Post Office Savings Schemes – Types & Benefits
India Post, which controls the postal chain of the country, also provides several deposit avenues for investors, commonly known as post office saving schemes. These schemes were introduced to provide investment avenues and inculcate savings discipline among Indians from across economic classes. Every post office provides these savings schemes to enable individuals from across India to apply and enrol easily.
Types of Savings Schemes Available?
Presently, the government provides 9 postal saving schemes for investment by the general masses. They are enumerated below.
- Public Provident Fund (PPF)
PPF is one of the preferable schemes and is available with a lock-in period of 15 years. Nonetheless, investors can avail partial withdrawal after 5 years. A minimum deposit of Rs. 500 per year is required to keep the account active.
- National Savings Certificate (NSC)
You can invest in NSC with a small deposit amount of Rs. 100 as a single individual, jointly or as a guardian of a minor. The lock-in period for this scheme is 5 years. Also, the annual interest on NSCs is re-invested and paid out as an accumulated amount at the time of maturity.
- Post Office Monthly Income Scheme
This post office monthly savings scheme is another reliable savings instrument that allows you to invest a maximum of Rs. 4.5 Lakh individually and Rs. 9 Lakh jointly. As an MIS plan, it allows investors to generate a steady monthly income.
- Sukanya Samriddhi Account
SSY Scheme Under this Indian post office saving scheme, parents or legal guardians of any girl child up to 10 years of age are eligible to open this account in the child’s name. A maximum of 2 accounts is allowed for a household for two daughters individually. Once the child reaches 21 years of age, she is eligible to claim the maturity amount.
Maturity of the account also differs as per the girl child’s age on the date of enrolment. Thus, with a limit of up to 10 years of age, the maturity term will be accordingly extended from 21 years of age. Like, if the child was 5 years old on the date of enrolment, the year of maturity will be 21 years + 5 years, i.e., 26 years.
- Senior Citizen Savings Scheme
Investors who are 60 years old, or 55 years old in case of voluntary retirement, can deposit up to Rs. 15 lakh over their lifetime in a Senior Citizen Savings Scheme to earn regular interest income. The plan also comes with a lock-in period of 5 years.
- Post Office Savings Account
You can also open a savings account with the post office, which is similar to savings accounts opened with banks, by depositing a minimum of Rs.20. Also, you must maintain the account with a minimum of Rs.50. India Post also allows you to transfer money in your post office savings account online.
- 5-Year Post Office Recurring Deposit Account
With small monthly investments, you can opt for as many RD accounts as you want with a post office. These investment options allow you to make periodic deposits while enabling substantial corpus creation over the tenure of investment.
- Post Office Time Deposit Account
You can also open time deposits as a post office saving scheme for 1, 2, 3 and 5 years of tenure. Even minors over 10 years of age can invest in time deposits along with a guardian. The savings option is similar to fixed deposits offered by banks.
- Kisan Vikas Patra (KVP)
KVP certificates allow you to earn double the deposit amount in 9 years and 10 months. Also, the deposit can be enchased only after 2.5 years against the payment of a nominal penalty.
A Comparative Study of Interest Rate and Taxability on Different Savings Schemes
|List of Schemes||Interest rate and Return||Taxability|
|Public Provident Fund||7.9% p.a., compounded annually.||A maximum deposit of Rs. 1.5 Lakh per year is exempted under Section 80C.|
|National Savings Certificate||7.9% p.a., compounded annually.||Tax deduction up to Rs. 1.5 Lakh p.a. under section 80C.|
|Post Office Monthly Income Scheme||7.7% p.a., return payable monthly.||Interest earned under the scheme is taxable.|
|Sukanya Samriddhi Accounts||8.4% p.a., compounded annually.||Deposit up to Rs. 1.5 Lakh tax-deductible under section 80C. Earned interest and maturity amount, all are tax-free.|
|Senior Citizen Savings Scheme||8.6% p.a., compounded annually.||Tax rebate under section 80C up to Rs. 1.5 Lakh of deposit and TDS rebate up to Rs. 50,000 on interest earned.|
|Post Office Savings Account||4% p.a.||Tax exemption up to Rs. 50,000 on interest earned.|
|Post Office Recurring Deposit Account (5 years)||7.2% p.a., compounded quarterly.||No TDS on interest earned.|
Taxable as per income tax slab applicable on an individual’s earning.
