Post Office Saving Schemes: Tax Saving Plans, Interest Rates & Benefits
Howdy Readers 🙂
The post office of India has tempting post office schemes for the Indians to reserve a few extra bucks.
They are offering high-interest rates than a saving account. The Post office saving scheme provides guaranteed returns and they also qualify for income tax benefits under section 80C.
Our today’s post is centered on “Post Office Saving Schemes”.
The post office fixed deposit scheme in India consists of a bucket list of the products that offer reliability and risk-free return on investment.
Such Security and returns are outstanding and are mostly associated with central government run-saving portfolios.
These post office schemes are functional via 1.54 lakh post offices all over the country.
Read us till the end to learn detail study of post office saving schemes.
So, without any further ado let’s get started!
Post Office Saving Schemes
Post office schemes were introduced by the government to encourage people to save money.
Such schemes allow you to get a rebate on taxes and also help you in gaining steady, risk-free returns
Some of the prominent schemes of the post office saving scheme are as follow
- Post Office Savings Account
- Post Office Recurring Deposit Account (RD)
- Post Office Time Deposit Account (TD)
- Post Office Monthly Income Scheme Account (POMIS)
- Senior Citizen Saving Scheme
- Public Provident fund
- National Saving Certificate
- Kisan Vikas Patra
- Sukanya Samridhi account
Let’s began with the explanation
Post Office Saving Account
- This account is similar to the savings account with a bank, except that it is held with a post office.
- The investor has to remember that only one account can be opened with one post office and can be relocated from one post office to another.
- One can also open an account in the name of a minor. The interest rate is 4% and is fully taxable. However, no TDS is deducted on the same.
- However, a deduction of Rs 10,000 per annum is available on your total savings to account interest including post office savings interest under Section 80TTA of the Income Tax Act, 1961.
- Latest NCD 2022
Post Office Monthly Income Scheme (POMIS)
- POMIS, being the only scheme that assures the investors of the pledged fixed monthly income on the lump sum investment made by the investor.
- Anyone can open the MIS account in a single or joint holding design. The best part is that a minor can also invest in this scheme. If a minor is of more than 10 years, then he can even monitor the account.
- The least limit for the investment is Rs 1500 and the maximum investment limit Rs 4.5 lakh in a single holding account and rs 9 lakhs for joint accounts.
- The current rate offers by the scheme is a rate of interest 7.7%per annum payable monthly with a maturity period of 5 years.
For example, Mr. Akhilesh has invested Rs. 4 00,000 (or Rs 4 lakhs) in the Post Office Monthly Income Scheme.
He will be entitled to receive Rs.2600 every month as an interest for 5 years. The investor will receive back the deposit on the accomplishment of the tenure.
The amount so received monthly can also be further invested in post office recurring deposits.
- An investor can keep the multiple accounts with a maximum investment of Rs 4.5 lakh by combining balances in all the accounts. If you have Joint accounts will have equal shares from all the holders.
- The investor will enjoy the liquidity by permitting to withdraw the deposit after 1 year.
However, the investors will have to bear a fine as there will be a penalty of 2 % on deposit if the money is withdrawn between 1 year 3 years and 1% penalty on withdrawals after 3 years
- The investor can transfer the accounts from one post office to another across the country.
- One of the great advantages is the tax benefit. Interest received on a monthly basis is a part of a taxable income.
- There will be no TDS ( Tax deduction at source) on the interest payout and deposits are exempt from the wealth tax.
- Best Savings Bank Accounts
This scheme is a preferable choice for investors who dislike risk-averse investors for regular monthly income.
Post Office Recurring Deposit
- Post office RD is a monthly investment option for a fixed period of 5 years. The interest rate of 7.3% per annum is given.
On completion of the fixed tenure of five years, RD account with rs 10,000 invested every month will deliver you Rs, 72,051.
- The investor can still continue the account for more 5 years to year basis even after the completion of its tenure.
- The Post account RD aids a small investor by allowing them to invest as little as Rs 10 per month and any amount in multiples of Rs 5. There is no upper limit for the investment.
- Joint accounts can also be opened by two adult individuals. An account can also open in the name of the minor. Multiple accounts can also be opened.
- The post office recurring deposit can be moved from one post office to another.
- There is a default fee borne by the investors of 5 paise for every 5 rupees in case you skip or fail to pay any of the monthly installments.
- There is a partial withdrawal facility up to 50% of the balance after a year.
- Also, there will be no TDS on the interest earned from post office RD. However, income is taxable in the hands of an investor as per their individual tax slab.
