When it comes to secure and government-backed investment options, Post Office investments in India are a popular choice. These savings schemes offer a high rate of interest, tax benefits, and most importantly, carry the sovereign guarantee of the Indian Government. Whether you are a risk-averse investor or someone looking for tax-efficient savings, Post Office investment schemes provide a diverse range of options to cater to your financial needs. In this article, we will explore various Post Office saving schemes, their interest rates, key features, benefits, and tenure of deposit.
Table of Contents
Post Office Savings Account
The Post Office savings account functions similar to a regular savings account with a bank, except that it is held with a post office. It offers a safe place to deposit your money and earn interest. Here are some key features:
- Only one account can be opened with one post office, which can be transferred to another post office if needed.
- It is possible to open an account in the name of a minor.
- The interest rate for a Post Office savings account is 4% and is fully taxable.
- Under the non-cheque facility, a minimum balance of Rs. 50/- needs to be maintained.
- A deduction of Rs. 10,000 per annum is available on the total savings account interest, including the Post Office savings interest, under Section 80TTA of the Income Tax Act, 1961.
Post Office Monthly Income Scheme (POMIS)
The Post Office Monthly Income Scheme is a unique scheme that offers a guaranteed fixed monthly income on a lump sum investment. Here are the key details:
- Any resident individual can open an MIS account in a single or joint holding pattern, including minors.
- The minimum investment limit is Rs. 1000, and the maximum investment limit is Rs. 9 lakh in a single holding account and Rs. 15 lakh for joint accounts.
- Currently, the MIS interest rate in the post office is 7.4% per annum payable monthly, with a maturity period of 5 years.
- Investors can hold multiple accounts with a maximum investment of Rs. 9 lakh by combining balances in all the accounts.
- The Post Office monthly income scheme offers liquidity by allowing investors to withdraw the deposit after 1 year, with penalties for early withdrawals.
- Interest received on a monthly basis is part of the taxable income. There is no TDS on the interest payout, and deposits are exempt from wealth tax.
|Small Savings Scheme||Interest Rate||Tenure||Tax Deduction on Investment?||Interest Taxable|
|Post Office Savings Account||4.0%||NA||No||Yes|
|Post Office Recurring Deposit||6.5%||5 Years||No||Yes|
|Post Office Monthly Income Scheme||7.4%||5 Years||No||Yes|
|Post Office Time Deposit (1 year)||6.9%||1 Year||No||Yes|
|Post Office Time Deposit (2 year)||7%||2 Years||No||Yes|
|Post Office Time Deposit (3 year)||7%||3 Years||No||Yes|
|Post Office Time Deposit (5 year)||7.5%||5 Years||Yes||Yes|
|Kisan Vikas Patra (KVP)||7.5%||30 Months Lock-in period||No||Yes|
|Public Provident Fund (PPF)||7.1%||15 Years||Yes||No|
|Sukanya Samriddhi Yojana||8%||21 Years||Yes||No|
|National Savings Certificate||7.7%||5 Years||Yes||No|
|Senior Citizens Savings Scheme||8.2%||5 Years||Yes||Yes|
Please Note:*Interest rates are reviewed every quarter by the Government for these schemes and are updated as on July 2023.
Post Office Recurring Deposit
The Post Office recurring deposit (RD) is a monthly investment scheme for a fixed period of 5 years. Here are the key details:
- The RD account offers an interest rate of 6.5% per annum, compounded quarterly.
- It allows small investors to invest as little as Rs. 100 per month, with no upper limit.
- Joint accounts can be opened by two adult individuals, and accounts can also be opened in the name of a minor.
- The RD can be transferred from one post office to another.
- The account offers flexibility by allowing partial withdrawals up to 50% of the balance after a year.
- Interest from the Post Office RD is taxable as per the investor’s individual tax slab. It is a risk-free investment avenue suitable for those looking to save a fixed amount every month systematically.
Post Office Time Deposit
The Post Office time deposit offers different tenure options for investment with competitive interest rates. Here are the key details:
- The interest rates for different tenure options as of July 2023 are as follows:
- 1-year Time Deposit: 6.9%
- 2-year Time Deposit: 7%
- 3-year Time Deposit: 7%
- 5-year Time Deposit: 7.5%
- The minimum amount that can be invested is Rs. 1000, with no upper limit.
- Accounts can be opened in single holding or joint holding patterns, and investments in the name of minors are also allowed.
- Accounts can be transferred from one post office branch to another across India.
- Once the time deposit matures, it automatically renews for the same tenure with the prevailing interest rate.
- Investments in the 5-year post office time deposit qualify for deduction under Section 80C of the Income Tax Act, 1961.
Kisan Vikas Patra (KVP)
The Kisan Vikas Patra is a post office investment scheme that offers a fixed interest rate and doubles the invested amount in a specific period. Here are the key details:
- KVP offers an interest rate of 7.5% compounded annually.
