Post Office Saving Schemes: Nine Investment Schemes You Should Know

From recurring deposits to 5-year term deposits to PPF, post offices offer many investment options.

Post Office Saving Schemes: Nine Investment Schemes You Should Know

Many post office savings schemes offer income tax benefits under Section 80C.

Department of Posts offers many investment schemes for the benefit of the public. From Public Provident Fund (PPF) to Senior Citizen Savings Scheme to income tax-saving five-year deposits, the investment schemes are many. Interest rates on schemes such as PPF, Senior Citizen Savings Scheme, Sukanya Samriddhi Scheme and many others are revised on a quarterly basis. They are benchmarked to yields on government bonds, with a small mark-up. For example, the interest rate on PPF was revised to 7.6 per cent for the January-March quarter. (Read: NPS, PMVVY, PPF Or SCSS: Which one to invest in?)

(Also read: Post Office savings schemes that offer income tax benefits | Financial planning crucial to secure financial future: SBI)

Here are key things to know about Post Office saving schemes, according to India Post.

1) Post Office savings account

This savings account scheme offered by India Post offers an interest rate of 4 per cent on individual/joint accounts.
A cheque facility is available if the account is opened with Rs 500 (a minimum balance of Rs 500 is to be maintained in the account).
Deposits and withdrawals can be made through any electronic mode at CBS (Core Banking) post offices.
Post Office savings accounts also come with an ATM facility.

2) 5-Year Post Office Recurring Deposit Account (RD)

This recurring deposit scheme offered by India Post offers an interest rate of 6.9 per cent per annum (quarterly compounded).
There is no maximum deposit limit.
There is rebate on advance deposit of at least 6 installments
If in any Post Office RD account, there is monthly default amount, the depositor has to first pay the defaulted monthly deposit with default fee and then pay the current month deposit.
One withdrawal up to 50 per cent of the balance allowed after one year

3) Post Office Time Deposit Account (TD)

Interest rate under Post Office Time Deposit Account is payable annually but calculated quarterly. Current interest rate on one to five-year deposits are as follows:
1-year account - 6.6%
2-year account - 6.7%
3-year account - 6.9%
5-year account - 7.4%

There is no maximum deposit limit.
The investment under 5-Year Post Office Time Deposit Account qualifies for the benefit of Section 80C of the Income Tax Act.

4) Post Office Monthly Income Scheme Account (MIS)

Post Office Monthly Income Scheme or MIS is a popular investment scheme wherein an individual invests a particular amount and gets an assured monthly income in the form of interest. Under the Post Office MIS scheme, the interest payable on a monthly basis commencing from the date of deposit is deposited in your post office savings account. There are no income tax benefits available for investing in the Post Office MIS account. This scheme is suitable for those who want a steady flow of income, such as retired persons.

Current interest rate on Post Office Monthly Income Scheme Account- From 1.01.2018, interest offered is 7.3% per annum payable monthly.

A depositor can operate more than one account under the Post Office Monthly Income Scheme (POMIS), subject to the ceiling of maximum amount, which may be invested in single or joint account. The maximum limit is cumulative Rs. 4.5 lakh in single accounts and Rs. 9 lakh in joint accounts.

The maturity period of Post Office Monthly Income Scheme is five years.

The scheme can be prematurely closed after one year. A deduction amounting to 2 per cent of the deposit will be applicable to a depositor closing the account between 1 year and three years after opening. And after three years, 1 per cent will be deducted. The remainder will be paid to the depositor. 

(Read: Post Office Monthly Income Scheme: Interest Rate, Maximum Amount And Other Details)

5) Senior Citizen Savings Scheme (SCSS)

Senior Citizen Savings Scheme offered by India Post is one of the most popular scheme wherein senior citizens earn regular income by investing in the scheme.
An individual of the age of 60 years or more may open the Senior Citizen Savings Scheme Account
The maximum amount should not exceed Rs 15 lakh
Maturity period of Senior Citizen Savings Scheme is 5 years
A depositor may operate more than one account in individual capacity or jointly with spouse (husband/wife).
Investment under this scheme qualifies for the benefit of Section 80C of the Income Tax Act

6) PPF

PPF is one of the most popular savings schemes for retirement savings. Investors also get the benefit of PPF's EEE - exempt, exempt, exempt - status in terms of income tax treatment. Contributions, interest and proceeds on maturity are all tax-free. Contributions in PPF up to Rs. 1.5 lakh in a financial year are eligible for tax deductions under Section 80C of the Income Tax Act. Investors also get the benefit of loan facility and partial withdrawal on PPF account, which currently offers an interest rate of 7.6 per cent.

PPF accounts have a maturity period of 15 years. Currently, PPF laws allow premature closure of accounts only under specific conditions such as expenditure towards medical treatment.

(Read | Public Provident Fund (PPF) Accounts To Offer More Benefits: 10 Points)

7) 5-Year National Savings Certificates (NSC)
Currently, National Savings Certificates (NSC) fetch an interest rate of 7.6% compounded annually but payable at maturity
Rs 100 grows to Rs 144.23 after 5 years
There is no maximum investment limit in NSC
Deposits qualify for tax rebate under Section 80C of Income Tax Act

8) Kisan Vikas Patra (KVP)
Kisan Vikas Patra currently fetch an interest rate of 7.3% compounded annually 
That means amount Invested doubles in 118 months (9 years and 10 months)
There is no maximum limit for investment
Certificates can be purchased from Post Offices by an adult for himself or on behalf of a minor.

9) Sukanya Samriddhi Accounts
Sukanya Samriddhi Yojana is a small savings scheme exclusively for the girl child. Under the Sukanya Samriddhi scheme, a parent or legal guardian can open an account in the name of the girl child until she attains the age of ten years. The Sukanya Samriddhi account can be opened in post offices and some designated banks. Apart from income tax benefits, the Sukanya Samriddhi scheme fetches a higher interest rate compared with other small savings schemes.

(Read | Sukanya Samriddhi Scheme: How To Open, Deposit Rules, Maturity, Premature Withdrawal And Other Details)

Sukanya Samriddhi Accounts currently fetch an interest rate of 8.1 per cent per annum (with effect from 1-01-2018), calculated on yearly basis, yearly compounded. 

A maximum of up to  Rs 1.5 lakh can be made in a financial year. 

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