Post Office fixed deposits have been popular among the Indian middle classes for decades. Typically offering higher interest rates than banks, post office fixed deposits offered a valuable alternative to people who did not mind having their money locked away for a certain period of time in return for higher interest rates. Like bank FDs, post office FDs are considered a safe investment. Moreover, several post office savings schemes are also eligible for tax deduction under section 80C of the income tax act, 1961. However, before investing in a post office FD, it is important to have a measure of what your expected returns are going to be.
What is a Post office FD?
The term fixed deposit refers to short-term savings deposits that lock your money for a fixed period of time. FDs are offered by banks, non-banking financial companies (NBFCs), and post offices. Post office FDs are simply deposits that are kept with your local post office instead of banks. In general, investing in a Post Office Fixed Deposit has the potential to provide better returns over time with investments made today and in the foreseeable future.
Post office FD Interest Rates
Just like bank FDs, the interest rate on post office FDs varies with the tenure. The tenure of a post office FD varies from 1-5 years and the interest varies accordingly. The table below gives the tenure and the corresponding interest rate for 2021.

FD Tenure Interest Rate
1 year 6.90%
2 years 6.90%
3 years 6.90%
5 years 7.70%

How to Calculate Post office FD Returns
You can calculate your post office FD returns through two means:
1. Using Pen and Paper – To calculate your post office returns manually, you will need to determine the tenure of your FD and the principal sum that you want to invest in the FD. You can then use the formula for compound interest as follows:
Maturity Amount = Principal (1+rate of interest/n) ^ (n * Tenure)
Where n = number of times the amount is compounded in a year.
In the case of Indian post offices, compounding is done quarterly so the value of n would be 4.
As you can see, this is a fairly complicated method of calculating returns and one that is prone to errors.

2. Using a Post office FD Returns Calculator – You can calculate your post office FD returns faster and more accurately by using an online post office FD calculator such as this one provided by Finserv MARKETS. Simply enter the principal and tenure and you can get an exact result for the returns from your FD.
To Sum Up
Post office FDs are a great investment and deserve a place in your portfolio if you are a risk-averse investor and do not mind locking your capital away for up to 5 years. However, before you invest in a post office FD, it is better to calculate your expected returns before committing your capital to it. The best way to do this is by using an online post office FD returns calculator.