Tax deductible small savings schemes.




Post Office Time Deposits (POTD) work like a fixed deposit account where the money is deposited for a fixed tenure and earns a guaranteed return. The investors’ capital is completely protected as the scheme is backed by the Government of India.


India Post offers a variety of small savings schemes to residents, many of which are tax deductible. One such scheme is the 5-year Post Office Time Deposit


Features of a 5-year POTD

  1. A POTD can be opened in any post office as an individual account, a joint account or on behalf of a minor. An individual account can be converted into a joint account and vice versa. A minor of 10 years and above can open and manage a POTD account.
  2. Any number of accounts can be opened in any post office.
  3. Nomination facilities are available.
  4. NRIs are not eligible to open a POTD.
  5. The minimum amount of deposit is ₹200 and there is no maximum amount.
  6. Normally, a POTD is automatically renewed for the period it was originally opened, unless otherwise specified by the account opener.
  7. The interest rate on a 5-year deposit is currently 7.6%  and is payable annually.
  8. The interest income is taxable, but the post office does not issue a TDS certificate.
  9. Maturity proceeds not withdrawn are eligible for interest rates applicable to a post office savings account for a maximum period of 2 years.
  10. There is no lock in period and the account can be prematurely closed, but accounts closed within one year will be eligible only for the post office savings account interest rates.


Please note, although post offices offer deposits ranging from 1 to 5 years, the 5-year deposit alone qualifies for tax deduction under section 80C of the Indian Income Tax Act and therefore the only one covered here.