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Post Office Savings Schemes in India

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Self sufficiency of low-income group of people of India is not far away...!

Postal Savings Schemes are very popular in India. It is the most risk less investment India since its returns are guaranteed by the Union Government of India. Also in every innermost rural areas in India are covered by post offices. More than 1.5 lakh post offices are functioning in India. It is the reason for its popularity. Total investments in small savings scheme is about 9 Lakh crore. There are 9 small savings schemes are offered by Indian Postal Bank. They are:

  1. Post Office Savings Account

  2. Post Office Recurring Deposit Account (RD)

  3. Post Office Time Deposit Account (TD)

  4. Post Office Monthly Income Scheme (MIS)

  5. Senior Citizens Savings Schemes (SCSS)

  6. National Savings Certificate (NSC)

  7. Kisan Vikas Patra (KVP)

  8. Sukanya Samriddhi Yojana (SSY)

  9. Public Provident Fund (PPF)

postofficesavingsinindia

1. Post Office Savings Account

  • It is the basic savings account in a Post Office.
  • The minimum balance to keep in the account is Rupees 500/-
  • No lock-in-period.
  • It offers 4% interest rate per year. The rate of interest is calculated on monthly balances and credited annually at the final day of the Financial Year (March 31).
  • Nomination facility is available at the time of opening of the account.
  • Interest earned is tax free up to Rs 10,000/- per year.
  • ATM can be available which can be used in Automated Teller Machine and in POS (Point of Sales) Terminals.
  • ID Proof and Address Proof are needed to open the Savings account and one Passport size photograph recently taken is also necessary.
  • Facility to link with IPPB(Indian Postal Payment Bank) Saving Account is available. Fund transfer with IPPB as Pay in/ Pay out is also available.

2. Post Office Recurring Deposit Account (RD)

  • The period of a recurring deposit is 5 years.
  • It is not an one time investment like a fixed deposit. The Nomination facility is available.
  • A customer can open any number of Recurring deposit in any post office.
  • If one advance deposit of six installment will attract a rebate to the investor.
  • The minimum amount for opening a Recurring Deposit is Rupees 100/- per month. Any amount in multiple of Rs 10/- above Rs 100/- can invest.
  • No maximum limit for investment.
  • After the first investment, subsequent deposit can be made up to 15th day of next month if account is opened up to 15th​ of a calendar month and up to last working day of next month if account is opened between 16th day and last working day of a calendar month.
  • One partial withdrawal up to 50% of the account is allowed after one year of opening the account.
  • Delay in deposit will cause for a penalty @Rupees one for every 100 Rupees of the deposit amount.
  • From 1.04.2020, interest rate on RD accounts is fixed at 5,8 per cent per year.
  • Interest rate is quarterly compounded.
  • Tax relief is not available to the profit from Post Office RD. The interest income from RD will be taxed as income from other sources.
  • No Tax Deduction at Source (TDS) for interest from Recurring Deposit.
  • When the post office recurring deposit account reaches its maturity period, that is, 5 years, the account holders have an option to again continue for five more years. For such an elongated period of time, they are supposed to make certain deposits on a monthly basis to the post office.
  • If the account holder wishes to continue holding the account but does not want to make any new deposit can extend for another span of a maximum 5 years.
  • The post office recurring deposit account provides the added facility to the account holders to prematurely close their accounts before it reaches the maturity period of five years. This can be done only after the expiry of first three years after opening such an account. In such a case of premature closure, the rate of interest should be the interest rate applicable on the post office savings account.
  • One loan up to 50% of the balance should be allowed after one year. The repaid should be in one lump sum along with prescribed interest.

3. Time Deposit Account

Time Deposit Account is one of the attractive investment schemes offered by the India Post. This scheme is particularly popular in rural and remote areas of India,

  • Account can be transferred from one post office to another
  • Any number of accounts can be opened in any post office
  • Minimum investment is INR 1000/- and in multiple of 100. There is no maximum limit for investment.
  • Interest payable is annually but calculated quarterly. There is no cumulative interest for annually payable interest.
  • Premature closure of TDS is not allowed before expiry of 6 month. If closed between 6 month to 12 month from date of Opening, Post Office Saving Accounts interest rate will be payable
  • The investment under 5 Years TD qualifies for the benefit of Section 80C of the Income Tax Act, 1961 from 1.4.2007. But the interest income is taxable.

