The post office is one of India’s oldest institutions. Having been established in October 1854 during the British rule, its initial purpose was to distribute mail (post). Later, it provided various other financial services such as banking, insurance, investments, etc.
Investing in one of the post office schemes is regarded as the most secure and reliable way to keep one’s money. Most middle-class Indians prefer to invest in post office schemes rather than risk their savings by investing in the lucrative but volatile stock markets or the new fad, the virtual money, i.e., cryptocurrency. Also, the government backs post offices, unlike crypto, which adds credibility to these institutions.
So, if this investment option is something that sounds good to you, stay with us as we take you through all the basics of the post office schemes in India.
- Post office schemes comprise a variety of savings plans that pay a high-interest rate, have tax advantages, and, most crucially, are backed by the Indian government’s sovereign guarantee.
- Most post office schemes are tax-free under Section 80C, which allows for a tax exemption of up to Rs. 1,50,000.
- 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 (SCSS), among others, are some renowned post office schemes.
Post Office Savings Scheme: Savings Schemes Under Post Office Investments
The post office schemes offer a variety of dependable saving products and risk-free investment returns. Almost 1.54 lakh post offices run these programmes across the country. The PPF scheme, for example, is run by the government through 8200 public sector banks and post offices in each city.
And, to make the choice easier for you, we have summarized the different post office schemes so that you can make an informed decision and put your money to work.
|Scheme||Interest Rate||Minimum Investment||Maximum Investment||Eligibility||Tax Implications|
|Post Office Savings Account||4% per annum (p.a.)||-INR 20-Non-cheque facility – INR 50||No limit||Resident Indian, minor and major||Tax–free interest up to INR 50,000 from the financial year 2018-19|
|Post Office Time Deposit Account (TD)||First year – 5.5% p.a.Second year – 5.5% p.a.Third year – 5.5% p.a. Fourth year – 6.7% p.a.||INR 200||No limit||Individual||Tax benefits up to 5 years under Section 80C on depositsTDS to be deducted on interest earned for more than INR 40,000 p.a. (INR 50,000 in case of senior citizens)|
|Post Office Monthly Income Scheme Account (MIS)||6.6% per annum payable monthly||INR 1,500||For a single account – INR 4.5 lakhFor joint account – INR 9 lakh||Individual||Interest is taxable, and no deduction under Sec 80C for deposits made.TDS to be deducted on interest earned for more than INR 40,000 p.a. (INR 50,000 in case of senior citizens)|
|Senior Citizen Savings Scheme (SCSS)||7.4% p.a. (Compounded annually)||INR 1,000||Maximum deposit over the lifetime allowed at INR 15 lakh||Individuals of age > 60 years who have opted for VRS or superannuation||Tax benefit under Section 80C for depositsTDS to be deducted on interest earned for more than INR 50,000 p.a.|
|15-year Public Provident Fund Account (PPF)||7.1% p.a. (Compounded annually)||INR 500 per financial year||INR 1.5 lakh per financial year||Individual||Tax rebate under Section 80C for deposits (maximum INR 1.5 lakh p.a.) Interest is tax-free|
|National Savings Certificates (NSC)||6.8% p.a. (Compounded annually)||INR 100||No limit||Individual||Tax rebate under section 80C for deposits (maximum INR 1.5 lakh p.a.)|
|Kisan Vikas Patra (KVP)||6.9% p.a. (Compounded annually)||INR 1,000||No limit||Individual (Adult)||Interest is taxable, but no tax on the amount received on maturity|
|Sukanya Samriddhi Accounts||7.6% p.a. (Compounded annually)||INR 1,000 per financial year||INR 1.5 lakh per financial year||Girl Child – up to 10 years from birth and one additional year of grace||Investment (up to INR 1.5 lakh exempt under Section 80C), interest and amount received on maturity are tax-free|
Should You Invest in a Post Office Scheme?
Post office schemes were created largely to give an investment channel for Indians of all economic backgrounds and to instil the discipline of saving among them. Some of the primary benefits of a post office saving scheme are:
|Advantages of post office savings scheme in India|
|Easy to invest||Documentation and procedures||Fulfilment of Investment goals||Tax exemptions||Interest rates|
|The savings plans are simple to join and appropriate for rural and urban investors. These plans are appropriate for anyone looking to reduce risk in their portfolio for a predictable return.||Because the government backs these savings programmes, they are simple to enrol in and safe to keep.||The post office schemes are long-term investments, with a PPF account having a maximum investment period of 15 years. As a result, these investment options are ideal for preparing for retirement and pensions.||The deposit amount in most of these programmes is eligible for tax rebates under Section 80C. The interest earned on a few plans, such as the PPF and the Sukanya Samriddhi Yojana, is tax-free.||These plans have interest rates ranging from 4% to 9% and are risk-free. Because the Government of India manages these investment options, there is very little risk.|
Did You Know?
