The Post Office Investments include a number of saving schemes that provide high rate of interest as well as tax benefits and most importantly, carry the sovereign guarantee of Indian Government. All these schemes are tax exempt under Section 80c, i.e. tax exemption up to Rs. 1,50,000 is allowed.
Post Office Savings Account
- Post Office savings account is like a savings account with a bank, except that it is held with a post office.
- Only one account can be opened with one post office and can be transferred from one post office to another.
- You can also open an account in the name of a minor. The Post Office savings account interest rate is 4% and is fully taxable. However, no TDS is deducted on the same.
- Under the non-cheque facility, the minimum balance which is required to be maintained is Rs. 50/-
- However a deduction of Rs. 10,000 per annum is available on your total savings account interest including post office savings interest under Section 80TTA of the Income Tax Act, 1961.
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Post Office Monthly Income Scheme (POMIS)
- Unique scheme which offers guaranteed fixed monthly income on the lump sum investment made by the investor
- Any resident individual can open the MIS account in a single or joint holding pattern. A minor can also invest in this scheme. If the minor is of more than 10 years, then he can even operate the account
- The minimum limit for investment is Rs. 1000 and the maximum investment limit is Rs. 9 lakh in a single holding account and Rs. 15 lakh for joint accounts under the Monthly Income Scheme of Post Office
- Currently, the MIS interest rate in the post office is 7.4% per annum payable monthly with a maturity period of 5 years. For example, Mr. Suresh invests Rs. 2,00,000 in Post Office Monthly Income Scheme. He will receive Rs. 1233 every month as interest for 5 years. He will receive back the deposit on completion of the tenure. The amount so received monthly can also be further invested in post office recurring deposits.
- Investors can hold multiple accounts with a maximum investment of Rs. 9 lakh by combining balances in all the accounts. Joint accounts will have equal shares from all holders. If we continue with the above example, Mr. Suresh would be able to open a joint account with his wife for a maximum amount of Rs. 7 lakh
- Post Office monthly income scheme also offers liquidity by allowing investors to withdraw the deposit after 1 year. However, there will be a penalty of 2% on deposit if withdrawn between 1 year-3 years and 1% penalty on withdrawals after 3 years
- Accounts are transferable from one post office to another across the country
There is no major tax benefit in this scheme. Interest received on a monthly basis is a part of the taxable income. There is no TDS on the interest payout and deposits are exempt from wealth tax. Post Office Monthly Income Scheme is a preferable choice for risk-averse investors looking for regular monthly income. To know more click here
Post Office Recurring Deposit
- Post office RD is basically a monthly investment for a fixed period of 5 years with an interest rate of 6.2% per annum (compounded quarterly).
- On completion of the fixed tenure of five years, RD account with Rs. 10,000 invested every month will fetch you Rs. 1,04,327
- Post Office Account RD helps small investors by allowing them to invest as little as Rs.100 per month and above minimum any amount in multiples of Rs.10. There is no upper limit for the investment.
- Joint accounts can also be opened by two adult individuals. The account can also be opened in the name of a minor. Multiple accounts can also be opened.
- RD can be transferred from one post office to another.
- There is a default fee of 1 rupee for every 100 rupees in case you miss on any monthly investment.
- The account offers flexibility by allowing a partial withdrawal up to 50% of the balance after a year.
There is no TDS on interest from post office RD. However, income is taxable in the hands of investors as per their individual tax slab. It’s one of the best investment choices for every investor who is looking for a risk-free investment avenue to save some amount every month systematically.
Post Office Time Deposit
- Post office time deposit comes with different tenure options for investment. Current rate of interest applicable is below:
Tenure Rate (w.e.f. 01.04.2023) 1 year Time Deposit 6.8% 2 year Time Deposit 6.9% 3 year Time Deposit 7% 5 year Time Deposit 7.7% - The minimum amount that can be invested is Rs. 1000. There is no upper limit. There is no restriction on the number of accounts one can hold.
- Accounts can be opened in single holding or joint holding pattern. An investment in the name of minor is also allowed.
