Post Office Schemes
Updated: Oct 25, 2022
Post Office Investments offers a variety of savings plans with high interest rates, favorable tax treatment, and, most significantly, the sovereign backing of the Indian Government. Learn more about several Post Office savings plans in the following paragraphs, along with interest rates, important characteristics and advantages, deposit terms, etc.
To meet the various needs of various investors, Indian Post provides a variety of investment alternatives. All Post Office Savings Plans offer returns since the Indian government supports them. Additionally, the majority of post office investment plans fall under Section 80C, which allows for a tax exemption of up to Rs. 1,50,000. The Post Office offers a number of small savings programmes, including the Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), National Savings Certificate (NSC), Post Office Time Deposit for a 5 Year Term, and Senior Citizen Savings Scheme. Continue reading to learn more about each of these programmes in detail (SCSS) even more.
Post Office Savings Account
Similar to a bank savings account, a post office savings account is held at a post office.
One post office can only open one account, and that account can only be moved from one post office to another.
A minor's name may also be used to open an account. The interest rate on the Post Office savings account is 4% and is completely taxable. On the same, however, there is no TDS deducted.
The minimum balance necessary to keep the non-cheque service is Rs. 50. However, Section 80TTA of the Income Tax Act, 1961 allows you to deduct Rs. 10,000 annually from your total savings account interest, including post office savings interest.
Post Office Recurring Deposit
Post office RDs are essentially monthly investments with a fixed 5-year term and a 5.8% annual interest rate (compounded quarterly).
Small investors can benefit from Post Account RD by investing as little as Rs. 100 each month and up to a minimum of any amount in multiples of Rs. 10. The investment has no maximum amount.
Additionally, two adults may open a joint account. It is also possible to open the account in a minor's name. Furthermore, multiple accounts may be created.
Transferring RD from one post office to another is possible.
In the event that you fail to make any monthly investment, there is a default fee of 1 rupee for every 100 rupees.
By permitting a partial withdrawal of up to 50% of the value after a year, the account is flexible.
On interest from the post office RD, there is no TDS. However, investors must pay taxes on their income according to their personal tax bracket. It's one of the best options for any investor seeking for a risk-free investing route to set aside money each month in a planned manner.
Post Office Time Deposit
There are various investment tenure possibilities available for post office time deposits. The applicable current interest rate is as follows:
The minimum amount that can be invested is Rs. 1000. There is no maximum amount. There is no limit on how many accounts one person may have.
Accounts may be started with a single holder or jointly. Investments may also be made on behalf of minors.
Throughout India, accounts may be transferred between post office branches.
When a time deposit reaches its maturity date, it will automatically renew for a new term with the interest rate in effect that day.
Investments made in 5-year post office time deposits have tax advantages. Section 80C of The Income Tax Act, 1961 permits a deduction for the investment. Otherwise, on maturity, taxable as per slab rate.
Post Office Monthly Income Scheme (MIS)
Unique programme that guarantees a fixed monthly income on the investor's lump sum investment
The MIS account may be opened by any resident person in a single or joint holding pattern. A minor may invest in this plan as well. The youngster may even manage the account if he is older than 10 years.
Under the Monthly Income Scheme of the Post Office, the minimum investment amount is Rs. 1000, and the maximum investment amount is Rs. 4.5 lakhs for a single holding account and Rs. 9 lakhs for joint accounts.
The current MIS interest rate at the post office is 6.6% per year, payable on a monthly basis, with a 5-year maturity. At the end of the tenure, the deposit will be returned to him. The money obtained in this way each month may also be invested further in post office recurring deposits.
By aggregating the balances in all of the accounts, investors can have several accounts with a maximum investment of Rs. 4.5 lakh. All holders will contribute equally to joint accounts.
In addition to providing liquidity, the Post Office Monthly Income Scheme allows investors to withdraw their deposits after one year. However, there will be a 2% penalty on the deposit if it is withdrawn within the first three years, and a 1% penalty after that.
Accounts can be moved from one post office to another nationwide.
This plan doesn't offer a significant tax benefit. Monthly interest payments are included in taxable income. The interest payment is not subject to TDS, and deposits are not subject to wealth tax. Risk-averse investors seeking a reliable monthly income can consider the Post Office Monthly Income Scheme.
Senior Citizen’s Savings Scheme
For the Senior Citizen Savings Scheme, 60 years of age is the admission requirement (SCSS). Within a month of receiving retirement benefits, a person who has elected to retire voluntarily after turning 55 can also start this account. In these situations, the amount invested shouldn't be greater than the corpus value obtained at retirement.
Individuals are only permitted to invest up to Rs. 15 lakhs total (across all accounts). Multiples of Rs. 1000 can be used as the investment amount.
Multiple accounts can be opened under a person's name or in joint ownership with their spouse.
The current interest rate is 7.4% per year and is due on the first working day of every quarter. The deposit has a five-year maturity period.
