Thursday, July 18, 2024

Time Deposit

What is Time Deposit?
A Post-Office Time Deposit Account (TD) is a banking service similar to a Bank Fixed Deposit  offered by Department of post, Government of India at all post office counters in the country. The scheme is meant for those investors who want to deposit a lump sum of money for a fixed period; say for a minimum period of one year to two years, three years and a maximum period of five years. Investor gets a lump sum (principal + interest) at the maturity of the deposit. Time Deposits scheme return a lower, but safer, growth in investment. 

Time Deposits can be made for the periods of 1 year, 2 years, 3 years and 5 years. The minimum investment in a post-office Time deposit is Rs 200 and then its multiples and there is no prescribed upper limit on your investment. 

On the maturity of any Time Deposit account, it will be automatically renewed for the same period as initially opened, and interest rate will be the same as that applicable on the day of maturity.

For Premature closing of account, the lock up period of 6 months has been removed and as and when any Time Deposit account is closed before one year, on such closure the amount invested is returned along with the interest of saving account applicable from time to time basis.  This will be applied for both CBS and non CBS Post offices. 

Interest is payable annually but is calculated on a quarterly basis at the prescribed rates. Post maturity interest will be paid for a maximum period  of 24 months at the rate applicable to individual savings account.  

One can take a loan against a time deposit with the balance in your account pledged as security for the loan.

This investment option pays annual interest rates between 8.4 and 8.5 per cent, compounded quarterly. Time deposit for 1 year offers a coupon rate of 8.40%, 2-year deposit offers an interest of 8.40%,  3 years is 8.40 % while a 5-year Time Deposit offers 8.50 % return.

Duration of Account

Quarterly Compound Interest

1 year
2 years
3 years
5 years

8.4 %
8.4 %
8.4 %
8.5 %


In this scheme your investment grows at a pre- determined rate with no risk involved. With a Government of India-backing, your principal as well as the interest accrued is assured under the scheme. 

The account can be transferred from one post office to another.
The amount invested in 5 year Time deposit is exempted as per section 80C of Income Tax Act, upto Rs. 1,00,000. The investment under 5 Years TD qualifies for the benefit of Section 80C of the Income Tax Act, 1961 from 1.4.2007.

How to start a Time Deposit
A Time Deposit account can be opened at any post-office in the country. Account can be opened by cash/cheque and in case of cheque the date of realization of cheque in Govt. account shall be date of opening of account. Account may be opened by an individual, i.e., Single or Joint A/B (not more than two adults). Trust, Regimental Fund or Welfare Fund not permissible to invest. On opening a Time Deposit, you will receive an account statement stating the amount deposited and the duration of the account. Any number of accounts can be opened in any post office. Account can be opened in the name of minor and a minor of 10 years and above age can open and operate the account. Nomination facility is available at the time of opening and also after opening of account. The account can be closed prematurely & On such closure, the amount invested is returned with/without interest depending on the time the deposit was maintained.