Why post office FD is a good investment option

Fixed deposit (FDs) are a trusted investment option for investors who have a limited risk-taking ability and those who want to know what amount of returns to expect upon maturity. In addition to big banks, non-banking finance companies (NBFCs) and small finance banks, the India post office also offers this facility. There are several benefits to opening a post office fixed deposit.

Guaranteed returns: Since the post office is a government-backed entity, the returns on the post office fixed deposit are assured. This scheme is deemed to be safer than FD options of other banks and financial institutions.

Good interest rates: The interest rates provided by the deposit in post office are higher than many other investment schemes. These rates of interest are revised by the government at the start of each quarter.  Here are the post office FD interest rates for the quarter ending September 2021:

Period Interest rate
1 year 5.5%
2 years 5.5%
3 years 5.5%
5 years 6.7%

No volatility: Investors can earn the same amount of interest irrespective of the ups and downs in the market. These investments bear no impact of market volatility.

Flexibility: Post office fixed deposits offer flexibility in several ways. The minimum investment amount with which the FD can be opened is Rs 1,000 and there is no maximum amount. A single post office FD account can be converted into a joint account or a joint account can be split up into single accounts.

There is no upper limit on the number of FDs an investor can open with the post office. An account can also be opened for a minor. These FD accounts can be transferred from one post office branch to another.

Nomination: When you open a post office FD, you can nominate another individual who can get the returns in your place.

Tax implications: Tax deductions under Section 80C of the Income Tax Act are applicable to five-year fixed deposits.

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