The Senior Citizen Savings Scheme also permits early withdrawals of deposits at any time following the account opening date, however there are fees associated. Before the first two years of the account's establishment, there is a 1.5% of the deposit amount penalty. After two years of deposit, a 1% fine is imposed.
After the plan matures, the account may be extended for a further three years.
Under Section 80C of the Income Tax Act, investments are eligible for a tax deduction. However, if the interest received in a year exceeds Rs. 50,000, tax would be withheld at source.
Public Provident Fund (PPF)
PPFs are long-term investments with a 15-year duration now available at an interest rate of 7.1% annually (compounded yearly). In a financial year, the maximum sum under this programme is Rs. 150,000. Furthermore, Section 80C of the Income Tax Act allows for the deduction of the deposit from income.
There is no minimum or maximum age requirement to open a PPF account.
The minimum and maximum investment amounts per fiscal year are 500 and 1.5 lakh rupees, respectively. Investments can be made in one payment or over time.
There is just one holding form available for opening a PPF account.
By adding the balances of all your accounts, you can invest in the name of a minor without going over your investment cap.
After 15 years have passed, the maturity period might be prolonged by an additional 5 years. Indefinitely, you can keep prolonging maturity in five-year increments.
PPF is a pure long-term investment plan, and early account closure is only permitted after five years have passed since account opening and only in the case of life-threatening illnesses or further education. After five years from the end of the year the account is opened, partial PPF withdrawals are also allowed.
From the second fiscal year to the fifth year after the account is opened, investors may use the loan facility.
Under Section 80C of the Income Tax Act, contributions to PPF accounts are eligible for tax deductions. Because its interest is entirely tax-free, it also provides a tax-efficient return. PPF interest must be disclosed in your income tax return, nevertheless.
Investors who want tax exemptions, principle safety, and tax-free returns should consider this plan.
Sukanya Samriddhi Scheme
A programme called Sukanya Samriddhi Yojana (SSY) was created to help girls. At the moment, it provides a tempting interest rate of 7.6% yearly compounded.
A financial year's worth of investments can be made for as little as Rs. 1000 or as much as Rs. 1,50,000. After the account is opened, you have 15 years to invest at least the required amount each year. After then, the account will keep earning interest until it matures.
Tax deductions for contributions to the Sukanya Samridhi Account are allowed up to Rs 1.5 lakh annually under Section 80 C. Both the maturity money and the interest earned on the Sukanya Samriddhi Account are tax-free.
The investment will mature once 21 years have passed since the account was opened, or upon the female child's marriage after turning 18 years old. If the girl kid loses her Indian citizenship or becomes an NRI, the account will also need to be cancelled.
Only a girl kid can have a Sukanya Samriddhi account opened in her name by her parents or other legal guardians. The girl must be 10 years old or younger when the account is opened.
One girl child can only have one account registered in her name. A parent or legal guardian may open a combined total of two accounts in the names of their two girl children.
If the required amount is not deposited within a financial year, there will be a penalty of Rs. 50.
Only a girl child can complete a premature closure after she reaches the age of majority, which is 18 years old, for purposes of marriage or higher education.
After turning 18 years old, girls can also use the partial withdrawal capability, but only up to 50% of the balance.
According to Section 80C of the Income Tax Act, parents and guardians can receive a tax break for the money they invested. The girl kid receives maturity revenues, which are entirely tax-free in her possession.
The SSY scheme has become quite well-liked, particularly in rural India. It's a terrific way to give the nation's future female leaders financial security.
National Savings Certificate
The NSC takes five years to mature. The interest rate on NSCs is 6.8% annually compounded and due at maturity.
With a minimum investment of Rs. 1000, there is no maximum investment amount. Investments are available in quantities of 100, 500, 1,000, 5,000, and 10,000 rupees.
The NSC Certificate may be bought in a single holding, joint holding (up to 3 adults), by a guardian on behalf of a minor or a person of unsound mind, or by a minor above the age of 10 acting on his or her own behalf.
Under Section 80C of the Income Tax Act, investments in NSC are tax deductible. Except for interest in the final year of the NSC, interest on NSC is considered to be reinvested under Section 80 C and is therefore tax deductible.
NSC certificates can be used as collateral when applying for bank loans.
Certificates can be moved. Only one transfer from one individual to another is permitted during the investment period.
For long-term and conventional investors who have no appetite for risk, NSC is a risk-free and tax-efficient savings plan.
Kisan Vikas Patra
It offers a yearly compound interest rate of 6.9%. It is available for purchase at any post office.
The money invested doubles every 124 months (10 years and 4 months).
The investment can be made in multiples of 100 and has a minimum limit of Rs. 1,000 with no maximum.
The endorsement of a third party is possible, and certificates are simply transferred.
Due to the fact that it allows for encashment after 2.5 years of investment, the certificate is rather liquid in nature.
The invested principal amount is not tax deductible, and interest on the KVP is subject to taxation as well. Thus, the Kisan Vikas Patra programme is not tax efficient. It is effective for novice and small investors from outlying regions without access to other financial products.