India Post, which oversees the country’s postal system, also offers a variety of deposit options for investors, known as post office deposit schemes. These plans were created to provide investment opportunities and encourage Indians of all economic groups to save. These savings programs are available at every post office in India, making it simple for anyone from all across the country to register and enroll.
Post office deposit schemes Those Are Available
1. Savings account at the post office
One of the Post Office’s savings accounts is the post office savings account. This post office savings plan is accessible in every state in India. In addition, the post office savings account pays a fixed rate of interest on the money deposited. As a result, the post office saving scheme is ideal for those looking for a guaranteed return on their money. A savings account can be opened at the post office for as little as INR 20.
This post office savings initiative is very popular in India’s rural areas. The rate of interest on post office savings accounts is set by the federal government. Frequently, the rates are comparable to those of a bank savings account. The interest rate on a post office savings account is roughly 4%, and the interest is computed monthly. In addition, interest on deposits of less than INR 50,000 per annum is tax-free in the hands of the depositor, according to Income Tax legislation.
Furthermore, depositors have the option to withdraw their funds at any time. They must, however, keep a minimum balance of INR 50 in a general account and INR 500 if they have a checkbook. Additionally, the post office savings account is simply transferable from one post office to the next.
2. Recurring Deposit Account (RD)
Investors can save on a monthly basis with a 5 Year Post Office Recurring Deposit (PORD) Account. The interest is compounded every three months. There are 60 monthly installments in this post office small savings scheme. Individuals who want to save regularly through monthly payments should use Post Office RD. For this scheme, the post office savings interest rate is 5.8% per year. Using the RD calculator, investors can estimate their returns on RD investments.
The minimum investment is INR 10 and there is no limit on the maximum amount. Anyone above the age of 18 who is a resident Indian national can open a post office account. Minors under the age of 10 can also open and administer an account with their guardian. Parents or guardians can also create an account on behalf of their minor children.
One cannot withdraw their post office RD investments early. However, in an emergency, the RD can be broken. For every INR 100 invested, a penalty of INR 1 is imposed. The RD account has a three-month minimum lock-in period. In addition, if the withdrawal is done before the three-month mark, no interest is paid. Depositors will only be refunded their principle.
3. Time Deposit Account at the Post Office (TD)
One of the most popular post office savings plans is the Post Office Time Deposit (POTD) Account. The Finance Ministry determines interest rates on a quarterly basis. The rates are based on the yield on government securities and are dispersed over the yield of the entire government sector.
A minimum deposit of INR 1,000 is required to open a post office fixed deposit account. One can open a TD account for one year, two years, three years, or five years. Depositors can also choose to reinvest their interest. This option, however, is not accessible for one-year TD. Alternatively, the interest can be redirected to a five-year recurring deposit arrangement.
Transferring time deposits from one post office to another is also possible. If the depositor does not withdraw the money at maturity, the money will be re-invested at the new relevant interest rates for the remainder of the deposit’s initial term.
Section 80C of the Income Tax Act allows for a tax deduction for investments in post office fixed deposits. Tax benefits of up to INR 1.5 lakhs per annum are available to investors. When they file their income tax returns, they can claim the tax benefit.
4. Monthly Income Scheme Account of the Post Office (MIS)
POMIS is a low-risk investment scheme that pays investors a monthly interest payment on a monthly basis. POMIS has the support of the Indian government. Every quarter, the interest rates are revealed. The current interest rate is 6.60 percent (for the quarter of January to March 2021). POMIS has a five-year lock-in duration. The depositor has the option of withdrawing or reinvesting the entire amount when the scheme matures.
POMIS requires a minimum of INR 1,500 and a maximum of INR 4,50,000 per individual. However, the maximum ceiling for combined holding is INR 9,00,000. A POMIS account can also be transferred from one post office to another. Furthermore, after one year of account opening, this post office savings plan allows for early withdrawals. These early withdrawals, however, come with a cost.
5. The Senior Citizen Savings Scheme (SCS)
The Senior Citizens Savings Scheme (SCSS) is a post office savings program for seniors. It has the support of the Indian government. For savers, the post office saving system provides a steady income as well as security. Interest payments provide a steady source of income. Every quarter, interest is calculated and credited to the investor’s account. Interest rates are adjusted every three months. The SCSS interest rate for the current quarter (January – March 2021) is 7.40 percent.
The minimum and highest investment amounts are INR 1,000 and INR 15,00,000. The lock-in term for this post office savings plan is five years. Investors can also choose to prolong the scheme’s lifespan by another three years. Investments in SCSS are tax-deductible under Section 80C. Interest income, on the other hand, is taxable. TDS is also deducted if the interest exceeds INR 50,000.
SCSS also allows investors to take money out of their accounts early. These withdrawals, however, are subject to specific penalties. The penalty varies depending on how long the account has been open. Investors can only withdraw their money before a year has passed since the account was opened. Withdrawals made within two years are subject to a penalty of 1.5 percent of the invested amount.
In addition, withdrawals made after two years after account inception are subject to a 1% penalty on the initial amount. The account will be closed if the depositor passes away before the account matures. The account’s income will be distributed to their nominee or heir.
6. Account of the Public Provident Fund (PPF)
The National Savings Institute established the Public Provident Fund (PPF) in 1968 as a post office savings system. Because the initiative is backed by the Indian government, it ensures a profit. The PPF interest rate is 7.1 percent for the current quarter (January 2021-March 2021). Every quarter, the Ministry of Finance changes the PPF interest rates. The scheme pays interest every year on March 31st. However, from the 5th to the 30th of each month, interest is calculated on the minimum balance.