- Accounts can be transferred from one post office branch to another across India.
- Once the time deposit is matured, it will automatically renew for the same tenure again with the prevailing rate of interest on the day of maturity.
- There is a tax benefit for the investment made in the 5-year post office time deposit. The investment qualifies for the deduction under Section 80C of The Income Tax Act, 1961.
| 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 | 6.2% | 5 Years | No | Yes |
| Post Office Monthly Income Scheme | 7.4% | 5 Years | No | Yes |
| Post Office Time Deposit (1 year) | 6.8% | 1 Year | No | Yes |
| Post Office Time Deposit (2 year) | 6.9% | 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 |
1. Post Office Savings Account
Definition: The Post Office Savings Account is the deposit scheme offered by the department of post on which fixed interest is paid. The individual investors deposit a good portion of their financial assets in a postal savings account in order to earn a fixed rate of interest on the investments
I.Interest payable, Rates, Periodicity etc.
4.0% per annum on individual / joint accounts
II. Minimum Amount for opening of account and maximum balance that can be retained.
Minimum INR 20/- for opening
2. National Savings Recurring Deposit Account 5-Year Post Office Recurring Deposit Account (RD)
Definition: The Post Office Recurring Deposit Account works on the same principle as that of the recurring deposit account in a bank, where the investor can deposit a fixed sum of money on a monthly basis. It is a scheme offered by the department of post and backed by the government of India on which fixed interest is paid.
I. Interest payable, Rates, Periodicity etc.
From 01.04.2020, interest rates are as follows:-
5.8 % per annum (quarterly compounded)
On maturity INR 10/- account fetches INR 725.05 . Can
be continued for another 5 years on year to year basis
II. Minimum Amount for opening of account and maximum balance that can be retained.
Minimum INR 10/- per month or any amount in multiples of INR 5/-. No
maximum limit.
3. National Savings Time Deposit Account
Definition: The Post Office Time Deposits are a saving scheme offered by the Indian Postal Service on which a fixed interest is paid. Often, the investors deposit a good chunk of their financial assets with a view to earning a fixed interest on it.
I. Interest payable, Rates, Periodicity etc.
Interest payable annually but calculated quarterly.
II. Minimum Amount for opening of account and maximum
balance that can be retained.
Minimum INR 100/- and in multiple thereof. No maximum limit.
Interest rates From 01.04.2020
Period Rate
1yr.A/c 5.5%
2yr.A/c 5.5%
3yr.A/c 5.5%
5yr.A/c 6.7 %
4. National Savings Monthly Income Account
Definition: The Post Office Monthly Income Scheme is a saving scheme backed by the government of India on which fixed interest is paid. This scheme is offered by the department of post and aims at providing regular monthly income to the depositors.
I. Interest payable, Rates, Periodicity etc.
From 01.04.2020, interest rates are as follows:-
6.6 % per annum payable monthly.
II. Minimum Amount for opening of account and maximum
balance that can be retained.
In multiples of INR 100/-
Maximum investment limit is INR 4.5 lakh in single account
and INR 9 lakh in joint account
An individual can invest maximum INR 4.5 lakh in MIS
(including his share in joint accounts)
For calculation of share of an individual in joint account,
each joint holder have equal share in each joint account
5. Senior Citizen Savings Scheme (SCSS)
Definition: The Senior Citizen Saving Scheme or SCSS is a short-term government saving scheme meant for the Indian citizens of the age of more than 60 years. The purpose of SCSS is to fulfill the needs of senior investors, who seeks for guaranteed returns, regular payouts, and safety of capital.
I. Interest payable, Rates, Periodicity etc..
From 01.04.2020 , interest rates are as follows:-
7.4 % per annum, payable from the date of deposit of 31st
March/30th Sept/31st December in the first instance &
thereafter, interest shall be payable on 31st March, 30th June,
30th Sept and 31st December.
II. Minimum Amount for opening of account and maximum balance that can be retained
There shall be only one deposit in the account in multiple of
INR.1000/- maximum not exceeding INR 15 lakh.