It is regarded as one of the best investment avenues for every investor who is looking for the risk-free investment avenue to procure some amount every month systematically.
Post Office Time Deposit
Post office time deposit comes with different tenure options for the investments.
The current rate of interest applicable is below
|Tenure||Interest rates From 01.01.2022|
|1 year Time Deposit||4%|
|2 year Time Deposit||4%|
|3 year Time Deposit||4%|
|5 year Time Deposit||4%|
- The minimum amount that can be invested in the post office time deposit is Rs 200. There is no upper limit. There is no restriction on the number of accounts one can hold.
- The investor can open the account in the single holding or joint holding pattern. An investor in the name of the minor is also allowed.
- The account can be transferred from one post office branch to another across India.
- Once the investor’s time deposit is matured, it will renew automatically for the same tenure again with the prevailing rate of interest on the date 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.
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Kisan Vikas Patra
- Kisan Vikas Patra scheme offers an interest rate of 7.7% compounded annually.
- The investor can buy the KVP scheme from any of the post offices. The invested amount doubles every 112 months ( 9 years and 4 months)
- The Investment is available in denominations of Rs.1,000, Rs. 5,000, Rs.10,000 and Rs. 50,000. The investment comes with the minimum limit of Rs.1,000 and with no maximum limit
- Certificates are easily relocated and can be endorsed to the third person A certificate is comparatively liquid in nature and it provides the encashment facility after 2.5 years of the investment.
- The interest on the KVP is taxable and there will be no tax deduction on the principal amount invested and interest on the KVP is taxable.
- The scheme is thus not tax efficient. It functions for new and small investors from the remote areas who do not reach out to the other financial products.
|Small Savings Scheme||Interest Rate||Tax Deduction on Investment?||Interest Taxable?|
|Post Office Savings Account||4.0%||No||Yes|
|Post Office Recurring Deposit||7.2%||No||Yes|
|Post Office Monthly Income Scheme||7.6%||No||Yes|
|Post Office Time Deposit (1 year)||6.9%||No||Yes|
|Post Office Time Deposit (2 years)||6.9%||No||Yes|
|Post Office Time Deposit (3 years)||6.9%||No||Yes|
|Post Office Time Deposit (5 years)*||7.7%||Yes||Yes|
|Kisan Vikas Patra (KVP)||7.6%||No||Yes|
|Public Provident Fund (PPF)||7.9%||Yes||No|
|Sukanya Samriddhi Yojana||8.4%||Yes||No|
|National Savings Certificate||7.9%||Yes||No|
|Senior Citizens Savings Scheme||8.6%||Yes||Yes|
The investors have to note that the interest rates are evaluated every quarter by the government for these schemes.
Investing in Post Office Time Deposit, Post Office Recurring Deposit, Post Office Monthly Income Scheme, National Savings Certificate (NSC) and Kisan Vikas Patra (KVP) in a given quarter will lock-in the rate in that quarter for the entire tenure of the savings scheme. However, for Public Provident Fund (PPF) and Sukanya Samriddhi Yojana, the revised rate will be implied in the concerned quarter and so on.
In other words, the applicable rate keeps changing.
In this article, we have mentioned the interest rates for January – March 2022. For October – December interest rates on these schemes.
Senior Citizen’s Savings Scheme
- The minimum age of investors in buy this scheme is 60 years for the senior citizen saving scheme.
- If the senior citizen investor, who took the voluntary retirement after 55 years of age can also open the account within a month of receiving the retirement benefits.
The amount invested in such cases should not exceed the value of the corpus received on retirement.
- The maximum amount of the investment allowed per individual in this scheme is 15 lakh. The investment amount can be in multiples of 1000.
- An investor can hold or retain multiple accounts in his name or in joint holding with the spouse.
- The prevailing rate of interest it offered is 8.7% per annum payable on the 1st working day of each quarter. The deposit has a maturity period of 5 years. For example, if you invest Rs 12 lakh in this scheme today, you will receive quarterly interest of Rs 24,900.
- If you want to continue the scheme even after the maturity then the Account can be extended for three more years after the scheme matures.
- Investments are eligible for tax deduction under the section of 80 c of the income tax act. However, the tax will be deducted at source if the amount of interest exceeds 10,000 in a year.
Public Provident Fund (PPF)
Public provident fund is basically a long term investment scheme for the tenure of 15 years currently offered at an interest rate of 8% per annum.
- There is no limitation or restriction on the minimum or maximum age of account opening.
- The minimum amount needed for the investment is of Rs 500 and maximum of Rs 1.5 lakh in a financial year. The investor can be made the Investment in a lump sum or in 12 equal installments.
