India Post pays interest rates up to 7.8 per cent per annum on five types of term deposits. Term deposit - or fixed income deposit - is a fixed-income instrument in which the investment amount is held in a financial institute for a fixed, pre-defined period against a guaranteed rate of return. India Post, which operates a network of more than 1.5 lakh post offices in the country, offers four types of time deposit and one kind of recurring deposit accounts, investment in which fetches interest in the range of 6.9-7.8 per cent, according to its website - indiapost.gov.in.
The post office pays the following interest rates on investment in the five small savings schemes (four time deposits and one recurring deposit):
| Instrument | Interest rate (applicable from October 1, 2018 to December 31, 2018) | Compounding frequency |
|---|---|---|
| 1 Year Time Deposit | 6.90% | Quarterly |
| 2 Year Time Deposit | 7% | |
| 3 Year Time Deposit | 7.20% | |
| 5 Year Time Deposit | 7.80% | |
| 5 Year Recurring Deposit | 7.30% | |
| (Source: Ministry of Finance) | ||
(A comparison of interest rates offered in the post office on one-five year time deposit (FD) and five-year recurring deposit (RD accounts)
Time deposit (TD) - or fixed deposit (FD) - interest rates
The post office offers four maturity periods in a time deposit account: one year, two years, three years and five years. Deposit in a TD account fetches interest at the rate of 6.90 per cent in a one-year, 7 per cent in two-year, 7.20 per cent in three-year, and 7.80 per cent in five-year maturity options. Investment in the five-year time deposit account qualifies for income tax benefit under Section 80C of the Income Tax Act, according to the India Post website.
Recurring deposit (RD) interest rate
The post office allows a minimum amount of Rs 10 per month for investment in a five-year recurring deposit account, according to the India Post website. The investor can choose any amount above Rs 10 in multiples of Rs 5 as the monthly deposit amount for investing in the scheme. There is no maximum limit applicable to the five-year RD account. An investment of Rs 10 per month in the 5-year post office recurring deposit account (RD) fetches a return of Rs 725.05 on maturity, according to India Post.
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