Tuesday, 26 October 2010

All About POTD or Post office Time Deposit

There are a number of safe investment options through post offices in India. All these schemes are safe and secure investments.  PPF (Public Provident Fund), NSC (National Savings Certificate), KVP (Kissan Vikas Patra) and POMIS (Post office Monthly Income Scheme) etc. are some of such safe investment schemes. Here we can go through Post office Time Deposit Scheme. This is also another safe deposit scheme operated through Post offices.

What is Post Office Time Deposit?

It is an account one can open with a post office with a onetime deposit of any amount of Rs. 200 or multiples of Rs. 200 for a certain period of time. It is just like fixed deposit in Banks.

Time Period of POTD

The time period of Post office Time deposit is 1 year, 2 years, 3 years and 5 years.

Who can open a POTD?

Any resident Indian who is at the age of 10 or more can open and operate a post office time deposit directly. Joint account also can be opened. A minor also can operate an account through guardian. Nonresident Indian and HUF cannot open a post office time deposit account. Nomination facility is also available.

Minimum and Maximum deposit

Minimum deposit amount should be Rs. 200 and multiples of Rs. 200 can be deposited in Post office time deposit. There is no maximum limit in this account. And a person can open any number of accounts.

Rate of Interest and Payment of interest

Interest of this deposit is according to the time period of deposit and calculate quarterly, but payable only annually as per the following rate of interest.

Time                            Rate of Interest

1 year              -           6.25%

2 years             -           6.50%

3 years             -           7.25%

5 years             -           7.5%

Withdrawals and Premature closing of POTD

Withdrawal of Post office time deposit is not permitted before 6 months. The withdrawal after six months and before one year will not get any interest. You can withdraw the deposit after one year, if it is made for 2years, 3years or 5years with a rebate of 2% from the interest applicable to the period of the deposit kept live. For example, if you deposit for 2 years and withdraw after one year, you will get only an interest of 4.35 (2% less for the interest applicable for one year). The account can be reinvested after maturity as per the direction of the depositor.

Income Tax Benefit

Only Post office Time Deposit for five years gets Income Tax Exemption under section 80 C of Income Tax Act. But if the time period is less than 5 years will not get any tax exemption. The interest received from this account is taxable. But there is not TDS deducted at the source. Deposits are exempt from wealth Tax. If the deposit is opened jointly only the first holder will get tax exemption.

Conclusion

Post office time deposit is a safe deposit just like other fixed deposits in banks. But the advantages of this deposit is that we can operate this account from anywhere in India even from rural areas where there is not banking facility and can be transferred from any post office to other.

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