Post Office Investment Schemes – Benefits, Interest Rates & Tax Implications
Post office is one of the oldest organizations in India which started way back during the British era on Oct 1854, initially being focusing only on delivering mail (post) and later started providing array of other financial services i.e., Banking, Insurance & Investments. The biggest advantage of these schemes is their sovereign guarantee i.e., it is backed by the government. Some of the post office savings schemes also offer tax-savings benefits U/S 80C of the Income Tax Act. Below is a list of such schemes with their applicable Interest rates: –
|Scheme||Interest Rate effective |
1 July 2019
|Minimum Investment||Maximum Investment||Eligibility||Tax Implications|
|Post Office Savings Account||4%||₹20 & ₹50 (for non cheque)||No limit||Individual including Minors||Exempted Interest up to ₹50,000|
|National Savings Recurring Deposit Account||7.2% (quarterly compounding)||₹10||No limit||Individual including Minors||Exempted Interest up to ₹50,000|
|National Savings Time Deposit Account||First, Second and Third year – 6.90%, and 7.70% thereafter||₹200||No limit||Individual||Section 80C deduction on deposits for 5 Years|
|National Savings Monthly Income Account||7.6% p.a. payable monthly||₹1500||For Individual holder ₹4.5 lacs, joint account holders ₹9 lacs||Individual||Interest earned is Taxable & No deduction under Sec 80C for Deposits made.|
|Senior Citizen Savings Scheme Account||8.6% p.a. (Compounded Annually)||₹1000||Maximum deposit – ₹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.
|Public Provident Fund Account (PPF)||7.9% p.a. (Compounded Annually)||₹500 per financial year||₹1.5 lacs per financial year||Individual||Tax rebate under section 80C for deposits|
|National Savings Certificates (NSC)||7.9% p.a. (Compounded Annually) but payable at maturity||₹100||No Limit||Individual||Tax rebate under section 80C for deposits (maximum ₹1.5 lacs pa)|
|Kisan Vikas Patra Account||7.6% p.a. (Compounded Annually)||₹1000||No limit||Individual||Interest is taxable but no tax on the amount received on maturity|
|Sukanya Samriddhi Account||8.4% p.a. (Compounded Annually)||₹1000 per financial year||₹1.5 lacs per financial year||Girl Child – up to 10 years from birth and 1 additional year of grace||Investment exempt under Section 80C, interest and amount on maturity is tax free|
Know the Post Office schemes in brief
Post Office Savings Account – It acts as a normal savings account of any bank and account is transferrable from one post office to another.
National Savings Recurring Deposit Account – The Scheme helps the small/poor investors to form a corpus to meet the future needs. An account is either opened by an adult or by two adults jointly.
National Savings Time Deposit Account – 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.
National Savings Monthly Income Account – This is a scheme in which investor contribute a certain amount and earn a fixed interest every month.
Senior Citizen Savings Scheme Account – The Scheme is a savings instrument offered to Indian residents aged over 60 years. The deposit matures after 5 years from the date of account opening but can be extended once by an additional 3 years by the investor.
Public Provident Fund Account – Public Provident Fund which is a long-term investment scheme declared by the Government of India. It is a safe deposit scheme that offers tax exemptions and attractive interest rates as decided each financial year.
National Savings Certificates (NSC) – The Scheme is a fixed income investment scheme that one can open with post office. As part of initiative from Government of India, it is a savings bond that encourages subscribers, primarily small or mid-income investors, to invest while saving on income tax.
Kisan Vikas Patra Account – Kisan Vikas Patra is a certificate scheme from the post office. It actually doubles a one-time investment in a period of approximately 9 years & 10 months. For example, a Kisan Vikas Patra for ₹5000 will get a capital of ₹10,000 post maturity.
Sukanya Samriddhi Account – Sukanya Samriddhi Account is a Government of India backed saving scheme targeted at the parents of girl children. The scheme enables parents to build a capital for the future education and marriage expenses for their female child and provides attractive interest rate on the investment.
Advantages of Investments in Post Office Schemes
- Simple investment process
Post office saving schemes are easy to enroll and require limited documentation as simple procedures in post office ensures that these saving schemes are safe investment tools and provide a fixed return as they are backed by the government.
- Easily Accessible
These schemes are best suited for the rural and the urban investors as Post office are in every corner of the country. To cater to the uneducated and rural population, these are simple and thus make these a much-preferred savings option.
- Long-term benefits
The investments in the Post Office Schemes are more future and long-term oriented as it can be a best retirement or pension plan with the investment period extending up to 15 years for a PPF account. With this kind of Investment scheme, an investor can diversify his/her portfolio for a risk free and fixed decent return.
- Risk-free and competent interest rates
Interest rates in post office savings schemes range from 4% to 9% which is also risk-free and highly competitive with Banks. There is a minimal amount of risk involved as this is regulated by Government of India.
- Customized Products to suit investor needs
The Post Office of India provides suites of different products to cater to different investor grades. The products on offering varies with tax implications, investment horizons and expected return as per the requirements of the investor.