5 lakh will be invested at Rs 7.25 lakh, which is better than bank FD post office scheme.

All banks, including SBI, are steadily reducing their deposit rate (FD). SBI is getting annual interest rate of 6.30% on FD for 7 days to 5 years. All major government and private banks, including HDFC Bank, ICICI Bank and Bank of Baroda, are also paying annual interest at this rate on FD. A better option than a bank FD is Post Office Time Deposit (POTD). Where interest is getting up to 7.7% on deposits from 1 year to 5 years. If you are thinking about FD, you can lock interest rates up to 7.7% annually in this scheme, as the government can reduce interest rates on small savings plans. His clues were given in the RBI Monetary Policy.

Interest on deposits from 1 year to 5 years

Year interest rate

1 year 6.9%

2 years 6.9%

3 years 6.9%

5 years 7.7%

2.25 lakh returns on a deposit of 5 lakhs

If an investor deposits Rs 5 lakh in a time deposit scheme for a period of 5 years, then he will get interest at compounding rate of 7.7% per annum. That is, the interest on the deposit will be Rs 2.24 lakh.

Maturity Amount will be Rs 6.10 lakh on 3 year deposit, Rs 5,71,381 on 2 year deposit and Maturity Amount on 1 year deposit will be Rs 5,34,500.

Interest will also be found in the savings account

If you do not want to go for interest annually, you can then notify the post office that the annual interest is transferred to your post office savings account. The benefit is that even on deposits you get 4% interest annually. This feature comes with a POTD of 2, 3 or 5 year duration.

The specialty of the scheme

-The biggest advantage is that the bank has a guarantee of security up to Rs 5 lakh. There is a 100% security guarantee on your post office investment.

- You can open a Time Deposit Account at least 1000 rupees at post office. There is no limit to the maximum amount you can deposit.

-It features both single and joint account. If the age is more than 10 years, the account is also opened in the name of a minor and the guardian has to look after it in adulthood.

- Be able to open as many accounts as possible under the scheme. A time deposit holder can get his or her funds back in an emergency. However, this should take 6 months before the first account is deposited into the account.

- This scheme is suitable for investment benefit for 5 years and can be exempted under Section 80C of the Income Tax Act 1961.

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