Post office Schemes include several savings schemes that offer high interest rates and tax benefits and, most importantly, are the sovereign guarantee of the Government of India. Learn about various post office savings schemes, interest rates, key features and benefits, etc.
Contents
What is the Post office Scheme?
Indian Post offers a variety of investment options to suit the different needs of different investors. Schemes are guaranteed for income as the Government of India Savings backs them up. Tax deduction up to 1,50,000 is allowed.
Read on to find out more about the various small savings schemes offered by the Post Office, including Sukanya Samriddhi Yojana (SSY), National Savings Certificate (NSC), Senior Citizen Savings Scheme (SCSS) and more.
Advantages of investing in the Post Office Savings Scheme
Here are some of the key benefits
Simple Documentation & Policy: Minimal Documentation & Disruptions – Investing in Post Office Investment Schemes and Registration Make it easy. These savings schemes are suitable for urban and rural investors and are available at post offices.
Efficient Interest Rates and Risk-Free: Post Office Savings Scheme interest rates are highly competitive, with bank interest rates ranging from 4% to 7.6%. Also, the risk involved is shallow as the government backs up these investments.
Tax Exemption: Most post office savings schemes are eligible for tax deduction under Section 80C for the deposit amount. Some schemes like SSS (Sukanya Samriddhi Yojana), PPF, etc., are tax-deductible on the interest earned.
Different products to meet different investment needs: These different post office savings schemes cater to the needs of different investors. Different investment schemes vary in their deposit limitations, tax implications and return on investment and can be chosen according to the exact needs of the investors.
Some Post Office Saving Schemes
A post office savings account
- A post office savings account is like a savings account in a bank, except that it had been maintained at the post office.
- Only one account can be opened at one post office and moved from one post office to another.
- You can also unlock an account in the minor name. The Post Office Savings Account’s interest rate is 4%, which is fully taxable. However, TDS will not deduct it.
- Under the non-check facility, the minimum balance to be maintained is Rs. 50 / –
- However, under Section 80TTA of the Income Tax Act, 1961, your total savings account interest, including post office savings interest, is Rs. 10,000; discounts will be available.
Post Office Monthly Income Scheme (POMIS)
Post Office Monthly Income Scheme (POMIS) is a unique scheme that provides a fixed monthly income guaranteed on the gross investment made by the investor.
Any resident can open an MIS account on a single or joint holding basis. Minor can also invest in this Scheme. If the minor is more than ten years of age, he can also maintain an account.
There is a minimum limit of Rs. 1000, and the maximum investment limitation is Rs 4.50 lakhs in a single holding account and Rs 9.0 lakhs for Joint Accounts under the Post Office’s Monthly Income Scheme.
Currently, the MIS interest rate at the Post Office is 6.6% per annum with a maturity of 5 years.
For example, Mr Suresh pays Rs. 2 lakhs in the post office monthly payment plan. He will receive Rs—1068 interest per month for five years.
He will repay the deposit at the end of the tenure. The monthly amount can also be invested in post office recurring deposits.
Investors can have multiple accounts with a maximum investment of Rs 4.5 lakh by combining the balances in all the accounts.
Joint accounts hold equal shares from all holders. If we persist with the above example, Mr Suresh can open a joint account with his wife for a maximum of 2.5 lakhs.
The post office’s monthly income scheme also provides liquidity by allowing investors to withdraw their deposits after one year.
However, withdrawals between 1 year and three years carry a penalty of 2% on deposits and a 1% penalty on withdrawals after three years.
Kisan Vikas Patra (KVP)
- Kisan Vikas Patra (KVP) shows an interest rate of 6.9% per annum, which we can purchase from any post office.
- The amount invested doubles every 124 months (10 years, four months).
- The investment comes with a minimum limitation of Rs.1,000, no maximum limit and can be in multiples of 100.
- Certificates can quickly be transferred and approved by a third party.
- The certificate is relatively liquid, offering an encashment facility after 2.5 years of investment.
- The actual amount invested is not tax-deductible, and KVP is also taxable.
- The Kisan Vikas document scheme is not tax-effective.
- It works for new and short investors from small areas who do not have access to other economic products.
Senior Citizen Savings Scheme
- The minimum age for entry into the Senior Citizen Savings Scheme (SCSS) is 60 years.
