How to fd in post office

Understanding Post Office Savings Schemes

When people inquire about making a 'Fixed Deposit' (FD) at the post office, they are generally referring to the various secure savings and investment schemes that the India Post offers. While traditional Fixed Deposits are primarily products of commercial banks, the post office provides comparable instruments that offer guaranteed returns on investment over a specified period. The most popular among these are the Post Office Monthly Income Scheme (POMIS) and the National Savings Certificate (NSC).

Post Office Monthly Income Scheme (POMIS)

The POMIS is designed for individuals seeking a regular income stream from their savings. Upon investing a lump sum, account holders receive a fixed interest payment every month. This scheme is ideal for retirees or anyone needing a predictable monthly income. The minimum investment is typically ₹1,000, and the maximum limit is ₹4.5 lakh for a single account and ₹9 lakh for a joint account. The tenure of the scheme is usually 5 years, after which it can be extended. The interest rate is fixed at the time of investment and is subject to change for new investments based on government directives. Premature withdrawal is allowed after one year with a penalty.

National Savings Certificate (NSC)

The National Savings Certificate (NSC) is a government-backed savings bond that offers tax benefits along with fixed returns. It is a popular choice for conservative investors. NSCs are issued in denominations starting from ₹100 and can be purchased by individuals, including minors, and Hindu Undivided Families (HUFs). The standard tenure for an NSC is 5 years, although 10-year NSCs were previously available. The interest earned on NSC is compounded annually but paid out only at maturity. The interest earned in the first four years is eligible for deduction under Section 80C of the Income Tax Act, 1961, making it an attractive tax-saving option. Like POMIS, the interest rates are decided by the government and are subject to revision. NSCs cannot be encashed before maturity, except in cases of death of the holder or court order.

Eligibility and How to Open an Account

Opening an account for these post office schemes is straightforward. You typically need to visit your nearest post office with a valid ID proof (like Aadhaar card, Voter ID, PAN card) and address proof. A passport-sized photograph is also generally required. For minors, a guardian must open the account. Joint accounts are permitted for POMIS. You will need to fill out an application form and deposit the desired amount, either in cash or via cheque/demand draft. For NSC, a PAN card is mandatory. The maturity amount, along with accrued interest, is credited to the account holder's bank account or paid via a cheque upon maturity.

Safety and Returns

Both POMIS and NSC are considered extremely safe investment options because they are backed by the government. This significantly reduces the risk of capital loss. The interest rates offered are generally competitive with bank FDs, especially when considering the tax benefits associated with NSC. However, it's important to note that these rates are subject to change, and the government reviews them quarterly. Investors should check the current rates at their local post office or the India Post website before making an investment. The returns are fixed for the duration of the investment, providing predictability.

Comparison with Bank FDs

While bank FDs offer flexibility in terms of tenure and interest payment options (monthly, quarterly, annually, or cumulative), post office schemes like POMIS provide a guaranteed monthly income, which is a unique advantage for income-seekers. NSC, on the other hand, offers tax benefits that many bank FDs do not provide directly. The interest rates on post office schemes are often on par with or slightly higher than those offered by public sector banks, and significantly better than many private banks, especially for longer tenures. However, bank FDs might offer higher interest rates during competitive periods, and some banks offer higher rates for senior citizens.

Conclusion

In summary, while the term 'FD in post office' might be a misnomer, India Post offers excellent alternatives like POMIS and NSC that cater to different investor needs. POMIS is ideal for regular income, while NSC is beneficial for tax savings and long-term wealth accumulation. Both are government-guaranteed, making them secure choices for your savings.