PPF investments have a 15-year fixed term. The investment is locked in for a period of 15 years after it is made. Investors can, however, withdraw a portion of their funds. At the end of the five-year period, investors can cash out. They can only take 50% of the previous year’s balance at the end of the fourth year. Investors might choose to close their PPF account early for a 1 percent penalty.
Premature closure of PPF accounts, on the other hand, is only permitted under limited circumstances. Between the third and fifth years, one can take a loan against their PPF investments, albeit the terms of the loan are subject to change.
PPF investments qualify for a tax deduction under Section 80C of the Income Tax Act of 1961. Tax benefits can be claimed on investments up to INR 1.5 lakhs. The tax deduction is available to investors when they file their income tax returns. Furthermore, because PPF belongs under the EEE (Exempt – Exempt) category, the interest and maturity amounts are completely tax-free.
7. National Savings Certificates (NSCs)
The National Savings Certificate (NSC) is a small savings scheme that encourages low- and middle-income people to save. Because this post office system is backed by the Indian government, the returns are assured. The current quarter’s interest rate is 6.8% (January 2021-March 2021). This fixed-income savings plan has a 5-year term.
As a result, the lock-in period is five years. The interest earned is immediately re-invested in the plan. At the end of the term, the investors will receive their money plus interest.
Investors can start investing in NSC with as little as INR 100. NSC is only open to qualified investors. The only people who can invest in NSC are Indians who live in India. HUFs, NRIs, and trusts are not permitted to invest in NSC. Except in the event of the investor’s death, one cannot withdraw their NSC investment early. One can, however, take out a loan against their NSC investment.
Section 80C of the Income Tax Act of 1961 allows for a tax deduction for NSC investments. When filing their income tax returns, investors can claim up to INR 1.5 lakhs in tax benefits. The interest that is re-invested qualifies for a tax deduction. On interest, there is no TDS. However, at the end of the five-year period, the investors must pay income tax on the interest income.
8. Kisan Vikas Patra(KVP)
Farmers’ savings scheme Kisan Vikas Patra (KVP) was introduced. The scheme, however, is open to all Indian citizens. This post office savings plan provides interest-bearing income. The scheme pays an annual fixed interest rate of 6.9% (January 2021-March 2021). Interest rates are adjusted every quarter, and a 124-month investment in this program doubles in value (10 years and two months).
This scheme allows investors to deposit as little as INR 1,000. Furthermore, there is no upper limit to the amount that can be invested. KVP programmes are available to Indian nationals aged 18 and up at any local post office. A PAN card is required for investments over INR 50,000. Investors must also present income evidence for investments over INR 10 lakhs.
The scheme features a 30-month lock-in period, during which time investors are unable to withdraw their funds. Investors can, however, withdraw their funds in 6-month periods after the lock-in period has ended. Tax deductions are not available for KVP investments. Furthermore, interest income is taxable. Investors can use the Income Tax Calculator to assess their tax due.
9. Sukanya Samriddhi Yojana (SSY)
The Sukanya Samriddhi Yojana (SSY) is an initiative of the Indian government that promotes the “Beti Bachao, Beti Padhao” campaign. This post office savings scheme was established in 2015 to encourage girls to attend school and marry. It’s a fixed-income investment that assures interest payments. The interest rate for the current quarter (January 2021 – March 2021) is 7.6%. Interest rates are adjusted on a quarterly basis. The Sukanya Samriddhi Yojana Calculator can be used to evaluate the returns that can be earned from this scheme.
Before the age of ten, parents or guardians of a girl child can invest on her behalf in this scheme. This scheme is only open to Indian residents. When the girl reaches the age of 21, the scheme matures.
Only until the age of 15 is it possible to invest in the scheme. The minimum and maximum annual investments are INR 250 and INR 1,50,000, respectively. Only one account per girl kid and two accounts per family are allowed under the system. The maximum number of accounts allowed for twins is three.
There are no early withdrawals permitted until the program reaches maturity. The only exceptions are when the girl dies or is suffering from a life-threatening illness. When you reach the age of 18, you can take half of your savings for further education. Section 80C of the Income Tax Act of 1961 allows for tax exemption on SSY investments.
A tax benefit of up to INR 1.5 lakhs per annum is available to investors. When they file an income tax return, they can claim the tax benefit. Furthermore, because this scheme falls under the EEE category, the interest and maturity amounts are tax-free.
ADVANTAGES Of Post office deposit schemes
1. Investing is simple
The savings plans are simple to join and ideal for both rural and urban investors. These schemes are suitable for anyone who wishes to reduce risk in their portfolio in exchange for a guaranteed decent return. Because of their simplicity and accessibility, these investment choices are a popular choice for saving money.
2. Procedures and documentation
Because these savings programs are backed by the government, they are easy to enroll in and safe to lock into.
3. Investments in Postal Savings Plans
The investments in Post Office Schemes are more forward-looking and long-term oriented, with a PPF account having a maximum investment period of 15 years. As a result, these investment options are a great way to plan for retirement and pensions.
4. Tax-free status
The deposit amount in most of these programs is eligible for tax rebates under Section 80C. The interest earned on a few of the plans, such as the PPF and the Sukanya Samriddhi Yojana, is also tax-free.
5. Interest Rates
These plans have interest rates ranging from 4% to 9%, and they are also risk-free. Because the Government of India manages these investment options, there is very little risk.
6. Product bins of various sizes
There is a large choice of things available for various types of people. Some of the most well-known programs include the Public Provident Fund (PPF), Kisan Vikas Patra, and Sukanya Samriddhi Yojana. To offer the people a safe investment option, the government has made these small savings programs available through post offices. These programs are simple to handle because they provide significant returns while keeping their assets safe. If the features and benefits outlined above align with your financial objectives, consider investing in a post office savings plan to protect your financial future while minimizing risk.