4. Monthly Income Scheme

  • This is a unique scheme which offers guaranteed fixed monthly income on the lump sum investment made by the investor.
  • A minor can also invest in this scheme. If the minor is of more than 10 years, then he can even operate the account.
  • Minimum limit for investment is Rs.1500 and maximum investment limit is Rs.4.5 lakhs in single holding account and Rs.9 lakhs for joint accounts.
  • Accounts are transferable from one post office to another across the country.
  • There is no Tax Deduction at Source on the interest payout. This scheme is preferable to risk less investors who looking for a regular monthly income.
  • Maturity period is 5 years from 1.12.2011
  • It can be prematurely withdraw after one year but before 3 years at the deduction of 2% of the deposit and after 3 years at the deduction of 1% of the deposit.
  • Interest shall be payable to the account holder on completion of a month from the date of deposit
  • If the interest payable every month is not claimed by the account holder such interest shall not earn any additional interest.
postofficesavingsinindia

5. Senior Citizens Savings Scheme (SCSS)

  • The minimum age of eligibility of is 60 years for Senior Citizen Savings Scheme.
  • Maximum limit of investment allowed per individual is Rs. 15 lakhs. The investment amount can be in multiples of Rs.1000.
  • An individual can hold multiple accounts in his name or in joint holding with his spouse.
  • Rate of interest is payable on 1st working day of each quarter. The deposit has a maturity period of 5 years.
  • The scheme also allows premature withdrawals of deposits after a year with a penalty of 1.5%. Penalty of 1 % is levied after 2 years of deposit.
  • Account can be extended for three more years after the scheme matures.
  • Investments are eligible for tax deduction under Section 80C of the Income Tax Act.
  • An individual of the age of 55 years or more but less than 60 years who has retired on superannuation or under Voluntary Retirement Scheme can open account subject to the condition that the account is opened within one month of receipt of retirement benefits and amount should not exceed the amount of retirement benefits,
  • A retired personnel of Defence Services (excluding Civilian Defence employees) shall be eligible to open an account under this Scheme on attaining the age of 50 years subject to the fulfillment of other specified conditions
  • Account can be opened by cash for the cash up to INR 99,999 and for INR One Lakh and above by Cheque only.
  • Account can be transferred from one post office to another
  • Any number of accounts can be opened in any post office subject to maximum investment limit.
  • Tax should deducted at source on interest, if the interest amount is more than INR 50,000/- per Year.

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6. National Savings Certificate

  • Minimum investment is INR1000/- and in multiples of Rs. 100/- There is no Maximum Limit of investment.
  • NSC has started to issue in the shape of Passbook w.e.f. 01.07.2016.
  • Deposits is eligible for tax rebate under Sec. 80C of IT Act.
  • The interest is calculating annually but deemed to be reinvested under Section 80C of IT Act except interest in the final year.
  • NSC certificates can be pledged as security for availing loans from banks and other financial institutions.

7. Kisan Vikas Patra

There is no tax deduction on the principal amount invested and interest on this scheme is also taxable. The scheme is thus not tax-efficient. It is an attractive scheme among small investors from remote areas since it assures the doubling of investment for a prescribed period.

  • Investment is available in denominations of Rs.1,000, Rs. 5,000, Rs.10,000 and Rs. 50,000. Investment comes with the minimum limit of Rs.1,000 and with no maximum limit.
  • Certificates are easily transferable and can be endorsed to third person.
  • Certificate is comparatively liquid in nature as it offers withdrawal facility after 2.5 years of investment.
  • KVP has started to issue in the shape of Passbook w.e.f. 01.07.2016.
  • KVP can be purchased from any Post office.

8. Sukanya Samriddhi Yojana

This scheme has gained a great popularity especially in rural India. It’s a good means to provide financial security to the next generation of women in the country.

  • This scheme introduced for the benefit of the girl child. It currently offers an attractive interest rate with compounding annually. Its interest rate offered by Government is higher than Public Provident Fund.
  • The minimum amount of investment is Rs.250 and maximum is Rs.1,50,000 in a financial year. You have to invest at least the minimum amount every year for 15 years from the date of account opening. Thereafter the account will continue to earn interest till maturity.
  • Investment in the Sukanya Samridhhi Account is tax deductible under Section 80 C up to Rs 1.5 lakh per annum. The interest on the Sukanya Samriddhi Account is also tax free and the maturity amount is tax free.
  • Investment will mature after the completion of 21 years from the date of opening the account or upon marriage of the girl child after attaining the age of 18.
  • The account will also have to be closed if the girl child becomes an NRI or loses her Indian citizenship.
  • Sukanya Samriddhi account can be opened only in the name of girl child by her parents or legal guardians.
  • Girl’s age should be 10 years or less on the date of opening the account.
  • Multiple accounts cannot be opened in the name of one girl child.
  • A parent/guardian can open maximum of two accounts in the name of two different girl children.
  • There will be a penalty of Rs.50 if minimum amount is not deposited in a financial year.
  • Premature closure can only be done by a girl child on attaining the age of majority that is 18 years for the purpose of marriage or higher education.
  • Girl can also avail partial withdrawal facility (not more than 50% of the balance) after attaining the age of 18 years.

9. Public Provident Fund

Considering the importance, a separate article will be published as next part

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