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Budget 2021 update :It has been proposed to exempt the senior citizens from filing income tax returns if pension income and interest income are their only annual income source. Section 194P has been newly inserted to enforce the banks to deduct tax on senior citizens more than 75 years of age who have a pension and interest income from the bank.
In this article, we have covered various investment options offered by the post office and their benefits.
The Post Office Saving Schemes include several products that offer reliability and risk-free returns on investment. These schemes are operated via 1.54 lakh post offices spread all over the country. For example, the PPF scheme PPF is operated via 8200 branches of public sector banks in addition to the post offices in each city.
The minimum deposit to open a Post Office Savings Account is Rs.500. The account can be opened in single or joint ownership by domestic customers. An interest rate of 4% p.a. Is applicable to the deposits. You can avail of a cheque book, ATM card, e-banking and mobile banking services, and other services with the account on request.
As the name suggests, the tenure of this RD account is fixed for five years. You can agree to a fixed monthly deposit payment starting from Rs.100 and earn interest at 5.8% p.a. The interest gets compounded quarterly. You can get a loan of up to 50% against the deposit you have already made in the account after completing 12 instalments without defaulting.
There are four possible tenures for Post Office Time Deposit Accounts you can choose from, i.e. 1 year, 2 years, 3 years, and 5 years. The minimum deposit allowed in this account is Rs.1,000. The interest is calculated quarterly but is payable on an annual basis. For a tenure of up to 3 years, the rate is 5.5% p.a. and it is 6.7% p.a. for a 5-year tenure.
You can deposit a sum of Rs.1,000 up to Rs.4.5 lakh in a single account and up to Rs.9 lakh in a joint account. An interest rate of 6.6% can be earned through this account. You can get monthly fixed income from the scheme. You cannot prematurely close the account before completing one year. Premature closure beyond one year can attract penalties.
This is a government-backed retirement scheme that allows you to make a deposit of a lump sum in one instalment. The deposit can range from Rs.1,000 up to Rs.15 lakh. The scheme offers an interest rate of 7.4% p.a. Individuals above the age of 60 years are eligible to open this account.
Retired civilian employees aged between 55 years and 60 years and retired defence employees aged between 50 years and 60 years of age can also open the account subject to investing the retirement benefits within one month from the date of receipt of the benefits.
Many salaried individuals prefer PPF as an investment and retirement tool as the scheme offers income tax deductions up to Rs.1.5 lakh per financial year. The minimum deposit required to open the account is Rs.500 and the upper limit is Rs.1.5 lakh.
Though the tenure of the account is 15 years, you only have to pay Rs.500 per financial year to keep the account active. An interest rate of 7.1% p.a. is offered by the scheme. The interest is compounded yearly. Also, the interest earned on this account is tax-free.
NSC comes with a tenure of five years where you need to make a minimum deposit of Rs.1,000. There is no maximum deposit defined for this account. With an interest rate of 6.8% p.a., the interest gets compounded annually and is paid out only at maturity.
An individual can open any number of accounts under the scheme. The certificate can be pledged or transferred as security to the housing finance company, banks, government companies, and others.
The attraction of this scheme is that over the tenure of the account, your investment will be doubled. The minimum deposit for this account is Rs.1,000. As per the rates applicable to quarter 4 of the fiscal year 2020-21, the applicable interest rate is 6.9% p.a. And the tenure of the account is 124 months (10 years and 4 months). Please note that the tenure of the account varies with the variation in the interest rate.
This is a government scheme dedicated to the financial well-being of the girl child. Only girl children below the age of 10 years are eligible to get the benefits of this account. The account must be opened and operated by parents or guardians.
