Post Office Savings Scheme: Everything an Investor Should Know
The Indian Post department has been contributing to the development of common people for decades. The Government of India has started several investment schemes under the post office savings scheme so that people develop a habit of making small savings for their future.
In this article, we will learn more about various schemes available with which you can create a savings pool for yourself and your family. Each scheme is meant for a distinct part of the population and helps them achieve their dreams with the help of planned financial investments. We will also learn about each scheme’s features and the application process. So, let us find out what the Department of Post has to offer in terms of financial security to the Indian population.
Thought Process of Post Office Saving Scheme
|Post Office Savings Scheme||Interest Rate||Tenure||Tax Benefits||Suitable For|
|Post Office Saving Account||4%||Flexible||On interest payable only||Short-term savings|
|Post Office Recurring Deposit||5.8% (quarterly compounded)||5 years||On interest payable only||Short-term savings|
|Post Office Monthly Income Scheme||7.4%||5 years||On interest payable only||Short-term savings|
|Post Office Time Deposit Account||Varies as per the tenure||1, 2, 3, and 5 years||On interest payable and investment||Short-term and mid-term savings|
|Kisan Vikas Patra||7.5%||123 months||On interest payable only||Short-term savings|
|Public Provident Fund||7.1%||15 years||On investment only||Low-risk bearing investors|
|Sukanya Samriddhi Yojana||8.0%||21 years||On investment only||Low-risk corpus building|
|National Savings Certificate||6.8%||5 years||On investment only||Low-risk bearing investors|
|Senior Citizens Savings Scheme||8.2%||5 years||On interest payable and investment||Retirement savings|
Post Office Schemes
Let us look at the different post office saving plans mentioned above in detail.
Post Office Savings Account
The post office saving account is the most basic post office saving scheme out of all the options available. It acts as a standard bank savings scheme with a predetermined rate of interest and flexible tenure. Generally, the rate of interest for a post office savings scheme is slightly higher compared to large banks and the same across the country as it is a service provided by the government.
Let us look at some of the key features of the post office saving account:
- A post office savings account works similarly to a savings bank account.
- A post office savings account can be transferred from one post office to another.
- The interest rate for a post office savings account remains fixed till the account stays active.
- The minimum deposit amount for a post office savings account is INR 500.
- This scheme is suitable for short-term savings for people looking for fixed returns on their investments.
- Under Section 80TTA of the Income Tax Act, interest earned up to INR 10,000 is eligible for tax exemption from taxable income.
Post Office Recurring Deposit
The Post Office Recurring Deposit (RD) is a post office saving scheme that helps people to save money for more considerable expenses in the future. The post office RD has a fixed tenure of five years. The interest for this post office scheme is compounded quarterly, rendering high maturity returns. The minimum monthly investment in a post office RD is INR 100.
Let us look at the features of a post office RD:
- Post office RD has a fixed interest rate of 5.8% throughout the tenure.
- At the time of maturity, the depositor will receive a lump sum amount along with interest.
- Deposits in the post office RD account are only made in multiples of 10 above the minimum limit of INR 100.
- You can apply for a loan against 50% of the amount deposited in the RD after 12 instalments. Your account should be continued for 1 year to avail this benefit
- Indian residents aged 18 or above can open and manage a post deposit RD account.
- If there is a withdrawal before maturity, savings account interest rates will be applicable
Post Office Monthly Income Scheme
The Post office Monthly Income Scheme (MIS) is an investment scheme that allows monthly payments in exchange for a fixed amount of money. This scheme is the most straightforward monthly income scheme that generates a steady flow of income. In addition, it is a low-risk investment option that does not involve market linkage and provides assured returns.
Let us look at the important features of the post office monthly income scheme:
- First, the post office’s monthly income scheme has a fixed interest rate of 7.4%. The rate is revised by the Indian government quarterly.
- The tenure for a post office monthly income scheme is 5 years. This is a fixed tenure. Investors can withdraw funds before maturity, but a penalty will be charged in the form of deductions.
- All Indian residents aged 18 and above can open and operate an MIS at the post office. A parent or guardian of a minor can also start a post office MIS on their child’s behalf.
- This scheme helps the investor earn a fixed monthly income in the form of investment returns and a fixed interest added to the returns.
- You can transfer your post office MIS account from one post office to another.
Post Office Time Deposit Account
The Post Office Time Deposit (TD) account is a post office scheme that entails different tenures and investment options for Indian residents. This scheme is a government-backed investment scheme with an interest rate decided by the Indian government.
Let us look at the features of the post office TD scheme:
- The post office TD account has a tenure of 1, 2, 3, and 5 years depending on the account holder’s decision regarding the investment.
- The longer you decide to keep your investment, the higher the returns will be.
- The scheme also offers a tax deduction under Section 80C of the Income Tax Act, 1961 on 5 year TD.
- The post office TD account has a minimum investment limit of INR 1000. However, this post office saving scheme does not have a maximum investment limit.
- If the returns are not withdrawn at the time of maturity, the scheme will renew for another tenure for which account was initially opened.
Kisan Vikas Patra
The Kisan Vikas Patra (KVP) is an investment scheme offered by the Government of India. This scheme is a small-investment post office scheme that helps you save money and generates a fixed rate of interest on the investment.
The following are the features of the post office time deposit account:
- The KVP scheme was initially meant only for farmers; however, in recent years, it has also been made available to all Indian citizens..
