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A Guide top Post Office Saving Schemes

The Post Office Savings scheme refers to a range of saving products portfolio offered by the central government. Since it has the backing of the central government, they are preferred by people who have less appetite for risks and want a secure return on their investment. The scheme is run via 1.54 lakh post offices all over the country. In certain schemes, public sector banks are also involved. For example, PPF in addition to be operated by post offices in each cities also is managed by 8200 branches of public sector banks.

The Post Office savings scheme portfolio consists of the following:

Post Office Saving Schemes – Interest Rates & Tax Implications

The following table discusses different Post office saving schemes and various factors and eligibility criteria associated with them like return on investment, minimum and maximum investment, tax implications, eligibility to invest in such scheme, etc.

Scheme Interest Rate Minimum Investment Maximum Investment Eligibility Tax Implications
Post Office Savings Account Interest offered is 4% per annum

– Rs 20

– Non Cheque Facility Rs 50

No upper limit Indian residents both minor and adults can invest in this scheme Interest earned from Financial year 2012-13 Tax free. The maximum amount is INR 10000
5-Year Post Office Recurring Deposit Account Interest offered is 6.9% per annum (compounded Quarterly) Rs 10 per  month No upper limit You can only invest in your Individual capacity Tax benefit under section 80 C on deposits for up to 5 years.  
Post Office Time Deposit Account (TD)

Interest offered  for first year – 6.6% pa

Interest offered  for second year -6.7% pa

Interest offered for third Year – 6.9% pa

Interest offered for fourth Year – 7.4% pa

  Rs 200 No upper limit You can only invest in your Individual capacity Tax benefit under section 80 C on deposits for up to 5 years.  
Post Office Monthly Income Scheme Account (MIS) Interest offered 7.3 % per annum which is compounded annually INR 1,500 Maximum investment limit for a single account holder is INR 4.5 lakh and for joint account holders is INR 9 lakh   The interest earned will be taxed for this scheme as it makes no provisions for tax rebate under Sec 80C
Senior Citizen Savings Scheme (SCSS) 8.3 % per annum which is compounded Annually INR 1,000 Maximum investment limit allowed over lifetime is INR 15 lakh This scheme is open to people who are over 60 years. This gets reduced to 55 for people  Individual who have opted for VRS or Superannuation

– Tax deduction allowed for deposits section 80 C

– TDS will be claimed on interest exceeding INR 10000 per annum

15 year Public Provident Fund Account (PPF) 7.6 % per annum which is compounded annually INR 500 per financial year INR 1.5 lakh in one financial year You can only invest in your Individual capacity Tax rebate under section 80 C for deposits (maximum INR 1.5 lakh pa
National Savings Certificates (NSC)

7.6 % per annum 

which is compounded Annually)

INR 100 No upper limit You can only invest in your Individual capacity Tax rebate allowed under section 80 C for deposits (maximum INR 1.5 lakh per annum
Kisan Vikas Patra (KVP) 7.3 % per annum  which is compounded annually INR 1,000 No limit Only Adults can invest in their individual capacity Interest earned will be taxed but the amount received on maturity will be tax free.
Sukanya Samriddhi Accounts 8.1 % per annum which is compounded Annually INR 1, 000 per financial year INR 1.5 lakh per financial year Scheme open only to a Girl Child – Up to 10 years from birth with one year of grace. Interest earned on investment up to INR 1.5 under Section 80 C is tax free.  Both interest and total mount received on maturity is tax free

Primary Benefits and Advantages of Post Office Saving Schemes

Post Saving schemes offer fixed return with absolutely no risk. Some of the important benefits of PO saving schemes are mentioned as following:

Investment in PO schemes are easy

It is extremely easy to invest in PO schemes which makes them ideal investment instrument for people of both urban and rural India who want a decent risk-free return on their investment.

Minimal documentation

These schemes are easy to enroll in as they require simple procedures and minimal documentation.

Long term investment

These saving schemes are generally forward looking with maturity period as long as 15 years. This greatly helps a person plan for his retirement and pension.

Exempted from tax

Majority of post saving accounts come with provision for tax exemptions under Section 80C for deposit amounts. And for few like SCSS , Sukanya Samriddh, etc, holders have to pay no taxes on interest earned.

Free from risk

Interest rate offered ranges from 4 to 9 per cent. The best thing is that the interest rate is guaranteed with zero per cent risk as it is backed by central government.

A whole bucket of portfolio to choose from

As mentioned above, there are many different types of saving schemes with different interest rates, tax rules, investment requirement, etc. This offers you the benefit of choosing one that most closely aligns with your needs and requirements.