- The Account can only be commenced in a single holding form.
- The investor can invest in the name of the minor also without exceeding your maximum limit of investment by combining the balances of your account.
- An individual can obtain a loan from the third financial year to the 6th year of the account opening.
- Under the section of 80c of the income tax 80C, the investor in PPF account qualifies for the tax deduction. It also offers a tax-efficient return as its interest is fully tax-free. However, you have to report the PPF interest in your income tax return.
- Public provident fund is a pure long term investment with a premature closure facility permitted only after 5 years from the account opening and only for serious ailments and higher education.
- The Maturity period can be prolonged to 5 years on fulfilling the period of 15 years. One can extend the maturity in the section of five years from the end of the year in which the account is opened
After the expiry of the 5th year, the partial withdrawal is also allowed after the expiry of 5 years from the end of the year in which the account is commenced
It is indeed a value for money scheme for the investors who wish to avail the tax exemption along with the safety of principal and tax-free returns
National Saving Certificates
The national saving certificate scheme has a maturity period of 5 years. The rate of interest it proffers is 8% per annum constituted half yearly but payable at maturity. That means, your investment of Rs. 100,000 will yield you Rs. 144,231 after 5 years.
- In this scheme, there is no maximum limit on the investment with a minimum amount of investment is Rs 100. Investments can be made by the investor in the denominations of Rs.100, Rs. 500, Rs. 1,000, Rs. 5,000 and Rs.10, 000.
- The NSC certificate can be obtained in the single holdings or on behalf of a minor.
- The Investment in NSC is tax-deductible under section 80 c of the income tax Interest on NSC is considered to also be reinvested under Section 80 C and hence tax-deductible, except interest in the final year of the NSC.
- NSC certificates scheme can be utilized as mortgaged as security for availing the loans.
- NSC certificates can be relocated. Yes, they are transferable. It can be transferred from one person to another during the investment tenure.
It is a reliable, risk efficient, and tax-efficient saving scheme for the long term and traditional investors with no risk appetite
Sukanya Samriddhi Scheme
The scheme was commenced for the benefit of the girl child. The scheme presently provides an attractive higher interest rate of 8.5 % per annum compounded annually.
The minimum amount you would require for the investment is 250 and the maximum is 1, 50,000 in a given financial year. The investor requires to invest at least the minimum amount every year for 15 years from the date of the account opening. Thereafter the account will earn the interest till the maturity
The Investment in this scheme is tax-deductible under section 80 c of the up to 1.5 lakh per annum.
The interest received under the sukanya samridhi account is tax-free and also the maturity amount is tax-free.
The investment will turn fully fledge after the completion of 21 years from the date of opening the account or upon the marriage of the girl. One thing to remind us is that the account will also have to be discontinued if the girl child becomes an NRI or loses her Indian citizenship
The account can be commenced in the name of the girl child by her parents or the legal guardians. In order to open the account, the age of the girl should be of 10 years or less on the date of opening of the account
Yes, several accounts can be maintained in the name of one girl child. A parents/guardians can open the maximum of the two accounts in the name of two different girl children
Fine of Rs 50 will be borne by the investor if the minimum amount is not deposited in a financial years
The investor should note that premature closure or discontinuation can only be done by the girl child on attaining the age of maturity that is 18 years for marriage or maybe for the higher education
The Girl can also access the partial withdrawal facility ( It should not more than the 50% of the balance) after completing the age of 18 years
Under section 80 c of the income tax act maturity proceeds, Parents or guardians can avail the tax benefits for the invested amount. Maturity money is paid to the girl and is completely tax-free in her hands.
Yes, indeed this scheme has garnered a lot of eminences, especially in rural India and proved helpful for the girlchild.
The scheme is a great means to provide financial security to the next generation of women in the country
Comparison: Post office savings schemes
|Scheme||Interest Rate||Minimum Investment||Maximum Investment||Eligibility||Tax|
|Post Office Savings Account||4% per annum (p.a.)||– Rs 20
– Non-Cheque Facility Rs 50
|No limit||Resident Indian, Minor and Majors||Tax-free Interest up to Rs 50,000 from the financial year 2018-19|
|Post Office Time Deposit Account (TD)||The first year – 5.5% quarterly
Second year -5.5% quarterly
Third Year – 5.5% quarterly
Fourth Year – 6.7% quarterly
|Rs 200||No limit||Individual||Tax benefits up to 5 years under section 80 C on deposits|
|Post Office Monthly Income Scheme Account (MIS)||7.3 % per annum payable monthly||Rs 1500||For one account holder Rs 4.5 lacs and joint account holders Rs 9 lacs||Individual||Interest earned is Taxable & No deduction under Sec 80C for Deposits made.|
|Senior Citizen Savings Scheme (SCSS)||8.7 % p.a. (Compounded Annually)||Rs 1000||Maximum deposit over the lifetime allowed at Rs 15 lacs||Individual of age> 60 years or age >55 years who have opted for VRS or Superannuation||– Tax benefit under section 80C for deposits
– TDS to be deducted on interest earned for more than Rs 50,000 p.a.