- The fixed interest rate for this scheme is 7.5%.
- The scheme has a lock-in period of 30 months, before which the investors cannot withdraw funds from their accounts.
- Any adult citizen can start investing under KVP. The KVP scheme also allows minors to have an investment account jointly with their guardian.
Public Provident Fund
The Public Provident Fund (PPF) is the most popular investment option offered by the post office. It is a scheme meant for people looking for long-term investments and high returns. This scheme is a low-risk investment option and best suited for risk-averse investors.
The features of Public Provident Funds are as follows:
- The minimum and maximum investment limits for a PPF are INR 500 and INR 1.5 lakhs, respectively.
- The interest rate for a PPF account is 7.1% per annum.
- The tenure for a PPF account is 15 years. It can be extended as per the requirements of the account holder.
- Loan can be taken against your PPF account after 1 year from the expiry of the financial year in which you started investing.
Sukanya Samriddhi Yojana
The Sukanya Samriddhi Yojana is meant for people who have a girl child and want to save money for her future education and/or marriage. It is a government-backed scheme that was set up for the upliftment of the girl child.
The features of the Sukanya Samriddhi Yojana are as follows:
- The current rate of interest has been prescribed as 8.0%.
- The tenure for the Sukanya Samriddhi Yojana is 21 years.
- An account can be opened with a minimum initial deposit of INR 250. Maximum deposit can be made up to INR 1.50 lakh (in multiple of INR 50) in a FY in lump sum or in multiple instalments.
- Withdrawals can be made after the girl child attains age of 18 or passed 10th standard.
- Account will be operated by the guardian till the girl child attains the age of majority.
National Savings Certificate
The National Savings Certificate (NSC) is a post office saving scheme with assured returns. The Government of India introduces this scheme for the betterment of lower and medium-income groups of the country.
Let us look at the features of National Savings Certificates:
- The interest rate for this scheme is 6.8 %.
- The tenure for the NSCs is 5 years. There is a lock-in period under which the scheme allows only interest-free withdrawals.
- Tax deductions under Section 80C are applicable on the investments in this scheme..
- This scheme is meant for risk averse investors looking for a low-risk investment alternative.
Senior Citizens Savings Scheme
The Senior Citizens Savings Scheme by the post office was introduced for senior citizens who are close to their retirement years. This scheme helps older people to have decent returns on their hard earned savings.
The features of the senior citizens savings scheme are as follows:
- This is a government-backed savings scheme for senior citizens. It offers an interest rate of 8.2% p.a. and interest is paid quarterly.
- The minimum age to enrol in this scheme is 60 years. Scheduled tenure for this scheme is 5 years and it can be extended for another 3 years.
- The scheme’s minimum and maximum investment limits are INR 1,000 and INR 15,00,000.
The process to Apply for a Post Office Saving Schemes & Documents Required
The process of applying for a post office saving scheme is as follows:
- First, go to your nearest post office branch.
- Then, select the scheme you want to invest in and get the form for the same from the post office.
- If you want to complete the process online, go to the official website for the Indian Post and download the form from there. You can also use the IPPB app for the account opening process.
- Complete the form with accurate details.
- Along with the form, you will also have to submit the required documents like address and identity proof for KYC.
- Make the necessary payments for the selected scheme.
- The post office will provide all the details regarding your chosen scheme.
Following is the list of documents required for applying for post office savings plans:
- Duly filled and signed form
- Proof of date of birth
- Passport-sized photos
- PAN card
- Adhaar card
- Driving Licence
- Voter’s ID card
Please note that all the documents mentioned in the list may not be required but it is advised to keep them handy.
Benefits of the Schemes
Following are the many benefits offered by post office savings schemes:
- These schemes are easy to avail of and offer assured returns. As these schemes are government-backed, risks are almost zero.
- Post office schemes are more convenient for people who do not have access to banks and other financial institutions.
- Many of these schemes offer slightly higher interest rates compared to large banks.
- Minimum investment limits for most post office schemes are extraordinarily feasible. So you do not require a large sum of money to start investing in these schemes.
- Most schemes are transferable with minimal documentation.
- Tax benefits are also provided with post office investment schemes.
In conclusion, the Department of Post has much more to offer regarding investment security and return assurance. People living in remote areas where no banks can benefit from this government-backed initiative to invest and save money for their future. Post office schemes have something for everyone.
What is the tax benefit available under the post office savings account?
Under the post office savings account, paid interest amounting to less than INR 10,000 per annum will be deductible from taxable income as per Section 80TTA of the Income Tax Act, 1961. This limit is increased to INR 50,000 for senior citizens under Section 80TTB.
Can minors open a post office recurring deposit account?
People below 18 years of age can also open a joint recurring deposit account in the post office. They can manage this account with a guardian or parent with whom they have jointly opened the account.
What are the minimum and maximum investment limits for a post office monthly income scheme?
The minimum and maximum investment limits for a post office monthly income scheme are INR 1000 and INR 4.5 lakh. In case there is a joint account, the maximum limit is extended to INR 9 lakh.
What are interest rates for the different tenures under the post office time deposit account?
The interest rates for the post office time deposit account’s 1-year, 2-year, 3-year, and 5-year tenures are 5.5%, 5.7%, 5.8%, and 6.7%, respectively.
How long after the lock-in period can I withdraw funds from a KVP account?
After the lock-in period of 30 months expires, you can withdraw your funds from the KVP account.