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Kolkata: Very few actually know that the post offices in India began offering services of a bank from as early as 1885! Significantly, the popularity of post offices as investment destinations have survived for well over a century. Even in this age of high returns of the equity market and mutual funds, the post office keeps attracting millions of depositors. No wonder post office deposit schemes are especially popular with the risk-averse and elderly sections of the population.
One of the key features of post office instruments is the fact that its schemes come with a sovereign guarantee and, therefore, offers the maximum security of capital that one can have in India. Against this backdrop, it becomes quite apparent why the post office term deposits -- they are akin to fixed deposits in banks -- are still popular with a large number of common people of India.
One should note that in post office parlance, these deposits are called Term Deposits. They offer a slew of benefits which can be listed as under:
Guaranteed returns: Since all post office schemes are backed by the government of India, they are one of the safest in the country.
Significant interest rate: The post office term deposit rates are stable and not low at all. Moreover, the interests are compounded on a quarterly basis which fetches higher returns that annual compounding.
Zero volatility: The returns are guaranteed and fixed without any chance of being volatile.Tax deductible: The investment in 5 year term deposits is tax deductible.
Term deposits in post offices are subjected to quarterly compounding. The rate of interest payable on 5 year Term Deposit is 7.5%. Income Tax deductions are available on this deposit according to Section 80C of the Income Tax Act. The interest rate for term deposits of 3-year, 2-year and 1-year deposit are 7.1%, 7.0% and 6.9% respectively.
Rate of interest on 5-year TD: 7.5%Rate of interest on 3-year TD: 7.1%Rate of interest on 2-year TD: 7.0%Rate of interest on 1-year TD: 6.9%
A term deposit can be opened with minimum investment of Rs 1,000 and in multiples of Rs 100 thereof. There is no maximum limit for investment in term deposits. The amounts in the term deposit account will be repayable after expiry of 1 year, 2 year, 3 year, 5 year from the date of opening depending on the terms of TD chosen.
