How much interest will you get on depositing ₹ 15 lakh in post office 5 years TD? Understand complete financial mathematics

The Post Office Time Deposit (TD) scheme is one of the most preferred options in the country to keep your hard-earned lump sum money safe and get guaranteed returns on it, away from the ups and downs of the stock market. This government scheme, which works on the lines of fixed deposits (FD) of banks, has a direct sovereign guarantee from the central government, due to which the depositor’s capital remains completely safe. The post office offers TD accounts for tenures of 1 year, 2 years, 3 years and 5 years. Of these, 5 year time deposit is the most popular because it not only has the highest 7.5% per annum Attractive interest is being given, but also the benefit of tax exemption under Section 80C of Income Tax is available. If you invest your capital of ₹15,00,000 (Rs 15 lakh) in Post Office TD for 5 years, it is very important to understand the complete calculation of how much net interest you will get annually and for the entire period of 5 years.

Under Post Office Time Deposit rules, interest is calculated on the basis of quarterly compounding, but it is paid on an annual basis into the investor’s post office savings account at the end of every year. The financial details of an investment of ₹15 lakh assuming an annual interest rate of 7.5% (approximately 7.71% effective annual yield with quarterly compounding) are as follows:

• Lump Sum Deposit: ₹15,00,000 (15 lakh rupees)

• Applicable interest rate: 7.5% per annum (compounded quarterly)

• Interest received every year: About ₹1,15,707 per year

• Total net interest earned in 5 years: About ₹5,78,535 (Approximately ₹5.78 lakh)

• Total return after 5 years (principal + total interest): About ₹20,78,535

If you withdraw this ₹1.15 lakh interest every year from your savings account, it provides you a regular annual income. At the end of the tenure of 5 years, your original deposit of ₹ 15,00,000 is returned completely safely.

No tax exemption is available on post office TD of 1, 2 or 3 years, but 5-Year Time Deposit Enjoys special tax exemption status under Section 80C of the Income Tax Act, 1961:

• Deduction up to ₹1.5 lakh: Taxpayers opting for the old tax regime can claim income tax deduction up to a maximum of ₹ 1,50,000 in a financial year on the amount deposited in this account.

• Tax rules on interest: Keep in mind that the interest of ₹1,15,707 received every year is not tax-free. This interest is added to your annual income under ‘Income from Other Sources’ and is taxable as per your respective tax slab. If the annual interest exceeds the TDS limit, the post office deducts TDS as per rules, to avoid which eligible persons can submit Form 15G or Form 15H.

Post Office TD has flexible rules for withdrawing money in case of any unexpected financial crisis:

• Minimum Lock-in: No withdrawal can be made from the TD account before completion of 6 months from the date of account opening.

• Confinement between 6 months to 12 months: If you close the account after 6 months but before 1 year, you will be given interest only at the simple interest rate of Post Office Savings Account (currently 4%).

• Detention after 1 year: On premature closure of 5 year TD after completion of 1 year, interest is deducted at 2% less than the TD interest rate applicable for that period.

• Account Extension: On completion of 5 years, if you do not need the money immediately, you can extend your account for next 5 years at the same interest rate applicable at that time by applying within 18 months from the date of maturity.

Opening a 5 year time deposit account in the post office is very simple and transparent. For this, you can go to any nearest post office in the country and submit your identity card, residence certificate, PAN card and passport size photo along with the application form. For investments of ₹15 lakh, you can opt for check or direct transfer from post office savings account. The account can be opened single or jointly by up to three adults. Additionally, investors who have an active Post Office Internet Banking or IPPB Mobile Banking account can book this account online from the comfort of their homes without any paperwork.