Post Office Saving Schemes And Interest Rates – Forbes Advisor INDIA

Post Office Saving Schemes And Interest Rates – Forbes Advisor INDIA

Post office savings schemes form a large part of the financial portfolio of an Indian depositor helped by their country-wide reach, risk-free and relatively high rate of interest earning needs. Also, small account holders, poor and uneducated people of all ages and backgrounds find dealing with Indian postal service somewhat easier as it comes with sovereign guarantee on depositors’ money, whereas, earning professionals can also avail of tax benefits on the interest earned on their investment.

Forbes Advisor India has analyzed nine saving schemes offered by the Indian Post Office as well as interest rates earned on the investment to help you create a balanced financial portfolio. Here are the features and interest rates on post office saving schemes.

Summary

Post Office Savings Account

The savings account provided by the Post Office Savings Bank is one of the government-backed schemes, and offers 4.0% interest rates on both individual and joint accounts. Some of its features include:

The savings bank offers a single account, joint account (up to three adults), a guardian or parent of a minor and/or of a person of unsound mind; and even under the name of a minor above 10 years of age. 

  • Application forms can be downloaded from the department of posts’ website, or at the nearest post office.
  • Nomination is mandatory.
  • Fresh application is required if the account is silent, or inactive for three financial years.

A minimum investment of INR 500 is required to open an account and a balance of INR 10 per month to maintain the savings, though it has no maximum monthly deposit limit. 

A depositor can visit the nearest branch to withdraw the full amount (above INR 50) and still maintain the account with INR 500 as minimum balance. At ATMs, the withdrawal limit is INR 25,000 with INR 10,000 per transaction. A fine up to INR 100 can be levied if the balance is nil or has not maintained the minimum balance since three financial years (then the account is closed).

The post offers an interest rate of 4.0% per annum.

The interest rate is calculated at the end of each financial year, and is accordingly credited to an account. The current rate of interest (ROI) has remained unchanged since 2020.

Depositors can claim exemption up to INR 10,000 on the interest earned under Section 80TTA of the Income Tax Act. 

The post office provides depositors with passbook, cheque, ATM card as well as credentials to log into its internet banking or mobile banking to access their account. 

Risk Level: Low to nil.

Interest Rate

5-Year Post Office Recurring Deposit Account

A depositor can fill up the purchasing certificate form to open a national savings recurring deposit (RD) account with the Post Office Savings Bank. The current interest rate on the 5-year scheme is 5.80% per annum on both individual and joint accounts. Some of its features include:

The recurring deposit (RD) offers account holders provisions of single account, joint account (up to three adults), a guardian or parent of a minor and/or of a person of unsound mind; and even under the name of a minor above 10 years of age. 

Minimum investment amount per month is INR 100.

The monthly investment has no upper limit, and deposits are accepted in cash/cheque at the branch, or using the internet or mobile banking provided to savings account holders.

The current interest rate on the RD account is 5.80%. The interest is paid at the end of the maturity.

The monthly investments are paid in 60 installments or up to five years.

Premature withdrawal with interest is possible after three years.

Under Section 80C of the Income Tax Act, a depositor can claim tax exemption of up to INR 1.5 lakh per annum on the post office RD scheme.

Risk Level: Low to nil. 

Post Office Time Deposit Account

The popular fixed deposit scheme provided by Post Office Savings Bank offers depositors interest rate from 5.50% to 6.70%. Some of its features include:

A depositor can invest a lump sum amount for a period of 1-5 years, and avail of interest rate that is calculated quarterly and payable at the end of maturity.

Minimum investment amount is INR 1,000, and has no upper limit.

The time-deposit investment matures as per deposit made for 1-year, 2-year, 3-year, 4-year, and 5-year.

Premature withdrawal is possible after six months at 2.0% less interest.

A depositor can claim tax exemption on their 5-year post office time deposit account under Section 80C of the Income Tax Act. 

Risk Level: Low to nil. 

Interest Rate: 

Post Office Monthly Income Scheme Account

The scheme provides account holders to receive benefits on the interest earned on the lump-sum deposit that are payable every month. The government-backed scheme offers 6.60% interest rates on both individual and joint accounts. Some of its features include:

The Indian postal service offers single account, joint account (up to three adults), a guardian or parent of a minor and/or of a person of unsound mind; and even under the name of a minor above 10 years of age. 

A minimum investment of INR 1,000 is required to open an account and a maximum balance of up to INR 4.50 lakh and 9 lakh are permitted for single and joint accounts, respectively. 

The scheme offers an interest rate of 6.60% per annum payable monthly.

The interest amount can be auto credited into the depositor’s savings account, or through electronic clearance service.

Account can be closed after five years from the date of opening. However, premature closure before one year is not allowed. Similarly, 2% is deducted from the principal amount if the account is closed between one year and three years, and 1% for three and five years.

Nominees can file a claim if the depositor dies before the maturity period.

Interest earned on the deposit is taxable.

Risk Level: Low to nil.

