What is Time
Deposit?
A Post-Office Time Deposit
Account (RDA) is a banking service similar to a Bank Fixed Deposit offered by Department of post,
Government of India at all post office counters in the
country. The scheme is meant for those investors who want to deposit a lump sum
of money for a fixed period; say for a minimum period of one year to two years,
three years and a maximum period of five years. Investor gets a lump
sum (principal + interest) at the maturity of the deposit. Time Deposits scheme
return a lower, but safer, growth in investment.
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Features
Time Deposits can be made for the periods of 1 year, 2 years, 3 years and 5 years. The minimum investment in a post-office Time deposit is Rs 200 and then its multiples and there is no prescribed upper limit on your investment.
Time Deposits can be made for the periods of 1 year, 2 years, 3 years and 5 years. The minimum investment in a post-office Time deposit is Rs 200 and then its multiples and there is no prescribed upper limit on your investment.
Account may be opened by
an individual, Trust, Regimental Fund and Welfare Fund.
The account can be closed
after 6 months but before one year of opening the account. On such closure the
amount invested is returned without interest. 2 year, three year and five
year accounts can be closed after one year at a discount. They involve a loss
in the interest accrued for the time the account has been in operation.
Interest is payable annually
but is calculated on a quarterly basis at the prescribed rates. Post maturity
interest will be paid for a maximum period of 24 months at the rate
applicable to individual savings account.
One can take a loan
against a time deposit with the balance in your account pledged as security for
the loan.
Returns
This investment option pays annual interest rates between 6.25 and 7.5 per cent, compounded quarterly. Time deposit for 1 year offers a coupon rate of 6.25%, 2-year deposit offers an interest of 6.5%, 3 years is 7.25% while a 5-year Time Deposit offers 7.5% return.
This investment option pays annual interest rates between 6.25 and 7.5 per cent, compounded quarterly. Time deposit for 1 year offers a coupon rate of 6.25%, 2-year deposit offers an interest of 6.5%, 3 years is 7.25% while a 5-year Time Deposit offers 7.5% return.
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Duration of
Account
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Quarterly Compound Interest
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1year
2 years 3 years 5 years |
6.25%
6.5% 7.25% 7.5% |
Advantages
In this scheme your investment grows at a pre- determined rate with no risk involved. With a Government of India-backing, your principal as well as the interest accrued is assured under the scheme.
In this scheme your investment grows at a pre- determined rate with no risk involved. With a Government of India-backing, your principal as well as the interest accrued is assured under the scheme.
The rate of interest is
relatively high compared to the 4.5% annual interest rates provided by banks.
Although the amount invested in this scheme is not exempted as per section 88
of Income Tax, the amount
of interest earned is tax free under Section 80-L of Income Tax Act.
How to start a
Time Deposit
A Time Deposit account can be opened at any
post-office in the country. Account may be opened by an individual, i.e.,
Single, Joint A/B (not more than two adults) Trust, Regimental Fund and
Welfare Fund. On opening a Time Deposit, you will receive an account statement
stating the amount deposited and the duration of the account. The account can
be closed after 6 months of opening the account. On such closure the amount
invested is returned with/without interest depending on the time the deposit
was maintained.
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