Post Office Savings Schemes

The Post Office Saving Schemes as the name says is not a single scheme instead it includes a list of schemes that provide risk-free and reliable returns on the investment. These returns and securities are the perks that an investor associated with the central government's various savings portfolios.

The Post Office Schemes are available across all the post-offices of India. One of the most prominent examples of these schemes is PPF, which is operated in public sector banks’ 8200 branches as well as the post-offices in every Indian city.

Saving Schemes Available Under Post-Office Savings Instruments

The savings schemes that are included in Post Office Saving Schemes are:

• Post Office Time Deposit Account (TD)
• Post Office Savings Account
• Five Years Post Office Recurring Deposit Account (RD)
• Post Office Monthly Income Scheme Account (MIS)
• Public Provident Fund (PPF) Account for 15 Years
• Senior Citizen Savings Scheme (SCSS)
• National Savings Certificates (NSC)
• Sukanya Samriddhi Accounts (SSA)
• Kisan Vikas Patra (KVP)

 Benefits of Investing in Post Office Saving Schemes

• Easy Enrollment Process: In order to start investing in one of the Post Office Saving Schemes, there is very limited documentation required. The proper steps and procedure ensure that the investment in these schemes is easy to opt.
• Simple to Invest: These schemes are very easy to enroll and invest and this is the reason they are best suited for both urban and rural investors.
• Invest Money for Long Term: Most of the Post Office Savings Schemes are long term schemes that give an opportunity to save for long term goals. For example, the investment period of the PPF scheme is 15 years.
• Good Interest Rate: The interest amount of all the schemes under Post Office investment fall under the range of 4% to 9%, which is considered as good.
• Risk-Free Investment: Since Post Office Saving Schemes are government schemes so they are completely risk-free. Almost all the schemes involve the least risk.
• Tax Exemption: Most of the Post Office Saving Schemes provide tax rebate under Section 80C of the Income Tax Act on the amount that the investor deposits. Some schemes such as SCSS, Sukanya Samriddhi Yojana, PPF, etc. as well provide the tax exemption over the interest earned amount.
• Different Schemes to Cater to the Requirements of All: Post Office Saving Schemes contain a group of schemes so that one can purchase a scheme according to his/her requirements.

Description of Different Post Office Saving Schemes

Post Office Time Deposit Scheme:

This scheme has various tenure options for the investment. The current rate as per the tenure is mentioned in the below table:

The minimum amount that one can invest in this scheme is Rs.200 with no upper limit. Moreover, there is no restriction on the number of accounts that one can have under this scheme. An account holder can transfer his/her account from one post office to another and there is a facility of joint account as well. As soon as the tenure of the time deposit matures, the same tenure is automatically renewed for a similar tenure. The tax benefits are provided for the investments that are made for five years under Section 80C of the Income Tax Act.

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Post Office Recurring Deposit:

It is basically a monthly saving scheme for five years that provides the interest at the rate of 7.3% yearly, which is quarterly compounded. Upon completion of five years, the Recurring Deposit account upon the investment of Rs.10, 000 every month will accumulate Rs.7, 25, 051. This scheme allows even the smallest investment of Rs.10/ month and any amount but it has to be in the multiples of Rs.5 with no upper limit on the investment. This Post Office Saving Scheme charges 5 paise on every Rs.5 if one misses any monthly investment. An account holder can transfer his/her RD from one post office branch to another and joint accounts are also available under this scheme. After one year of investment, one can withdraw up to 50% of the amount available in his/her RD account.

Post Office Savings Account:

Thus account works in the same way as of the savings accounts of banks with a difference that it is held with the post office. However, an individual can open only one account with one post office but can transfer an account from one post office to another. The rate of interest that is available with this account is 4% and it is completely taxable with no TDS deduction.

Post Office Monthly Scheme Account (MIS):

It is a unique scheme that provides fixed monthly income over the investment that is made by the investors. Any Indian resident can open an account under this scheme as an individual account holder or in joint. This Post Office Saving Scheme offers an interest rate of 7.7%/ yearly with a maturity period of five years. This account can be opened for a minor as well and if a minor is more than 10 years, then he/she can also operate his/her account.

Public Provident Fund:

It is a long-term investment plan with an investment period of 15 years and it currently provides 8% interest/ year that compounds on a yearly basis. The minimum investment that one can do in his/her PPF account is Rs.500 which can go to Rs.1 lakh 50 thousand in one financial year. One can do the investment in a lump sum or in equal installments for 12 months. The maturity period for PPF account is 15 years and one can extend it into five years upon completion of the 15 years period. In addition to this, an account holder can keep extending the maturity period in the block of five years. In this way, PPF is originally a long term plan for investment that provides the premature closure facility in five years only in case of higher education or some serious ailments. The facility of partial withdrawals is also provided after completion of five years from the year in which the PPF account is being opened. The facility of loan is also provided against PPF from the third and sixth year of opening the PPF account. The investments made for PPF account are eligible to get tax exemption under Section 80C of the Income Tax Act. The interest provided on PPF balance are also tax-free, but one has to provide the details of PPF interest in his/her ITR.