India was one of the first countries to join the Universal Postal Union (UPU), a United Nations specialized body with headquarters in Berne, Switzerland.
Which Post Office Savings Scheme Should You Choose?
The middle class in India has long prioritized saving in a suitable savings programme, preferring to invest in a policy with a high rate of interest and assured returns. While banks offer fixed deposits to meet this demand, the interest rate and tax benefits are not as good as those offered by post office savings schemes. Post office savings schemes accounts provide a higher rate of return than fixed deposits, so if you’re searching for a risk-free investment, this could be the way to go.
Interest rates on post office schemes, which the government supports, generally range from 5.5 per cent to 7.6 per cent, depending on the programmes you choose.
And to make that choice easier for you, we’ve done some research. Here are the top post office schemes with high-interest rates and tax benefits.
Public Provident Fund
The PPF account is a 15-year policy with a high-interest rate of 7.1 per cent and income tax benefits, with the money generated being tax-free. A PPF account can be opened in the name of a minor, and contributions ranging from Rs 500 to 1.5 lakh can be made annually.
Sukanya Samriddhi Yojana
The SSY plan, which is intended for earmarking cash for a girl child, pays a 7.6% interest rate. A girl kid under ten can open an account, and the system has a 21-year term. Under Section 80C of the Income Tax Act, the investment and interest earned under this programme are tax-free.
Senior Citizens Savings Scheme
The post office established the senior citizens savings scheme, or SCSS, to provide senior residents with a guaranteed income after retirement. This programme has an interest rate of 7.4 per cent. The scheme’s maturity time is 5 years, although it can be extended beyond that. The account’s maximum balance is Rs 15 lakh, and any interest received is fully taxable. With a few exceptions, it is intended for Indians above 60.
National Savings Certificates
This plan is best for those who desire to invest for five years while still receiving tax benefits. While a five-year bank FD normally pays 5.5 per cent interest, NSC pays 6.8 per cent. This post office savings plan takes a one-time payment and does not require monthly contributions.
The government-backed post office schemes are designed to meet the needs of consumers who seek risk-free investments while simultaneously lowering their tax liability.
Word to Remember
TDS (tax deduction at source) is a method of collecting tax on income, dividends, or asset sales in India that requires the payer (or legal intermediary) to deduct the tax payable before delivering the remainder to the payee (and the tax to the revenue authority).
Now that you know all about post office schemes visit your nearest post office branch and get started with post office saving schemes. All you have to do is get the relevant physical form or download it from the official website of the Indian Post Office. Fill in your details alongside the KYC and finish the enrolment process by depositing your preferred amount in the scheme of your choice.
The following are the documents that you’ll need when opting for a post office saving scheme:
Voter’s ID Card
Proof of date of birth
|Savings account||No lock-in period|
|RD||After 3 years, but SB rate of interest will be applicable|
|TD||After 6 months but a preclosure fee is applicable|
|MIS||After 1 year but a preclosure fee is applicable|
|PPF||After 5 years, but only in specific cases such as – Severe illness, higher studies, and NRI status.|
|SSA||After 5 years of account opening for extreme compassionate grounds|
|SCSS||No lock-in period, but a preclosure fee is applicable|
|NSC (VIII Issue)||Premature withdrawal is not permitted (except in case of death and forfeiture)|
|KVP||After 2.5 years|
For most post office schemes, you can deduct your contribution under Section 80C. Investment in post office MIS or recurring deposit programmes, on the other hand, are not eligible for a tax deduction.
Yes, Indian Post Office account users can use the internet banking feature to retrieve their account details and other information. Customers must have a valid individual or joint account, KYC documentation, and an active DOP ATM card to register for net banking.
The minimum balance necessary for a post office account varies depending on the account type, as shown below:
|Senior Citizen Savings Scheme||INR 1,000|
|SB (Cheque account)||INR 500|
|Public Provident Fund||INR 500|
|SB (Non-cheque account)||INR 50|
|MIS Post Office Scheme||INR 100|