- Anyone who has voluntarily retired after 55 can also open this account within one month of receiving retirement benefits.
- The investment in such cases should not exceed the corpus value obtained on retirement.
- The maximum investment limit allowed per person (combined balances in all accounts) is Rs. 15 lakhs. The total investment can be in multiples of Rs.1000.
- Individuals may have multiple accounts in their name or a joint holding with their spouse.
- The current interest rate of 7.4% is payable on the first working day of each quarter. The deposit has a maturity of 5 years. For example, if you have Rs. 12 lakhs in this Scheme today, you get a quarterly interest of Rs. 94,800.
- The Senior Citizen Savings Scheme permits premature withdrawals of deposits anytime after the account opening date but with penalties.
- A fine of 1.5% of the deposit amount will be levied within two years of opening the account. A penalty of 1% will be levied after a two-year deposit.
- They can extend the account for another three years after the Scheme matures.
- Assets are eligible for tax determination under Section 80C of the Income Tax Act. However, if the interest amount exceeds Rs.10,000 a year, it will be tax-deductible at the source.
National Savings Certificate (NSC)
- NSC Maturity Duration is five years.
- The NSC interest rate is 6.8% per annum compound payable for half-yearly but at maturity.
- Your investment of Rs. 100,000 will give you Rs. 1,38,949 after five years.
- There is no maximum investment limit with an investment of at least Rs.1000. One can invest in denominations of Rs.100, Rs.500, Rs.1,000, Rs.5,000 and Rs.10,000.
- The NSC Certificate can be purchased on behalf of a Minor/Disadvantaged person by a Guardian or a minor over ten years of age in his name for a single holding or joint holding (up to 3 persons).
- Investments in NSC are tax-deductible under Section 80C of the Income Tax Act.
- Interest in NSC is also considered a reinvestment under Section 80C and is tax-deductible in the last year of NSC.
- NSC certificates can be pledged as security.
- Certificates will transfer. Transferring from one person to another is allowed only once during the investment period.
- NSC is a risk-free and tax-effective savings plan for long-term and traditional investors.
Sukanya Samriddhi Yojana
- Sukanya Samriddhi Yojana (SSY) is a scheme introduced for the benefit of girls. It offers an attractive interest rate of 7.6% per annum.
- The minimum investment in a financial year is Rs. 1000, and the maximum is Rs. 1,50,000.
- You must invest a minimum amount each year for 15 years from opening the account. After that, the account continues to receive interest till maturity.
- The investment in Sukanya Samriddhi’s account is Rs. Up to Rs 1.5 lakh is tax-deductible.
- Interest on the Sukanya Samriddhi account is tax-free, and the Maturity amount is tax-free.
- The investment develops after 21 years from opening the account or after the girl marries at 18.
- The account must be closed even when the girl becomes an NRI or loses her Indian citizenship.
- Sukanya Samriddhi’s account can be opened only in the girl’s name by her parents or legal guardians. The girl must be ten or younger when opening the account.
- We cannot open multiple accounts in a girl’s name. Parents/guardians can open a maximum of two accounts in the name of two different girls.
- Failure to deposit the minimum amount in a financial year will result in a penalty of Rs.50.
- Only a girl over 18 can get a premature closure for marriage or higher education.
- The girl can also avail of the partial withdrawal facility (not to exceed 50% of the balance) after 18 years.
- Parents/guardians can avail of tax benefits on the amount invested under Section 80C of the Income Tax Act. Maturity collections had been paid to the girl, and she is fully tax-deductible.
- The SSY scheme is trendy, especially in rural India. It is an excellent way to provide financial security to the next generation of women in the country.
Interest Rate and Tenure of Post Office Schemes
| Small Savings Scheme | Interest Rate | Tenure | Tax Deduction? | Interest Taxable |
| Post Office Savings Account | 4.0% | NA | No | Yes |
| Post Office Monthly Income Scheme | 6.6% | 5 Years | No | Yes |
| Kisan Vikas Patra (KVP) | 6.9% | During 30 months lock-in period | No | Yes |
| Sukanya Samriddhi Yojana | 7.6% | 21 years | Yes | No |
| National Savings Certificate | 6.8% | Five years | Yes | No |
| Senior Citizens Savings Scheme | 7.4% | Five years | Yes | Yes |