|Post Office Time Deposit||6.9% p.a. for 1, 2 and 3-year time deposit. 7.7% p.a. for 5-year time deposit.||Tax rebate up to Rs. 1.5 Lakh p.a. under Section 80C only for a 5-year term deposit.|
|Kisan Vikas Patra||7.6%, compounded annually.||TDS on interest earned but corpus tax-free on maturity.|
You can avail any post office saving scheme if you prefer to invest in risk-free avenues with high returns.
Benefits of Post Office Savings Schemes?
The saving schemes offered by India Post share some common features and benefits. Here are some generic features you should know.
- Risk-free and reliable
Regardless of any related parameters, all post office savings schemes are government-backed. Thus, they are considered risk-free investment options to park your funds.
- Attractive return generation
The Ministry of Finance updates the interest rates of the post office saving scheme in every 3 months. Presently, the next interest review is due in March 2020. Nonetheless, the interest rate updates range between 4-9%, thus allowing investors to receive substantial returns.
- Simple investment process
Minimal documentation and simple application procedures offered by the post office provide you with easy enrolment to any of the saving schemes.
- Long term investments
Most of the post office saving schemes are long term investments which can run up to 15 years. A long tenure, such as with PPF, allows an investor to accumulate sizeable fund over time. Thus, they can be considered as effective plans for financial security as well as retirement benefits.
- Availability to investors across the economic strata
Postal investments are designed to cover investors from every corner of the country and across different economic strata. With 1.55 lakh post office branches, from rural to urban, every Indian citizen can avail these schemes.
- Tax benefits
Tax efficiency is another highly acknowledged feature of post office saving scheme. Some of the schemes such as National Saving Certificates come with tax exemptions on deposit amount under Section 80C. Also, some schemes like Kisan Vikas Patra offer tax deductions on the earned interest.
- Various types of product
Indian post saving scheme options are spread across different types of savings and investment products to cater to various investors. The financial products are – savings deposit, recurring deposit, fixed deposit, monthly scheme, saving certificates, etc. Investors can choose from these options as per their financial goals.
Who can Invest in Post Office Saving Schemes?
Investors who prefer a no-risk investment portfolio along with substantial return generation can opt for these postal schemes. Saving parkways like National Savings Certificates, Sukanya Samriddhi Accounts, and PPF come with attractive interest rate and zero financial risks. Also, the minimum investment amount is low and affordable; so investors from lower economic classes can also look forward to investing in these schemes.
How to Apply for a Post Office Saving Scheme?
You can apply for any of the post office saving schemes with the following steps-
- Step 1
Visit your preferred post office branch.
- Step 2
Obtain the relevant account opening form for the chosen scheme from your nearest post office. Nonetheless, you can also download these forms online from India Post’s official website.
- Step 3
Fill up the form with necessary details and submit it along with your KYC proof and photographs, and other documents if required as per your post office saving scheme.
- Step 4
Complete enrolment by depositing the required amount as per your chosen investment scheme.
- Is it safe to invest in a savings scheme with the post office?
Yes, India Post is a government-backed organisation, and thus a credible and reliable institution to invest with. Also, you can choose any of the post office saving schemes with entirely zero financial risk.
- Do the post office schemes provide tax benefits?
Yes, you can avail tax exemptions and deductions on your investments in post office schemes. With a few schemes, tax is deducted either on the deposit amount, or the earned interest or both.
- Can I withdraw money from any branch of the post office?
Yes, similar to withdrawals via banks, you are allowed to withdraw money from any post office branch across the country.