6. 15 year Public Provident Fund Account (PPF )
Definition: The Public Provident Fund, popularly known as PPF is the long-term saving scheme introduced by the Ministry of Finance (MoF) in 1968. The purpose of the PPF is to mobilize the small savings of individual by offering them investments that carry a reasonable return along with the income-tax benefits.
I. Interest payable, Rates, Periodicity etc..
From 01.04.2020, interest rates are as follows:-
7.1 % per annum (compounded yearly).
II. Minimum Amount for opening of account and maximum
balance that can be retained
Minimum INR. 500/- Maximum INR. 1,50,000/- in a
financialyear.
Deposits can be made in lump-sum or in 12 installments.
7. National Savings Certificates (NSC)
Definition: The National Saving Certificate or NSC is the small-saving government scheme offered by the department of post and is available in several denominations of Rs 100, Rs. 500, Rs. 1000, Rs. 5,000, and Rs. 10,000.
I. Interest payable, Rates, Periodicity etc
From 01.04.2020, interest rates are as follows:-
6.8 % compounded annually but payable at
maturity.
INR 100/- grows to INR 146.25 after 5 years
II. Minimum Amount for opening of account and maximum
balance that can be retained
Minimum of Rs. 100/- and in multiples of Rs. 100/- No
Maximum Limit
8. Kisan Vikas Patra (KVP )
Definition: The Kisan Vikas Patra is a government small saving scheme offered by the department of posts, which guarantees that the amount invested gets doubled in 110 months, i.e. 9 years and 2 months. . Kisan Vikas Patra is a saving certificate that comes in the denominations of Rs.1000, Rs.5,000, Rs.10,000 and Rs.50,000.
I. Interest payable, Rates, Periodicity etc.
From 01.04.2020, interest rates are as follows:-
6.9 % compounded annually
Amount Invested doubles in 113 months (9 years & 5
months)
II. Minimum Amount for opening of account and maximum
balance that can be retained
Minimum of Rs. 1000/- and in multiples of Rs. 1000/-
No Maximum Limit.
9. Sukanya Samriddhi Accounts
Definition: Sukanya Samriddhi Account, also called as Girl Child Prosperity Account is the saving scheme backed by the Government of India on which the fixed interest is paid. This scheme was launched for the parents of a girl child to encourage them to save funds to meet the future expenses incurred in the higher education and marriage of their girl child.
Sukanya Samriddhi Scheme
- Sukanya Samriddhi Yojana (SSY) is a scheme introduced for the benefit of the girl child. It currently offers an attractive interest rate of 8% per annum compounded annually.
- The minimum amount of investment is Rs.1000 and maximum of Rs.1,50,000 in a financial year. You have to invest at least the minimum amount every year for 15 years from the date of account opening. Thereafter the account will continue to earn interest till maturity.
- Investment in the Sukanya Samridhhi Account is tax deductible under Section 80 C up to Rs. 1.5 lakh per annum. The interest on the Sukanya Samriddhi Account is also tax free and the maturity amount is tax free.
- Investment will mature after the completion of 21 years from the date of opening the account or upon marriage of the girl child after attaining the age of 18. The account will also have to be closed if the girl child becomes an NRI or loses her Indian citizenship.
- Sukanya Samriddhi account can be opened only in the name of girl child by her parents or legal guardians. Girl’s age should be 10 years or less on the date of opening the account.
- Multiple accounts cannot be opened in the name of one girl child. A parent/guardian can open maximum of two accounts in the name of two different girl children.
- There will be a penalty of Rs. 50 if minimum amount is not deposited in a financial year.
- Premature closure can only be done by a girl child on attaining the age of majority that is 18 years for the purpose of marriage or higher education.
- Girl can also avail partial withdrawal facility (not more than 50% of the balance) after attaining the age of 18 years.
- Parents/guardian can avail a tax benefit for the invested amount under Section 80C of The Income Tax Act. Maturity proceeds are paid to the girl child and are completely tax free in her hands.
SSY scheme has gained lot of popularity especially in rural India. It’s a good means to provide financial security to the next generation of women in the country.
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