- The investment amount doubles every 115 months.
- The minimum investment limit is Rs. 1000, and there is no maximum limit.
- Certificates are easily transferable and can be endorsed to a third person.
- The certificate is liquid as it offers encashment after 2.5 years of investment.
- The principal amount invested in KVP does not qualify for tax deduction, and the interest earned is taxable. It is suitable for new and small investors who do not have access to other financial products.
Public Provident Fund (PPF)
The Public Provident Fund is a long-term investment scheme with attractive interest rates and tax benefits. Here are the key details:
- PPF has a maturity period of 15 years and offers an interest rate of 7.1% per annum, compounded yearly.
- The maximum amount that can be invested in a financial year is Rs. 1,50,000.
- There is no minimum or maximum age requirement for opening a PPF account.
- Investments can be made with a minimum amount of Rs. 500 and a maximum of Rs. 1.5 lakh in a financial year.
- PPF accounts can only be opened in a single holding form.
- The maturity period can be extended in blocks of five years indefinitely.
- PPF offers tax deductions under Section 80C of the Income Tax Act. The interest earned is also tax-free, but it needs to be reported in the income tax return.
Sukanya Samriddhi Yojana (SSY)
The Sukanya Samriddhi Yojana is a government scheme designed for the benefit of the girl child. Here are the key details:
- The scheme offers an interest rate of 8% per annum, compounded annually.
- The minimum investment amount is Rs. 1000, and the maximum is Rs. 1,50,000 in a financial year.
- The account can only be opened in the name of a girl child by her parents or legal guardians.
- The account matures after 21 years from the date of opening or upon the girl child’s marriage after attaining the age of 18.
- Partial withdrawals and premature closures are allowed under specific conditions.
- Investments in the Sukanya Samriddhi Account qualify for tax deductions under Section 80C of the Income Tax Act. The interest and maturity amount are also tax-free.
National Savings Certificate (NSC)
The National Savings Certificate is a fixed-income investment scheme offered by the post office. Here are the key details:
- NSC has a maturity period of 5 years and offers an interest rate of 7.7% per annum, compounded half-yearly but payable at maturity.
- There is no maximum limit on the investment, with a minimum amount of Rs. 1000.
- The NSC certificate can be purchased in a single holding, joint holding, or by a guardian on behalf of a minor or person of unsound mind.
- Investments in NSC qualify for tax rebates under Section 80C of the Income Tax Act. The interest is also deemed to be reinvested under Section 80C, except for the final year’s interest.
- NSC certificates can be pledged as security for bank loans.
Senior Citizen Savings Scheme (SCSS)
The Senior Citizen Savings Scheme is designed specifically for senior citizens, offering attractive interest rates and tax benefits. Here are the key details:
- The minimum age of entry is 60 years, and those who have taken voluntary retirement after 55 years of age can also open this account.
- The maximum investment allowed per individual is Rs. 15 lakh, with investments in multiples of Rs. 1000.
- Current interest rate offered is 8.2% per annum, payable on the first working day of each quarter.
- The maturity period of the deposit is 5 years.
- Premature withdrawals are allowed with penalties, and the account can be extended for three more years after maturity.
- Investments in SCSS qualify for tax deduction under Section 80C of the Income Tax Act. However, tax will be deducted at source if the interest amount exceeds Rs. 10,000 in a year.
Interest Rate and Taxability on Different Savings Schemes
Different Post Office savings schemes offer varying interest rates and taxability. Here is a summary of the interest rates and tax implications:
|Public Provident Fund (PPF)||7.1% p.a.||Principal amount qualifies for deduction under Section 80C. Interest earned is tax-free.|
|Post Office Savings Account||4.00% p.a.||Interest earned is tax-free up to Rs. 10,000 p.a. from the financial year 2012-13.|
|Post Office Recurring Deposit||6.5% p.a.||–|
|Post Office Time Deposit||6.9% to 7.5% p.a.||5-year Time Deposit qualifies for deduction under Section 80C.|
|Post Office Monthly Income Scheme||7.4% p.a.||Interest earned is part of taxable income. No TDS on the interest payout, and deposits are exempt from wealth tax.|
|Senior Citizen Savings Scheme||8.2% p.a.||Interest is taxable. Investments qualify for tax deduction under Section 80C.|
|Kisan Vikas Patra (KVP)||7.5% p.a.||Principal amount invested is not tax-deductible. Interest earned is taxable.|
|National Savings Certificate||7.7% p.a.||Investments qualify for tax rebate under Section 80C. Interest is deemed to be reinvested except for the final year’s interest.|
|Sukanya Samriddhi Yojana||8% p.a.||Investments qualify for tax deduction under Section 80C. Interest and maturity amount are tax-free.|
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Advantages of Investing in Post Office Savings Schemes
Investing in Post Office savings schemes offers several advantages for investors. Here are some key benefits:
- Simple Documentation & Procedure: Opening an account and investing in Post Office schemes is hassle-free, with minimal documentation requirements. These schemes are accessible to both urban and rural investors through Post Offices across the country.
