IndiaLends Advisory

By IndiaLends Advisory

Aug 13, 2018

Post Office Saving Schemes: Which One Is The Best For You

Jackie Mason once said, “Money is not the most important thing in the world. Love is. Fortunately, I love money.” Just like Jackie, we care about money too. We’d be lying if we say we don’t. Earning money is important. There is no doubt about that. But saving some part of that earning for rainy days and inevitable old age is more important.  Now there are a lot of saving schemes in the market today that claim to get returns on your money while you save it. Post office saving schemes have joined this league too. Each one of them has their own advantage and benefits. A lot of them also help in tax benefit. Let’s see what these post offices savings schemes have to offer-

Post Office Savings Account

This saving scheme is just like another bank account. People who want to achieve slow and continuous gains without any risk can go for this scheme. Here is a snapshot of this scheme-

 Interest Rate Offered  4%
 Minimum Amount  ₹ 20
 Minimum balance  ₹ 50 for non-cheque facility and ₹ 500 with  cheque facility
 Transfer  Available from one post office to another.
 Cheque Facility  Available only if the account is opened with a  minimum of ₹ 500.
 Nominee  Available at the time of opening the account  and after that as well.
 Tax Free Interest Earned  Up to ₹ 10,000
 Joint     Account  By a maximum of 3 adults
 Account for Minors  A minor of 10 years and above, can open and  operate the account.
 ATM Facility  Available

 

Other Things That You Should Know About This Saving Scheme:

–> One can open one account in only one post office.

–> At least one transaction of deposit or withdrawal in three financial years is mandatory in order to keep the account active.

5-Year Post Office Recurring Deposit Account (RD)

An RD is a special kind of term deposit which help people with regular incomes to deposit a fixed amount every month into their Recurring Deposit account and earn interest at the rate applicable to Fixed Deposits. This saving scheme is similar to making FDs of a certain amount in monthly installments. This deposit matures on a specific date in the future along with all the deposits made every month.

Thus, a recurring deposit saving scheme allows customers to build up their savings through regular monthly deposits of a fixed sum over a fixed period of time. In case of a Post Office Recurring Deposit Account, the tenure of maturity is 5 years. Here are some of the features of this savings scheme-

 Interest Rate   Offered  6.9% per annum (quarterly compounded)
 Minimum Amount  ₹ 10
 Tax-Free Interest   Earned  Rebate on advance deposit of at least 6 installments
 Nominee  Available at the time of opening the account and after that as well.
 Joint Account  Can be opened by 2 adults
 Transfer  Available from one post office to another.
 Account for   Minors  A minor of 10 years and above, can open and operate the account.
 Withdrawal Terms  One withdrawal up to 50% of the balance allowed after one year. Full maturity value allowed on R.D.   Accounts restricted to that of INR. 50/- denomination.

 

Other Things That You Should Know About This Saving Scheme:

–> Any number of accounts can be opened in any post office

–> If in any RD account, there is a monthly default amount, the depositor has to first pay the defaulted monthly deposit with default fee and then pay the current month deposit.

–> There is a rebate on advance deposit of at least 6 installments

Post Office Time Deposit Account (TD)

This post office saving scheme is an alternative to the bank fixed deposits. It is ideal for those looking for fixed income since it is safer than an FD. Here is a summary of this savings scheme-

 Interest   Rate   Offered  1 Year: 6.6%
 2 Year: 6.7%
 3 Year: 6.9%
 4 Year: 7.4%
 Minimum   Amount   ₹ 200
 Tax Benefit  The investment under 5 Years TD qualifies for the benefit of   Section 80C of the Income Tax Act, 1961 from 1.4.2007.
 Nominee  Available at the time of opening the account and after that as well.
 Transfer  Available from one post office to another.
 Joint     Account  By two adults
 Account for   Minors  A minor of 10 years and above, can open and operate the account.

 

Other Things That You Should Know About This Saving Scheme:

–> When a TD account is matured in the CBS Post offices, the same TD account will renew for the period for which the account was initially opened.

–> Interest rate applicable on the day of maturity will be applied

Post Office Monthly Income Scheme Account (MIS)

In this post office saving scheme, you invest a certain amount and earn a fixed interest every month. It is a low-risk investment and generates steady revenue every month. Mostly because the money is safe under the government till the time of maturity. Let’s see a snapshot of its benefits and features-

 Interest Rate   Offered  7.3 % per annum payable monthly
 Minimum   Amount   In multiples of INR 1500/-
 Maximum investment limit  INR 4.5 lakh in a single account and INR 9 lakh in the joint account; An  individual can invest maximum INR 4.5 lakh
 Nominee  Available at the time of opening the account and after that as well.
 Maturity  5 Years; Premature withdrawal before 3 at the deduction of 2% of the deposit.  And after 3 years at the discount of 1% of the deposit.
 Joint Account  By two or three adults
 Account for Minors  A minor of 10 years and above, can open and operate the account.
 Transfer  Available from one post office to another.

