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.
1. Definition of a Post Office Savings Account
The post office savings account is a deposit scheme provided by the post office throughout India. The account provides a fixed interest rate on the account balance. It is a beneficial scheme for individual investors who wish to earn a fixed rate of interest by investing a significant portion of their financial assets.
Post office savings account is also a very helpful scheme for those residing in rural parts of India. Since the nationwide reach of the post offices is much greater as compared to banks, a large number of unprivileged people have been able to get access to savings accounts through post offices.
2. Eligibility for Post Office Savings Account
- An adult can open a post offices savings account.
- The adult must be an Indian.
- In case a minor needs to open a post office savings account, he/she should be at least 10 years old.
- A guardian can also open an account on behalf of the minor.
- Two or three persons can open a joint post office savings account.
- A person who is not of sound mind can also open a post office savings account.
3. Interest Rates on post office savings account
The central government decides the interest rates on the post office savings account. Mostly it is same as that of the banks which is around 4% and it is calculated every month. According to the income tax regulations, if a post office savings account holder generates returns lower than Rs. 10,000 a year through interest, then it is tax-free.
4. Benefits of Post office savings account
Opening a savings account through post office is way easier than savings accounts in banks. Let us take a look at its benefits.
- A post office savings account requires a minimum balance of Rs. 20 to open the account.
- The cash can be withdrawn either partly or completely if need be.
- The risk exposure is very less to the account holders because they can avail an assured return on all the investments.
- The account can be transferred from one post office to another.
- Core banking post offices also provide the facility of ATM/Debit cards.
- An account can be opened in the name of minor who is below the age of 10 years. It will be managed and operated by the parent or guardian.
- An account holder can nominate a person to whom the funds will be provided in case of any demise to the account holder.
- Post office savings account does not have any maturity period. Hence, the account opening process is hassle-free and quick.
- An individual account can be converted into joint account and vice-versa.
- People residing in a rural area can open a savings account with the post-office.
5. Steps to open a post office savings account
- Get a form from the nearest post office or online. Separate forms are available for senior citizens.
- Fill-in the form and submit it along with the necessary KYC documents and photographs.
- Pay the amount that you wish to deposit, which should not be less than Rs. 20.
- In case you wish to open a post office savings account without cheque book, then the minimum deposit amount required is Rs. 50.
- Separate forms are available for senior citizens.
- Once you pay the amount, your savings account will be generated.
6. Withdrawal from a post office savings account
The money deposited in a post office savings account can be withdrawn any time when the depositor needs. Only thing is a minimum balance of Rs. 50 should be maintained in case of a generic account and Rs. 500 in case of cheque facility.