Interest Rate

Senior Citizen Savings Scheme (SCSS)

The 5-year SCSS scheme provides senior citizens to receive benefits on the interest earned on the lump-sum deposit that are payable on a quarterly basis. The government-backed scheme offers 7.40% interest rates on the SCCS account. Some of its features include:

The Indian postal service offers a single account to an individual above 60 years of age, retired citizen or employees between 55 to 60 years; whereas, joint account can be opened with spouse only and the entirety of the amount pledged to the first account holder. 

A minimum investment of INR 1,000. 

A maximum balance of up to INR 15 lakh is permitted. 

SCSS offers an interest rate of 7.40% per annum payable on a quarterly basis on Mar. 31, Jun 30, Sept. 30, and Dec. 31.

The interest amount can be auto credited into the depositor’s savings account, or through electronic clearance service.

Under Section 80C of Income Tax Act, 1961, a depositor can claim for tax deduction if the interest earned on the amount is below INR 50,000 in a financial year.

Account can be closed after five years from the date of opening an SCSS account. However, interest cannot be earned if the account is closed before one year. Similarly, 1.5% is deducted from the principal amount if the account is closed between one and two years, and 1% for two and five years.

A nominee can file a claim if the depositor dies before the maturity period.

In case of a joint account with the spouse, the account can be continued till maturity. 

Risk Level: Low to nil.

Interest Rate

Public Provident Fund Account (PPF)

PPF is a government-backed fixed income scheme that is a risk-free investment as its returns are guaranteed by the government, and offers 7.10% interest rate per annum.

The Indian postal service offers PFF for single accounts, and a guardian or parent of a minor and/or of a person of unsound mind. 

A minimum investment of INR 500. 

A maximum balance of up to INR 1.50 lakh in a financial year, which can be deposited in one to 12 times during the period. 

The PPF offers an interest rate of 7.10% per annum, which is fixed by the Ministry of Finance on a quarterly basis.

The interest amount is credited to the depositor’s account at the end of the financial year.

Under Section 80C of Income Tax Act, 1961, a depositor can claim for tax deduction for interest earned below INR 1.50 lakh per financial year.

A PPF fund matures in a span of 15 years.

Partial withdrawals are allowed after five years of the account opening.

Risk Level: Low to nil.

Interest Rate

Sukanya Samriddhi Account (SSA)

As the name suggests, SSA is a government-backed scheme for a girl child, and offers 7.60% interest rate per annum.

SSA can be opened by a guardian as a single account in the name of the girl child below 10 years of age, or a maximum of two girls in a family, and two accounts in cases of twins or triplets.

A minimum investment of amount is INR 250. 

A maximum balance of up to INR 1.50 lakh in a financial year, which can be deposited in multiple installments or in lump sum. 

The SSA offers an interest rate of 7.60% per annum, which is fixed by the Ministry of Finance on a quarterly basis.

The interest amount is credited to the depositor’s account at the end of the financial year.

Under Section 80C of Income Tax Act, 1961, a depositor can claim for tax deduction on interest earned below INR 1.50 lakh per financial year.

A SSA matures in a span of 15 years.

Partial withdrawals are allowed after the girl attains 18 years of age, with up to 50% of the balance.

Risk Level: Low to nil.

Interest Rate

National Savings Certificate (NSC)

A 5-year NSC plan is a government-backed scheme for all citizens, and offers 6.80% interest rate per annum.

NSC offers single account, joint account (up to three adults), a guardian or parent of a minor and/or of a person of unsound mind; and even under the name of a minor above 10 years of age.

A minimum investment of INR 1,000, and has no upper limit. 

The NSC offers an interest rate of 6.80% per annum, which is compounded annually and payable at maturity. 

A NSC plan matures in a span of five years.

Interest earned is tax free under section 80C of Income Tax Act.

Risk Level: Low to nil.

Interest Rate

Kisan Vikas Patra (KVP)

As the name suggests, KVP is a government-backed scheme for farmers, and offers 6.90% interest rate per annum.

KVP offers single account, joint account (up to three adults), a guardian or parent of a minor and/or of a person of unsound mind; and even under the name of a minor above 10 years of age.

Minimum investment of amount is INR 1,000, and has no upper limit. 

The NSC offers an interest rate of 6.90% per annum, which is payable at the end of maturity as fixed by the Ministry of Finance. 

A KVP plan matures in a span of 10 years 4 months from the date of opening an account.

The investment does not qualify for tax deduction under section 80C of Income Tax Act.

Risk Level: low to medium.

Interest Rate

Interest Rates On Post Office Savings Schemes

Bottom Line

Although investments on post office savings schemes have a sovereign guarantee of the Government of India, investing money without knowing the prospects has its own risks.

Frequently Asked Questions (FAQs)

How to apply for post office savings schemes?

There are various forms available as per savings schemes you opt for, which are downloadable from the India Post’s website, or can be availed at any branch of your nearest post office.

What is the minimum balance required to apply for savings schemes?

What facilities are available on Indian Post’s online banking?

What documents are required to open a savings account with the post office?

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