A Post Office Time Deposit, or POTD, works much like a bank fixed deposit but is offered through India Post instead of a bank. You choose a tenure — 1, 2, 3, or 5 years — deposit a lumpsum, and earn a fixed interest rate declared by the government, revised quarterly for new deposits, with interest compounded quarterly but paid out annually.
The 5-year POTD stands out because, unlike the shorter tenures, it qualifies for a Section 80C tax deduction, making it a government-backed alternative to a bank tax-saving FD for those who prefer post office instruments or don't have easy access to a bank branch. Interest earned on POTDs is fully taxable as per your income slab, just like a regular bank FD.
Interest rates and account rules are largely uniform across post offices nationwide, making POTDs a convenient option even in areas with limited bank branch access.