Post office FD Calculator

When considering options for earning fixed returns or investing in a secure instrument, fixed deposits often come to mind as the preferred choice. By depositing a lump sum of money into a fixed deposit scheme, investors can earn substantial returns upon maturity. India Post offers a fixed deposit plan known as the Post Office Fixed Deposit (POFD), which is similar to bank fixed deposits and guarantees investors a fixed return on their investment. To calculate returns from a post office fixed deposit investment, one can conveniently use a post office FD calculator. In this article, we will explore everything related to post office fixed deposit calculators and their usage.

Post Office Fixed Deposit (POFD)

Post Office Fixed Deposit (POFD) is a savings scheme that offers a fixed return, provided by India Post. This plan is available at all Indian Post offices, allowing individuals to open an FD account at their nearest branch and enjoy guaranteed returns. Here are the key features of a post office fixed deposit:

• The interest rate for a post office fixed deposit starts from 6.9% and can go up to 7.7% depending on the chosen investment period.
• Interest is calculated quarterly and paid annually.
• Deposits made in POFD can be utilized for obtaining a loan.
• The post office fixed deposit scheme offers multiple tenure options ranging from 1 to 5 years.
• The minimum amount required to start a fixed deposit is Rs 200.

Features and Benefits of Post Office FD

Tenure and Requirement: Post office fixed deposits have tenures ranging from 1 year to 5 years. Any individual can open a fixed deposit at the post office. The account can be opened by either cash/ cheque. In the case of the cheque, the date of realization of the cheque will be considered as the date of opening of the account. NRIs are not permitted to open POFDs. POFD accounts can be opened in the name of a minor and can be operated by a parent or legal guardian. Minors aged ten years or more can open and manage the account. A minor after attaining adulthood has to apply for the conversion of the account in his name.

Nominee: Nominees can be added either while opening the account or later. Furthermore, the person you nominate can also nominate a person even with an existing POFD account.

Minimum Investment Amount: Post Office FD accepts only one deposit per one account. The minimum amount for a POFD is INR 200, and there is no upper limit on the maximum investment. The investment amount has to be in multiples of INR 200 only. An investor can make multiple accounts in any post office. Two individuals can open a joint account, and a single account can be converted to a joint account and vice-versa.

Interest Rate: The interest rate for a five-year deposit is notified before April 1 every year. It is usually aligned with G-sec rates of similar maturity with a spread of 0.25%. Interest is payable annually but calculated quarterly. The government of India offers this scheme; hence it does not require any commercial rating. Post office fixed deposit interest rates for July 2023 is 6.80% to 7.50% p.a. and are sometimes higher than Bank FD rates.

Integration with the savings account: According to the investor’s instructions, the interest earned from the account can be redirected to the post office savings account. This would earn the same rate of return.

However, this requires the savings account to be at the same post office. This integration facility is available at the Head of Departmental sub-offices only.

Integration with Post Office Recurring Deposits: As per the investor’s instructions, the interest earned can also be redirected to a %-year post office recurring deposit. For this too, both the accounts are required to be at the same post office. This is available at the Head of Departmental sub-offices only.

Taxation: For fixed deposits with tenure less than five years, there is no tax benefit. However, a 5-year POFD is eligible for tax exemption under Section 80C. The interest earned is added to the annual income and is taxed as per the applicable tax rate. The interest paid by the post office is subject to TDS. If no TDS is deducted, the same needs to be offered in the return of income.

Maturity: Upon maturity, an investor can renew their investments. This can be done by filling out a form or can opt for auto-renewal if the post office is equipped with a CBS system.

Premature Withdrawal: Early withdrawals before six months are not allowed. For withdrawals between six months to one year, the investor will only earn the interest as applicable to the savings account. For all withdrawals beyond one year, an exit penalty of 1% is charged.

Calculating Post Office Fixed Deposit Return

To calculate the returns from a post office fixed deposit, the following formula is used:

M = P x (1 + i/4)^(n x 4)

Where:
M = Final value of maturity
P = Principal invested amount
i = Interest rate offered in the FD
n = Tenure of investment in years

For instance, let’s consider an investment of Rs 2 lakhs in a post office fixed deposit for 5 years, earning an interest rate of 7.7% per annum. Applying the formula, we get:

P = 2,00,000
i = 7.7
n = 5

Thus, M = 200,000 x (1 + 7.7/4)^(5 x 4)
M = Rs 2,77,000.

However, rather than going through this complex calculation, utilizing a user-friendly tool such as the FD calculator post office is recommended. Numerous post office interest calculators are available online, including CashZeni post office time deposit calculator. Let’s explore how to use it.

Post Office FD Investment Rules

• Post Office Fixed Deposit can be opened offline by cash or cheque.
• For deposits made through cheques, the date of realization of the cheque will be the opening date of the FD. The interest will be calculated from this date only.
• Transfer from one post office to the other can be done easily.
• Interest is compounded quarterly, but payouts are annual.
• Post Office Fixed Deposits are guaranteed by the Government of India and hence are a safe investment option.
• Post office interest rates for senior citizens are the same. There are no special interest rates for them. For Senior citizens, POFD does not offer any additional or special interest rates as they have Senior Citizen Saving Scheme.
• Minors can open accounts under valid guardianship. Minors, attaining 18 years of age, should get the account converted in their name.
• The minimum investment is INR 200 and no maximum investment limit.
• No restriction on the number of FD accounts an investor can open. Each FD is treated as a different account.
• Nominee to post office FD savings account can be added even after opening the account.
• Upon maturity, the post office FD can be renewed with the same tenure. The applicable interest rate would be the rate available on the day of maturity.
• Premature withdrawals are allowed only after completion of 6 months of the FD tenure. These attract a penalty of 1%.
• After the post office FD matures, and the depositor doesn’t withdraw the amount, they are not entitled to extra interest post the tenure of the fixed deposit.

Benefits of Using Post Office Fixed Deposit Calculator

Some of the upsides of using this calculator are listed down here

• No erroneous calculation since it’s an automatic calculator
• Making complicated calculations hassle-free at multiple tenures, amount,s and interest rates, thus saving time and effort
• The tool is absolutely free of cost thus you can use it as many times as you want and compare returns for different combinations of FD rates, tenure, and amount

Developing the habit of using a post office FD calculator is beneficial when making planned and efficient investments in a post office fixed deposit scheme. Prior knowledge of expected returns empowers investors to make informed decisions and earn maximum returns from their post office FD investments.

Frequently Asked Questions