 

Other Things That You Should Know About This Saving Scheme:

–> Interest can be drawn through auto credit into savings account standing at the same post office, through PDCs or ECS.

–> In case of MIS accounts standing at CBS Post offices, monthly interest can be credited into savings account standing at any CBS Post offices.

–> A bonus of 5% on principal amount is admissible on maturity in respect of MIS accounts opened on or after 8.12.07 and up to 30.11.2011.

Senior Citizen Savings Scheme (SCSS)

As the name suggests, it is a post office saving scheme for senior citizens of India that offers regular income and is a risk-free tax saving investment. It is an amazing option for senior citizens to stay independent. As it is effective & long term saving option which offers security.

This scheme is available through certified banks and post offices across India. Here are some of the major features of this saving scheme-

 Interest Rate Offered  8.3 % per annum
 Minimum Amount   INR.1000/-
 Maximum investment limit  INR 15 lakh
 Nominee   Available at the time of opening the account and  after that as well.
 Maturity period  5 years
 Joint Account  Can open an account jointly with a spouse  (husband/wife).
 Eligibility  An individual of the Age of 60 years or more may  open the account.
 Transfer  Available from one post office to another.
 Joint Account  Joint account can be opened with spouse only  and the first depositor in a Joint account is the investor.
 Tax Benefit  Qualifies for the benefit of Section 80C of the Income Tax Act, 1961 from 1.4.2007.

 

Other Things That You Should Know About This Saving Scheme:

–> One can open an account by cash for the amount below INR 1 lakh and for INR 1 Lakh and above by cheque only.

–> Premature closure after one year on deduction of an amount equal to 1.5% of the deposit & after 2 years 1% of the deposit.

–> TDS is deducted at source on interest if the interest amount is more than INR 10,000/- p.a.

15 year Public Provident Fund Account (PPF )

This is one of the most popular post office saving schemes. The PPF came into existence to make people save more money. Since the interest earned in this scheme is tax-free. A lot of people turn to it to invest as it is a safe option. Let’s see how this saving scheme is beneficial-

 Interest Rate Offered  7.6 % per annum
 Minimum Amount   An individual can open an account with INR 100/-  but has to deposit a minimum of INR 500/- in a financial year
 The Maximum investment limit  INR. 1,50,000/- in a financial year
 Maturity period  15 years but the same can be extended within one year of maturity for further 5 years and so on
 Nominee  Available at the time of opening the account and after that as well.
 Tax Benefit  Qualifies for deduction from income under Sec.  80C of IT Act. Interest is completely tax-free.
 Withdrawal  Every year from the 7th financial year.
 Loan facility  Available from the 3rd financial year.
 Account for Minors A minor of 10 years and above, can open and operate the account.

Other Things That You Should Know About This Saving Scheme:

–> Premature closure is not allowed before 15 years.

–> One can open the PPF account in a Post Office which is Double handed and above.

 

National Saving Certificate (NSC)

A National Saving Certificate from a post office encourages people associated with small and medium size investments. To invest money and save tax at the same time. You can also use this saving scheme as an asset to get a loan from banks and NBFCs. Here are the basic features of this scheme-

 Interest Rate Offered  7.6 %
 Minimum Amount   ₹100/-
 Maturity period  5 Years/10 Years
 Tax Benefit  Qualifies for deduction from income under Sec. 80C of IT Act.
 Transfer  Only once from date of issue to date of maturity.
 Account for Minors  An adult can hold a certificate on behalf of a minor

 

Related Article: Is Personal Loan With Security A Good Idea?

Other Things That You Should Know About This Saving Scheme:

–> There is no TDS on NSC accounts

–> One can withdraw the money before maturity in exceptional cases like the death of investor and with a court order.

Post Office Interest Rates In A Nutshell:

 Saving Scheme

 Interest Rates

 Post Office Savings Account  4%
 Recurring Deposit Account  6.9%
 Time Deposit Account  6.6% – 7.4%
 Monthly Income Scheme Account  7.3 %
 Senior Citizen Savings Scheme  8.3 %
 Public Provident Fund Account  7.6 %
 National Saving Certificate  7.6 %

 

Related Article: Sukanya Samriddhi Yojana: Changes and Benefits

Now that you know the benefits and features of all the post office saving schemes. You can easily make the decision of which one is the best for you. These investment and saving schemes are not risky. So the money you have right now is not under any kind of threat. Hence even though a lot of banks offer investment options. A lot of people stick to the risk-free post office saving schemes. Also, most of these schemes qualify for tax rebate. Hence you need not worry about the interest you earn on them. If there are any questions that you have regarding these saving schemes. Do let us know in the comment section below. To stay updated with personal finance, follow IndiaLends Blog. Until next time!

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