The minimum deposit required is Rs.250 and a max of Rs.1.5 lakh per financial year. An interest rate of 7.6% p.a. Is applicable. The interest is calculated on a yearly basis and compounded annually. The guardian can operate the account until the girl child attains 18 years of age. The deposit can be made for a maximum of 15 years from the date of opening the account.
|
Scheme |
Interest Rate |
Minimum Investment |
Maximum Investment |
Eligibility |
Tax Implications |
|
Post Office Savings Account |
4% per annum (p.a.) |
–Rs 20 –Non-cheque facility – Rs 50 |
No limit |
Resident Indian, minor and majors |
Tax-free interest up to Rs 50,000 from the financial year 2018-19 |
|
Post Office Time Deposit Account (TD) |
First year – 5.5% p.a. Second year – 5.5% p.a. Third Year – 5.5% p.a. Fourth Year – 6.7% p.a. |
Rs 200 |
No limit |
Individual |
Tax benefits up to 5 years under section 80C on deposits |
|
Post Office Monthly Income Scheme Account (MIS) |
6.6% per annum payable monthly |
Rs 1,500 |
For one account holders – Rs 4.5 lakh Joint account holders – Rs 9 lakh |
Individual |
Interest earned is taxable and no deduction under Sec 80C for deposits made. |
|
Senior Citizen Savings Scheme (SCSS) |
7.4% p.a. (Compounded annually) |
Rs 1,000 |
Maximum deposit over the lifetime allowed at Rs 15 lakh |
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. |
|
15-year Public Provident Fund Account (PPF) |
7.1% p.a. (Compounded annually) |
Rs 500 per financial year |
Rs 1.5 lakh per financial year |
Individual |
Tax rebate under section 80C for deposits (maximum Rs 1.5 lakh p.a.) |
|
National Savings Certificates (NSC) |
6.8% p.a. (Compounded annually) |
Rs 100 |
No limit |
Individual |
Tax rebate under section 80C for deposits (maximum Rs 1.5 lakh p.a.) |
|
Kisan Vikas Patra (KVP) |
6.9% p.a. (Compounded annually) |
Rs 1,000 |
No limit |
Individual (Adult) |
Interest is taxable but no tax on the amount received on maturity |
|
Sukanya Samriddhi Accounts |
7.6% p.a. (Compounded annually) |
Rs 1,000 per financial year |
Rs 1.5 lakh per financial year |
Girl Child – up to 10 years from birth and one additional year of grace |
Investment (up to Rs 1.5 lakh exempt under Section 80C), interest and amount received on maturity is tax free |
The saving schemes are easy to enrol and are best suited for both rural and urban investors. Anyone who wants to hedge risk in the portfolio for a fixed decent return can invest in these schemes. The simplicity and availability make these investment options a much-preferred savings cum investment option.
Limited documentation and proper procedures in post office ensure that these saving schemes are simple to opt for and safe to be locked onto as the government backs them.
The investments in the Post Office Schemes are more forward-looking and long-term oriented with the investment period extending up to 15 years for a PPF account. Therefore, these investment options are an excellent option for retirement and pension planning.
Most of these schemes are eligible for tax rebates under Section 80C for the deposit amount. Few of the schemes like the PPF, the SCSS, the Sukanya Samriddhi Yojana, etc. also have the interest earned amount exempted from taxation.
Interest rates in these schemes range from 4% to 9%, which is also risk-free. There is a minimal amount of risk involved, as the Government of India undertakes these investment options.
There is a wide range of products based on different types of individuals. Public Provident Fund (PPF), Kisan Vikas Patra and Sukanya Samriddhi Yojana are some of the more well-known schemes.
The government has made these small savings schemes available via post offices to provide a safe investment avenue for the public. By providing them with good returns and keeping their investments safe, these schemes are easy to manage. If the features and benefits iterated above meet your financial goals, then invest in a post office savings scheme to secure your financial future at minimal risk.
Post Office Saving Schemes are suitable for individuals with a low-risk appetite. The returns from these schemes are not prone to market fluctuations making it the suitable products for risk-averse investors who still wish to make the most of their savings.
You can open a recurring deposit or term deposit account online through the mobile app.
Step 1: Download and log into the India Post Mobile Banking app on your mobile from Google Play Store.
Step 2: Upon successful login, select the ‘Requests’ tab on the home screen to open a POFD account.
Step 3: Enter the details, such as the deposit amount, tenure, the account from which you want to deposit the money, nominee, and others to open the account.
For opening an account under any other Post Office Saving Schemes, you need to visit the home branch of the Post Office.
Step 1: Download and print the relevant application form from the Post Office’s official website.
Step 2: Attach all the necessary documents.
Step 3: Visit your home branch of the Post Office and submit the documentation to the relevant personnel.
Documents Required
