Post Office schemes are guaranteed return schemes that every Indian knows. Some of these schemes include Kisan Vikas Patra (KVP), Fixed Deposit (FD), among others. One of the best Post Office schemes is the Term Deposit (TD). TD is also called FD (Fixed Deposit). These government-backed schemes are best for investors who don’t want to take any risk.
Term Deposit
In this scheme, you have to deposit money for a fixed period to earn interest on your principal amount. You can open a time deposit account in the post office for 1 year, 2 years, 3 years, and 5 years. The interest rate is different for each period.
A look at the TD interest rates
For 1 year: 6.9%
For 2 years: 7%
For 3 years: 7.1%
For 5 years: 7.5%
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Tax benefits on Term Deposit
Yes, investors can take advantage of the scheme under Section 80C of the Income Tax Act.
Term Deposit: How to make your deposit 3x?
To increase your money to 3x, you will have to reinvest your money in the same scheme. The power of compounding will show its magic here.
Understand with an example
Suppose you invest Rs 5,00,000 for five years. At the rate of 7.5 per cent, you will earn interest of Rs 2,24,947 in five years.
Your maturity amount will be Rs 5,00,000+ Rs 2,24,947= Rs 7,24,974
Now, if you don’t withdraw this money, you can make your corpus bigger. Here’s how:
Invest for 5 more years
Invested amount: Rs 7,24,974
At the rate of 7.5 per cent, you will earn interest of Rs 3,24,634 in five years.
Total interest after 10 years: Rs 5,49,608
Now you have a total of Rs 10,48,783
This happens if you invest for 5 more years
Invested amount: Rs 10,48,783
Interest earned: Rs 4,70,167
Total interest earned in 15 years: Rs 10,19775
Maturity amount: Rs 15,19,775
How to extend your TD?
There are some simple rules to follow to extend the account:
You can request an extension at the time of opening the account, or you can extend it even after maturity.
This is to be noted that when you extend the account, it will attract the same interest rate as is prevailing on the TD of that term on the day of maturity.