervals: Post office Time Deposits interest rates are compounded quarterly and payable annually. In Post Office Monthly Income Scheme Accounts, interest is paid monthly starting from completion of a month from the date of opening.
  • Nomination feature: Available for all fixed deposits.
  • Auto-Renewal facility: Offered at post office branches for time-deposits. Interest rate applicable to respective FD accounts on the day of maturity day shall apply to the extended period.

Post Office vs Other Banks' FD Rates

Banks NameRegular FD ratesSenior Citizen FD RatesPost Office FD Rates
State Bank of India 3.00% to 7.10%3.50% to 7.60%6.90% - 7.50% 
HDFC Bank 3.00% to 7.25%3.50% to 7.75%6.90% - 7.50%
Axis Bank 3.50% to 7.20%3.50% to 7.95%6.90% - 7.50%
Punjab National Bank 3.50% to 7.25%4.00% to 7.75%6.90% - 7.50%
Bank of India 3.00% - 7.00%3.50% - 7.50%6.90% - 7.50%
Canara Bank 4.00% to 7.25%4.00% to 7.75%6.90% - 7.50%
IDBI Bank 3.00% to 6.75%3.50% to 7.25%6.90% - 7.50%

Points to Note about Post Office FD Interest Rate

  1. The interest for the National Savings Time Deposit Account is compounded quarterly and payable annually at the end of each year 
  2. Where the interest contains part of a rupee that is fifty paisa or more, it shall be rounded off to one complete rupee and if such part is less than fifty paisa, it shall be ignored. 
  3. The interest rate at the time of opening the deposit will be applicable for the entire tenure of FD
  4. If the date of payment of the interest amount is a non-working day then the interest will be paid on the next working day.
  5. No additional interest shall be payable on the amount of interest that has become due for payment but not withdrawn by the account holder.
  6. You can opt for payment of the interest amount directly to your savings account.

Eligibility to Open a Post Office FD Account

The eligibility criteria for opening a Post Office FD Account are as follows:

  • Indian residents, individually or jointly.
  • Legal guardian can make investments under the name of a minor.

However, NRIs, trusts, companies and other organisations cannot invest in Post Office FDs.

Documents Required to Open a Post Office FD Account

If you are looking to open a National Savings Time Deposit Account, then you need to submit at least one document in each category as follows, along with two passport-size photographs:

  • Proof of identity: Passport, Aadhaar Card, Voter ID, Driving license, PAN card
  • Proof of address: You can show utility bills such as electricity bills, Passport, Driving License

If you do not have access to the above documents, you can also show an NREGA Job card with the signature of the State Government official or a letter issued by the National Population Register containing details of your name and address.

How to Invest in Post Office FD

You can visit your local post office branch to open a fixed deposit. You will need to offer all Know Your Customer documents, fill out the requisite form, and either pay the principal amount by cash or cheque.

 

You can also open an account online by registering at the Post Office’s internet banking portal at ebanking.indiapost.gov.in. Then log in with your registered ID and password. Under the 'General Services' tab, click on 'Service Request'. Next, click on 'New Request', choose Post Office Fixed Deposit or Time Deposit opening, and follow the directions to open the account.

Taxation on Post Office FD

Investing in a 5-year Post Office Fixed Deposit (FD) or National Savings Term Deposit makes you eligible for a tax deduction under section 80C, allowing you to deduct up to Rs 1,50,000 from your taxable income for the deposited amount.

It's important to note that the interest earned on the post office fixed deposit is subject to taxation for depositors. Taxable interest applies to taxpayers below the age of 60. However, senior citizens aged 60 and above enjoy full tax exemption on interest income up to Rs 50,000.

Premature Closure of Post Office Fixed Deposit

Investors can withdraw from the post office deposit six months after the initial deposit date. Withdrawals are not permitted before six months.

It's important to highlight that during a premature withdrawal, interest will be payable for the completed months after six months but before twelve months. Any interest already paid to the depositor will be deducted from the deposit repayment amount, and the interest payable on the withdrawal amount.

Final Thoughts

Post office fixed deposits are an effective saving mechanism as there is minimal risk of principal loss due to sovereign guarantee from the central government. You can put in a lump sum and enjoy a guaranteed yearly or monthly income  as per your requirement. This is a step toward diversifying your portfolio and balancing risk with a secure government-backed instrument that  offers guaranteed returns.

FAQs

What is the Post Office fixed deposit interest rate?

For the first quarter of the financial year 2023, the Post Office fixed deposit interest rate is 6.8%, 6.9%, 7.0% for 1, 2, and 3 years, respectively, and 7.5% for five years.

What are some major differences between bank FD and post office FD?

The advantage of bank FDs is that you can open a deposit with a flexible tenure of between 7 days and 10 years. The minimum tenure for post office fixed deposits is one year, and the maximum is 5 years. Interest rates for bank fixed deposits are set by the particular bank and vary between 2.5% and 8.4%. On the other hand, the interest rate for post office FDs is fixed by Ministry of Finance and currently ranges from 6.8% to 7.5%. Bank FDs offer the option of earning income on a monthly, quarterly, bi-annual or annual basis, whereas the Post Office enables depositors to earn an annual income or monthly income.

Is a post office Fixed deposit a safe investment?

The National Savings Time Deposit Account is a  highly secure investment with guaranteed returns. This government-backed savings scheme is not market-linked and offers fixed interest rates.

Is the post office FD a taxable investment?

Yes, this is a taxable investment. The interest earned is taxed as per your income slab. However, depositors aged 60 years and above get a tax exemption of up to Rs 50,000. If you go for a tenure of five years, then your post office fixed deposit is eligible for a tax deduction of up to Rs 1.5 lakhs under Section 80C of the Income Tax Act of 1961.

Can I get a loan against Post Office FD?

The facility to avail of a loan against Post Office FD is currently unavailable.

What minimum amount do I need to open a post office fixed deposit account?

The minimum amount you need to open a post office fixed deposit is Rs. 200.

Can I open a Post Office FD online?

You can open a post office FD account online through mobile or internet banking.

Can I open a Post Office FD joint account?

Yes, you can open a joint account for post office FD. The maximum number of members allowed is 3.

Can I claim the 80C deduction for the Post Office FD investment?

If you invest in post office FD for 5 years, you can claim the 80C deduction.

Is TDS applicable on interest received from Post Office FD investment?

Post Office FD TDS is applicable only if the interest earnings exceed Rs. 40,000 annually for regular investors and Rs. 50,000 annually for senior citizens.

Can I break my Post office Fixed Deposit before maturity?

You can break the post office FD after 6 months of investment.

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