The government-backed Post Office ₹1 Lakh FD Scheme 2025 — a fixed-deposit product offered through the Postal Department — has been revised for 2025, with interest rates ranging between 6.90 % and 7.50 % per annum. This article details the new rates, projected returns for a ₹1 lakh investment, eligibility rules, tax implications, and how this scheme compares with alternate savings options.
Why this matters
In a low-yield environment, many Indian savers seek secure instruments with government backing rather than riskier assets. The Post Office time-deposit scheme offers exactly that: guaranteed returns, sovereign backing and defined tenures. With banks cutting FD rates in mid-2025, this scheme remains a benchmark for conservative investors.
New Interest Rates for the Post Office ₹1 Lakh FD Scheme 2025
Rate structure
For the time-deposit scheme (also called the National Savings Time Deposit) operated via the Postal Department:
- 1-year tenure: 6.90 % p.a.
- 2-year tenure: 7.00 % p.a.
- 3-year tenure: 7.10 % p.a.
- 5-year tenure: 7.50 % p.a.
These rates apply for the quarter beginning 1 July 2025.
Key features
- Minimum deposit: ₹1,000.
- Tenure options: 1, 2, 3 or 5 years.
- Interest is calculated quarterly (compounded) and paid annually.
- The scheme is fully backed by the Government of India, offering capital protection.
- Premature withdrawal is permitted (after at least 6 months) but subject to terms.
What a ₹1 Lakh Investment Looks Like
Let’s illustrate returns on a ₹1 lakh deposit in this scheme under current rates.
Example for 3-year tenure
- Interest rate: 7.10% p.a.
- Using quarterly compounding, the maturity amount is approximately ₹1,23,676 (interest earned ~₹23,676) at end of 3 years.
Example for 5-year tenure
- Interest rate: 7.50% p.a.
- Estimated maturity amount: about ₹1,49,234 (interest earned ~₹49,234) at end of 5 years.
These figures are approximate and illustrative; exact values depend on deposit date and compounding frequency.
Tax, Eligibility and Other Features
Eligibility
- The scheme is open to resident Indian individuals (including minors aged 10+).
- Non-resident Indians (NRIs), trusts and many institutional funds are not eligible.
Taxation
- The interest earned is taxable in the year it is credited.
- Deposit under the 5-year tenure may qualify for deduction under Section 80C of the Income-Tax Act, 1961.
- Note: unlike some bank FDs, there is no separate higher rate for senior citizens under this scheme.
Additional features
- Account can be held singly or jointly (up to 3 adults).
- The account may be transferred between post offices across India.
- If the matured amount is not withdrawn, it may be renewed at prevailing interest rates.
- Premature withdrawal: if after 6 months but before 1 year, the interest rate paid is the savings account rate; if after 1 year but before maturity, the rate is 2% lower than booked rate.
How It Compares with Bank Fixed Deposits (FDs)
- Bank FDs in mid-2025: Many banks faced pressure to cut their FD rates, especially for shorter tenures.
- The Post Office scheme offers circa 6.90-7.50% for comparable tenures, which is competitive in the current interest-rate environment.
- Risk profile: The Post Office scheme is backed by the sovereign guarantee of the Government of India, which may appeal to highly risk-averse savers. Banks’ FDs are covered by Deposit Insurance (by Deposit Insurance and Credit Guarantee Corporation – DICGC) only up to ₹5 lakh per depositor per bank.
- Liquidity: Bank FDs often provide more frequent interest-payout options and greater flexibility for withdrawal. By contrast, the Post Office time-deposit has fixed tenure and stricter withdrawal conditions.
Who Should Consider This Scheme?
- Conservative savers seeking capital protection and predictable returns for 1-5 year horizons.
- Investors who value the government backing and absence of market risk.
- Those who do not expect to need frequent liquidity and are comfortable locking the funds for the tenure.
- Those who are aware of tax implications (interest taxable) and understand the lower real return once inflation is accounted for.
Limitations and Considerations
- Real return may be modest: If inflation runs at 5-7%, a nominal 7.50% yield may give a low positive real return.
- Liquidity is limited: if you need to withdraw early, you may incur penalty or lower interest.
- No differentiated benefit for senior citizens under this scheme — they may find other schemes offering higher yield or tax perks more attractive.
- Opportunity cost: A fixed-term deposit means money is locked; higher-yielding but riskier alternatives (e.g., equities, corporate bonds) may outperform over longer horizons.
- Rate revisions: Though you lock in the rate at the time of deposit, the general environment of small-savings rates may move—making future deposits (or refills) less attractive.
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Additional Context and Background
The scheme in question is formally described as the National Savings Time Deposit Account and is part of the broader portfolio of small-savings instruments managed by India Post (via its network of post offices) under the supervision of the Ministry of Finance.
The interest-rate structure for small-savings schemes is typically reviewed quarterly, based on yields on government securities and other macro-factors.
In the broader scheme of things, the small-savings ecosystem in India offers a range of products (e.g., PPF, NSC, SCSS) that cater to different time-horizons, liquidity needs and tax-objectives. The time-deposit product occupies the “fixed-term conservative” slot for 1-5 years.
Key Takeaways
- The Post Office ₹1 Lakh FD Scheme 2025 scheme now offers rates from 6.90 % to 7.50 % p.a. for 1- to 5-year tenures, as of July 2025.
- A ₹1 lakh deposit over 3 years accrues to about ₹1.24 lakh; over 5 years about ₹1.49 lakh (pre-tax).
- The scheme is ideal for risk-averse investors who prioritise safety and guaranteed returns.
- Tax and inflation issues may reduce the effective yield, and liquidity is constrained compared with some bank FDs.
- Savers should compare alternatives (bank FDs, other small-saving schemes, equity-linked options) before committing funds, given their own time-horizon and risk appetite.