- Competent Interest Rates and Risk-free: Post Office savings schemes offer competitive interest rates, often higher than those offered by banks. Additionally, these schemes are backed by the government, providing security and peace of mind to investors.
- Tax Exemption: Most Post Office saving schemes qualify for tax rebates under Section 80C of the Income Tax Act. Some schemes, such as Sukanya Samriddhi Yojana (SSY), Public Provident Fund (PPF), and National Savings Certificate (NSC), also provide tax exemption on the interest earned.
- Diverse Products to Cater to Different Needs: Post Office saving schemes cater to the varying needs of different investors. Whether you are looking for regular monthly income (Post Office Monthly Income Scheme), long-term investment (PPF), or secure savings for the girl child (SSY), there is a scheme to suit your requirements.
Schedule of Fee
The schedule fee of Post office Investment Schemes are as follows:
|Duplicate Passbook Issue||Rs. 50|
|Deposit Receipt or Issue of Statement of Account||Rs. 20/case|
|Issue of Passbook in Lieu of Lost or Mutilated Certificate||Rs. 10 per registration|
|Cancellation or Change of Nomination Charges||Rs. 50|
|Account Transfer Fee||Rs. 100|
|Pledging of Account||Rs. 100|
|Issue of Cheque Book (for Savings Bank a/c)||Nil: Up to 10 leafs in a calendar yearRs. 2 per cheque leaf thereafter|
|Cheque Dishonour Charges||Rs. 100|
Note: Tax as applicable shall also be payable on the above service charges
Aadhaar and PAN Now Mandatory for All Post Office Schemes
It is now mandatory to provide your Aadhaar number and PAN to open any new Post Office scheme or account. Existing account holders are required to submit their Aadhaar number within six months and PAN within two months. Failure to comply with these requirements may render the account inoperational until the necessary information is provided.
How to Apply for Post Office Investment Schemes: A Step-by-Step Guide
Section 1: Understand the Different Investment Schemes Offered by the Post Office Before applying for a specific Post Office investment scheme, it is important to familiarize yourself with the available options. This section provides an overview of the various schemes offered, including savings accounts, recurring deposits, fixed deposits, and more.
Section 2: Gather the Required Documents To apply for a Post Office investment scheme, certain documents will be required. This section outlines the necessary documents, such as identity proof, address proof, and PAN card details. Make sure to gather these documents in advance to streamline the application process.
Section 3: Choose the Nearest Post Office Locating the nearest Post Office is crucial for convenience and accessibility. This section guides you on how to find the nearest Post Office branch using online directories or official Post Office websites.
Section 4: Visit the Post Office Once you have identified the nearest Post Office, it’s time to visit in person. This section highlights the importance of visiting during working hours and provides tips on preparing for your visit.
Section 5: Fill out the Application Form When you arrive at the Post Office, you will need to fill out the application form for your chosen investment scheme. This section offers guidance on filling out the form accurately and provides explanations for any confusing sections.
Section 6: Submit the Application and Required Documents After completing the application form, you will need to submit it along with the required documents. This section explains the submission process and offers tips for ensuring a smooth submission.
Section 7: Deposit the Initial Investment Amount Depending on the investment scheme, an initial deposit may be required. This section provides information on the accepted modes of payment and guides you through the deposit process.
Section 8: Receive the Account/Deposit Details Once your application is processed, you will receive the account or deposit details. This section explains how the Post Office will provide this information and suggests keeping it safe for future reference.
Section 9: Track Your Investment It is important to keep track of your Post Office investments for monitoring and management purposes. This section outlines different ways to track your investment, including online portals, passbooks, and periodic statements.
Section 10: Enjoy the Benefits of Post Office Investments Finally, this section highlights the benefits of Post Office investment schemes, such as guaranteed returns, tax benefits, and the security of government-backed schemes. It encourages readers to take full advantage of their investments and make informed financial decisions.
Post Office investments provide individuals with a wide range of secure and government-backed saving schemes. From the Post Office savings account to long-term investment options like PPF and SSY, these schemes offer competitive interest rates and tax benefits. Before investing, it is essential to understand the features, interest rates, and tax implications of each scheme to make an informed decision based on your financial goals and risk appetite. By leveraging the Post Office investment options, you can safeguard your savings, enjoy steady returns, and potentially save on taxes.
Can I open multiple Post Office savings accounts?
No, only one account can be opened with one post office. However, you can transfer your account from one post office to another if required.
What is the minimum investment amount for the Post Office Monthly Income Scheme (POMIS)?
The minimum investment amount for the POMIS is Rs. 1000.
Is the interest earned on a Post Office recurring deposit taxable?
Yes, the interest earned on a Post Office recurring deposit is taxable as per the investor’s individual tax slab.