Compared to FD, there is a higher loss on POTD when the money is withdrawn prematurely. If the FD is withdrawn prematurely, then the penalty ranges from 0.5-1.0 percent, whereas the rate of penalty can be much higher in the time deposit scheme.
Any deposit scheme is meant for savings. In this you deposit money and wait for maturity. Even by depositing less money, you can get big money in the end. But sometimes it happens that money has to be withdrawn in emergency. Such a situation can come in front of anyone.
Can’t even stop it. But you can control it. Control because there is a lot of loss in premature withdrawal of money from the deposit scheme. There is a huge reduction in interest and a separate penalty. A similar rule is also with the Post Office Time Deposit POTD scheme.
Suppose a person invested Rs 5 lakh in Post Office Time Deposit Scheme in 5 years. This investment was made on 1 April 2021. According to that time, the rate of interest was fixed at 6.7% on the deposit amount. This person will get interest of Rs 34,351 every year on his deposit and will continue to get it for 5 years. Suppose that after running the scheme for 3 years, this depositor needed money in emergency. Its date can be 2 April 2024.
Losses more than FD
In the event of an emergency, this depositor had to break his post office deposit scheme. Since the scheme was of 5 years but it had to be broken in emergency only after 3 years, so one time only Rs 4,50,140 will be available from the post office. Looking at the current rule, this depositor had to bear a loss of 48% on interest.
If this scheme is closed even earlier, then the loss of interest will be very high. Compared to Fixed Deposit, the customer will have to bear more losses on Post Office Time Deposit. If you break the FD prematurely, then the interest will not be cut as much as the 48% deduction in the POTD scheme.
More benefits if you close the scheme after maturity
On the contrary, if the post office time deposit scheme was run for the whole year, then the returns would have been higher than FD. But the scheme was closed prematurely, so there was more deduction than FD. Post Office Time Deposit Scheme is a government-backed scheme in which the interest is higher than the bank’s FD.
In this, 5.5 percent interest is available on one year, 5.5 percent on two-year scheme, 5.5 percent on three-year scheme and 6.7 percent on 5-year scheme. But as compared to FD, there is more loss on POTD when the money is withdrawn prematurely. If the FD is withdrawn prematurely, then the penalty ranges from 0.5-1.0 percent, whereas the rate of penalty can be much higher in the time deposit scheme.
Cannot withdraw money for 6 months
The POTD scheme is available in four different periods. 1 year, 2 years, 3 years and 5 years. For 1 to 3 years, 5.5% interest is available, while for 5 years scheme, 6.7% interest is given. It has to be noted here that premature withdrawal is not allowed in POTD. If you withdraw money, you have to bear a huge loss. This rule is of 6 months, before which money cannot be withdrawn. There is a rule in FD that the day after depositing money, you can break it even on the next day.
POTD’s rule
POTD How much money will be received for premature closure of POTD depends on the year the scheme was run. If the time deposit is closed after 4 years, then the same interest will be available on it as it is available for running the scheme for 3 years. If POTD is closed in 4 years and few months, then it will get interest at the rate of Post Office Saving Scheme. Similarly, if you close the 5-year time deposit for 2 years or 3 years, then both get the same interest.