Senior Citizen’s Savings Scheme:

The minimum age to take this Post Office Senior Citizen Saving Scheme is 60 years and one who has taken the voluntary retirement after the age of 55 years is also eligible to open this account within the month he/she starts receiving the benefits of retirement. The investment amount in this scheme must not exceed the corpus value that one gets on retirement. One can open the joint SCSS account with his/her spouse. The maximum allowed limit of the investment is Rs.15 lakh per individual and the amount of investment can be a multiple of Rs.1000. Currently, the rate of interest provided under this scheme of Post Office is 8.7% per year that is payable on every first working day of every quarter. The maturity period for the deposit in this scheme is five years. The facility of premature withdrawal is also allowed after one year of deposit with a 1.5% penalty. However, a penalty of 1% is applied after completion of 2 years. After the maturity of the scheme, the account can be extended for three years. The investments can get tax exemption under Section 80C of the Income Tax Act. However, if the interest amount becomes more than Rs.10, 000, and then the tax is deducted at the source.

National Saving Certificate:

The maturity period of this Post Office Saving Scheme is five years. The rate of interest provided by this scheme is 8% yearly that compounds in half-year, but it is payable at maturity only. One can purchase an NSC certificate on behalf of a minor or for self. The investments made under this scheme are eligible for a tax deduction as per Section 80C of the Income Tax Act. In addition to this, the NSC can be transferred from one person to other but during the tenure of investment.

Sukanya Samriddhi Yojana:

This Post Office Saving Scheme is for the betterment of the girl child. This scheme provides 8.5% interest rate per year and it is compounded yearly. The minimum amount that one can invest in this scheme is Rs.250 and its maximum allowed limit is Rs.1, 50, 000 in one financial year. One has to invest at least 15 years regularly after opening this account. In this way, the account will continue earning interest until the maturity. The investments that one makes towards Sukanya Samriddhi Yojana are eligible to tax exemption under Section 80C of the Income Tax Act (up to Rs.1.50 Lakh per year). In addition to this, the interest gained on this account as well as its maturity amount is tax-free. The investment one makes towards Sukanya Samriddhi Yojana matures after 21 years from the date of opening of the account or on the marriage of the child after she attains the age of 18 years.

Kisan Vikas Patra:

The interest rate that is earned on Kisan Vikas Patra is 7.7% which is compounded on an annual rate. One can purchase a Kisan Vikas Patra from any Post Office. The amount invested in this account doubles after every 9 years 4 months. One can easily transfer Kisan Vikas Patra. The encashment facility of these certificates can be availed after two and a half years of the investment. The Kisan Vikas Patras does not attract any kind of tax deduction and the interest earned on them is as well taxable.

Comparison of These Post Office Saving Schemes

The table below shows the interest rates applicable to various savings schemes are as under:

Note: The rate of interest mentioned above is with effect from April 1, 2020, to 31 December 2020 and have been taken from the official website of the Indian Post.

Benefits of Post Office Saving Schemes

The postal chain of the nation is controlled by the Indian Post and also provides various deposit avenues for the investors that are popularly referred to as the post office saving schemes.  These schemes have been introduced primarily to provide the investment avenue and also inculcate the discipline of savings among the Indians coming across from various economic backgrounds.

• Simplified Process of Investment: The post office saving schemes have a minimalistic documentation and application procedure, which implies easy and quick enrolment to benefit from any of the available saving schemes. The procedure for investing in these schemes is easy to choose.
• The Different Types of Product: The Indian Post Office Saving Scheme alternatives are spread across various types of investment products and savings catering to the needs of the investors. The financial products include fixed deposit, recurring deposits, savings deposit, saving certificates, monthly scheme, and so forth. As per the financial objectives, investors can make the choice that fulfils their needs and requirements.
• Accessibility to the Investors: The postal investments are designed catering to each investor from every corner of the nation and coming across from various economic strata. Right from someone who is living in an urban area to a rural area can easily avail the post office saving schemes.
• Long-term Investment: The post office saving schemes can mostly run-up to a span of 15 years. For instance, the Public Provident Fund permits an investor to accumulate a corpus within this time-frame. This is one instance that helps to create a financial safety net and retirement benefits as well.
• Good Return Generation: The post office saving scheme interest rates are updated by the Ministry of Finance in every three months. For the ending quarter of June 30, 2020, the per annum interest rate is 6.60 that is payable each month. The rate of interest is updated ranging from 4 per cent to 9 per cent, which helps the investors to obtain substantial returns.
• Risk-free and Reliable Investment: Regardless of any other related parameters, the post office saving schemes are government-backed and therefore, are the safest and risk-free investment avenue to park the funds.
• Tax Benefits: The key acknowledged highlight of post office saving schemes is tax efficiency. There are schemes such as the National Saving Certificate that comes with tax exemptions upon the deposit sum within Section 80C. With the other schemes such as the Kisan Vikas Patra, it offers tax deductions upon the interest earned.

Who Can Invest in Post Office Saving Schemes?

Any investor who is looking forward to the no-risk investment portfolio and substantial return generation should opt to consider opting for the post office saving schemes. The saving parkways such as the Public Provident Funds, Sukanya Samriddhi Accounts, National Savings Certificate, and so on comes up with negligible financial risk and an attractive rate of interest. The minimum sum of investment is pocket-friendly, which makes it an ideal investment avenue even for those belonging from a lower economic class to invest in such schemes.

How to Apply for a Post Office Saving Scheme?

Now let us take you through the easy steps of applying for any of the post office saving schemes listed below:

• Step 1: Primary, visit the preferred branch of the post office.
• Step 2: Now, get the account opening form of the preferred post office scheme that you wish to invest. You can also download the forms from the official website of the Indian post.
• Step 3: Fill up the form with all correct information and then submit it with the KYC evidence and other documents including the photograph as per the requirement of the post office saving scheme.
• Step 4: Now, simply complete the enrolment by depositing the sum as per the selected investment scheme.

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