|15 year Public Provident Fund Account (PPF)||8.0 % p.a. (Compounded Annually)||Rs 500 per financial year||Rs 1.5 lacs per financial year||Individual||Tax rebate under section 80C for deposits (maximum Rs 1.5 lacs pa)|
|National Savings Certificates (NSC)||8.0 % p.a. (Compounded Annually)||Rs 100||No Limit||Individual||Tax rebate under section 80C for deposits (maximum Rs 1.5 lacs pa)|
|Kisan Vikas Patra (KVP)||7.7 % p.a. (Compounded Annually)||Rs 1000||No limit||Individual (Adult)||Interest is taxable but no tax on the amount received on maturity|
|Sukanya Samriddhi Accounts||8.5 % p.a. (Compounded Annually)||Rs 250 per financial year||Rs 1.5 lacs per financial year||Girl Child – up to 10 years from birth and 1 additional year of grace||Investment (up to Rs 1.5 lacs exempt under Section 80C), interest and amount received on maturity is tax-free|
Advantages: Post Office Saving Schemes in India
- Easy to invest – This saving scheme is simple to enroll and is well suited for the rural as well as the urban investor, any investor who wants a cushion against the risk in a portfolio for the fixed decent return.
- Simple Procedure to enroll– This scheme is simple and hassles free as there will be no long procedures. Limited documentation and proper procedures in the post offices ensures that these are simple and easy to process
- Investment for long term investment in the post office theme is more forward-looking and long term oriented. This act as a huge help in the retirement and the pension planning
- Tax Exemption-Many of these schemes carries with them the tax rebates under the section of 80c of for the deposit amount.
Few of the schemes like the PPF, the SCSS, the Sukanya Samriddhi Yojana, etc. also have the interest earned amount exempted from taxation.
- Risk-free and competent Interest rate: The interest rate proffered by the post office schemes ranges from 4% to 9% which is also risk-free. There is a minimum amount of risk involved in an undertaking by the government of India.
Different Buckets of products
There is a vast range of products the different types of individuals
Kisan Vikas Patra and Sukanya Samriti are one of the well-known schemes.
Post Office Latest News
Government Maintains Status quo on Saving Scheme Rates
January 2, 2022
The Central Government in its quarterly review has decided to leave the interest rates on the savings scheme largely unchanged. Apart from making some small changes, the government has maintained the status quo on the interest rates.
The latest rates are as follows:
|Post Office Savings Schemes||Interest Rate (From 01.01.2022)|
|Post Office Savings Deposit||4.0 %|
|Post Office 1 Year Time Deposit||5.5 %|
|Post Office 2 Year Time Deposit||5.5 %|
|Post Office 3 Year Time Deposit||5.5 %|
|Post Office 5 Year Time Deposit||6.7 %|
|Post Office 5 Year Recurring Deposit||5.8 %|
|Senior Citizen Saving Scheme (SCSC)||7.4 %|
|Post Office Monthly Income Account||6.6 %|
|National Saving Certificate (NSC)||6.8 %|
|Public Provident Fund (PPF)||7.1 %|
|Kisan Vikas Patra||6.9 % (124 Months)|
|Sukanya Samridhi Scheme||7.6 %|
The post office has come up with the investment facility for several of the schemes and accounts that you can open with it.
You can view the details below
Eligibility for starting online Post Office Investments
- Valid and active single or joint savings ‘B’ account
- Required KYC documents if not already submitted
- Active Post Office ATM/Debit Card
- PAN Number
- Mobile Number
- Email address
Which post office transaction can be done online?
Many of you have the query regarding what transaction can be carried with post office online facility
|Initiate fund transfer within Department of Posts|
|PPF Contribution / Loan repayment|
|Loan on PPF|
|RD half withdrawal repayment|
|Tax Deducted at Source (TDS)|
|View recurring/standing instructions|
|View Incomplete Transactions.|
How to register for the online post office online services/internet banking?
- Visit your nearest branch
- Fill the pre-printed application form and furnished the required documents
- Your department of the posts (dop) Internet banking will be activated from the next working day.
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