Post office time deposit scheme: How much interest can you earn on a ₹1L investment across 1, 2, 3 and 5-year tenures?

Traditional and risk-averse investors often look for avenues to safely invest the surplus salary after meeting their expenses. Apart from bank fixed deposits, provident fund and savings accounts, such people can invest in small savings schemes offered by the government through post offices.

One such option is the post office time deposit (TD), commonly known as a post office fixed deposit. Just like bank FD, the scheme requires a one-time deposit for a set period, with the principal and accumulated interest paid at maturity.

The scheme offers four tenures of one, two, three and five years, allowing depositors to choose a period based on their financial needs. It can be a suitable option for those seeking assured returns without exposure to market fluctuations that can be witnessed in stocks and mutual funds.

Interest rates under the post office TD scheme vary according to the investment period. As per official details, the annual rates are 6.9% for one year, 7% for two years, 7.1% for three years and 7.5% for five years. The five-year deposit offers the highest interest rate among these options.

Source: India Post

Furthermore, interest is calculated quarterly and credited annually. The eventual rate depends on the tenure that is chosen by the individual investor.

Lets' say you want to make an one-time investment of ₹1 lakh. Before committing the money, it is important to assess the potential returns. Here are the estimated returns based on calculations from Paisabazaar post office TD calculator:

— 1-year deposit: At 6.9% interest, a one-time deposit of ₹1 lakh will earn around ₹7,081. The maturity amount is ₹ ₹1,07,081.

— 2-year deposit: At 7%, the investment earns an interest of approximately ₹14,888 until maturity, taking the final corpus to ₹1,14,888.

— 3-year deposit: At 7.1%, a ₹1 lakh investment earns around ₹23,508. The maturity amount will be ₹1,23,508.

— 5-year deposit: At 7.5%, the investment earns approximately ₹44,995 in interest. The final amount will be ₹1,44,995 upon maturity.

The five-year post office time deposit offers certain tax benefits under Section 80C of the Income-tax Act, subject to applicable conditions.

You can claim a deduction of up to ₹1.5 lakh in a financial year across eligible investments, but only if you have opted for the old tax regime. Many deductions and exemptions are not available in the new tax regime.

However, the interest earned on the deposit is subject to tax. Therefore, the scheme should not be considered completely tax-free.

A post office TD can be extended post maturity, only if the request is made within a set period of time, as per official rules. For a 1-year deposit, you can ask for an extension within 6 months of maturity. A 2-year deposit can be extended if request is submitted within 12 months of maturity.

For longer tenures such as 3 years and 5 years, you have to submit a request at the specified post office within 18 months of maturity.

For doing so, the depositor needs to submit an extension application form along with the passbook to the post office concerned, and this request can also be made when the account is originally opened.

Whatever the rate happens to be at that moment carries through the whole extended term, meaning the interest rate in effect on the maturity date is what applies for the entire extended tenure.

Eshita Gain is a digital journalist at Mint, where she joined in May 2025. She writes on corporate developments, personal finance, markets, and business trends, with a focus on delivering timely and relevant stories to a broad audience. <br><br> While her core beat lies in business and finance, she is not confined to a single niche and frequently explores stories across domains, including international relations and policy developments. <br><br> She holds a postgraduate diploma in business and financial journalism by Bloomberg from the Asian College of Journalism (ACJ), Chennai. During her time there, she received rigorous training in tracking financial data, interpreting corporate filings, and reporting on business developments. She has pursued her graduation from St. Joseph’s University, Bengaluru in a multi-disciplinary course. Her majors included Journalism, International Relations, peace and conflict studies. <br><br> Eshita has previously worked in digital marketing, which enables her to write SEO friendly copies that are clear and engaging. <br><br> Her primary interest lies in breaking down complex subjects and writing clear, accessible copies that inform readers. She aims to bridge the gap between technical financial language and everyday understanding. Outside the newsroom, Eshita enjoys reading non-fiction, and exploring new places, constantly seeking fresh perspectives and stories beyond headlines.

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