Looking to park your money safely and earn stable returns? The Post Office Time Deposit Scheme (POTD) is one of the most reliable investment options in India. It offers fixed returns and capital protection, making it a favorite among conservative investors. But how much interest do you really earn if you invest ₹5 lakhs in this scheme? Let’s break it down for you.
As of April 1, 2025, the government has kept the interest rate for a 5-year Post Office Time Deposit at 7.5% per annum, compounded quarterly. If you invest ₹5,00,000 in this scheme, your total interest over 5 years will be around ₹2.24 lakhs, resulting in a maturity value of approximately ₹7.24 lakhs.
Time Deposit Scheme
| Feature | Details |
|---|---|
| Scheme Name | Post Office Time Deposit Scheme (POTD) |
| Investment Amount | ₹5,00,000 |
| Interest Rate (5-Year) | 7.5% per annum (compounded quarterly) |
| Interest Earned | ₹2,24,645 (approx.) |
| Maturity Amount | ₹7,24,645 (approx.) |
| Lock-in Period | 5 years for tax benefit |
| Tax Benefit | Available under Section 80C for 5-year deposit |
| Official Website | India Post |
If you’re looking for safe, stable, and tax-saving returns, the Post Office Time Deposit Scheme is worth considering. An investment of ₹5 lakhs can grow to ₹7.24 lakhs in 5 years, giving you an effective return of ₹2.24 lakhs. It’s not the highest-yielding investment out there, but for conservative investors, it’s a solid bet.
What Is a Post Office Time Deposit Scheme?
The Post Office Time Deposit Scheme is similar to a fixed deposit (FD) offered by banks. You deposit a lump sum for a fixed tenure and earn interest on it. The interest is compounded quarterly but paid annually.
You can choose from 1, 2, 3, or 5-year deposit periods. The 5-year deposit is the most popular because it offers the highest interest rate and also qualifies for income tax deduction under Section 80C.
Current Interest Rates (April-June 2025 Quarter):
- 1-Year Deposit: 6.9%
- 2-Year Deposit: 7.0%
- 3-Year Deposit: 7.1%
- 5-Year Deposit: 7.5%
Note: Interest rates are set by the Ministry of Finance and revised quarterly.
see also: Post Office PPF Scheme ₹22 Lakh 78 Thousand Will Be Available
How Much Will You Get on ₹5 Lakhs?
Let’s run a simple example using the 5-year deposit at 7.5% annual interest:
Step-by-Step Calculation:
- Principal = ₹5,00,000
- Interest Rate = 7.5% compounded quarterly
- Time = 5 years (20 quarters)
- Formula: Maturity Amount = Principal * (1 + Rate/4)^4*Years
Maturity=5,00,000×(1+0.075/4)20=5,00,000×(1.01875)20\text{Maturity} = 5,00,000 \times (1 + 0.075/4)^{20} = 5,00,000 \times (1.01875)^{20} Maturity≈₹7,24,645\text{Maturity} \approx ₹7,24,645
Interest Earned = ₹7,24,645 – ₹5,00,000 = ₹2,24,645
Why Choose POTD Over Bank FDs?
| Feature | Post Office TD | Bank FD (Average) |
|---|---|---|
| Safety | Backed by Govt. | Depends on bank rating |
| Returns | Up to 7.5% | Typically 6-7% |
| Lock-in | Flexible, 5-year for tax benefit | Flexible |
| Tax Benefits | Yes (5-year only) | Yes (5-year tax-saving FDs) |
POTD is ideal for risk-averse investors, senior citizens, and salaried professionals looking for stable, tax-saving returns.
How to Open a Post Office Time Deposit
Step 1: Visit the nearest post office
You can open an account at any Department of Post (DoP) branch.
Step 2: Submit the required documents
- KYC Documents: Aadhaar, PAN
- Passport-size photograph
- Address proof
Step 3: Choose your deposit period and amount
You can deposit a minimum of ₹1,000, and there’s no upper limit.
Step 4: Make payment
You can pay via cash, cheque, or electronic transfer from your bank account.
Step 5: Collect your Time Deposit certificate
This will show your principal amount, interest rate, and maturity details.
You can also open an account online via India Post Payments Bank (IPPB) if linked.
Tax Benefits & Rules
The 5-year Time Deposit qualifies for Section 80C deduction up to ₹1.5 lakhs per financial year. However, interest earned is taxable as per your income slab.
Premature Closure:
- Not allowed before 6 months
- From 6 to 12 months: Savings account rate applies
- After 1 year: 1% penalty on applicable interest rate
Pros and Cons
Pros:
- Guaranteed returns
- Government-backed security
- Flexible tenures
- Tax benefit on 5-year deposit
Cons:
- Interest is taxable
- Lower liquidity due to lock-in
- Returns may be lower than mutual funds or stocks
see also: if You Break a 5-Year FD Before Maturity, You Will Face a Double Blow
Time Deposit Scheme FAQs
Q1. Is the Post Office Time Deposit safe?
Yes, it is backed by the Government of India and is among the safest investment options.
Q2. Can I open this account jointly?
Yes, you can open it as a single, joint, or minor account.
Q3. What happens if I close it early?
You can close it after 6 months, but penalties will apply.
Q4. Is there TDS on interest?
No TDS is deducted by the post office, but you need to declare it when filing income tax returns.
Q5. Can I extend the tenure?
Yes, you can extend the deposit after maturity by submitting a fresh application.
