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Introduction
Post office investments come in the form of various saving schemes that offer high-interest rates as well as tax benefits. Investors prefer these as they come with the sovereign guarantee of the Indian Government. Post office investment schemes are mostly tax-exempt under Section 80C, i.e. the tax exemption is up to Rs. 1,50,000.
Read on to find out the different interest rates to be earned from post office investments and salient features of some of the saving schemes offered.
Post Office Interest Rates on Investments
| Small Savings Scheme | Interest Rate | Tax Deduction | Interest Taxable |
|---|---|---|---|
Post Office Savings Account | 4.0% | No | Yes |
Post Office Recurring Deposit | 5.8% | No | Yes |
Post Office Monthly Income Scheme | 6.6% | No | Yes |
Post Office Time Deposit (1 year) | 5.5% | No | Yes |
Post Office Time Deposit (2 years) | 5.5% | No | Yes |
Post Office Time Deposit (3 years) | 5.5% | No | Yes |
Post Office Time Deposit (4 years) | 6.7% | Yes | Yes |
Kisan Vikas Patra (KVP) | 6.9% | No | Yes |
Public Provident Fund (PPF) | 7.1% | Yes | No |
Sukanya Samriddhi Yojana | 7.6% | Yes | No |
National Savings Certificate | 6.8% | Yes | No |
Senior Citizens Savings Scheme | 7.4% | Yes | Yes |
Features of Post Office Savings Account
The post office savings accounts are similar to bank savings accounts. Here are some of the key features of a post office savings account:
- One account is permitted with one post office. The account can always be transferred from one post office to another in case of a location change.
- A savings account can also be opened in the name of a minor. The applicable interest rate is 4% and is taxable in the hands of the investor. However, no TDS is applicable on the same.
- For a non-cheque facility, the minimum balance required is Rs.50/-
- An annual deduction of Rs 10,000 is allowed on total savings account interest that includes post office savings interest as per Section 80TTA of the Income Tax Act, 1961.
Features of Post Office Recurring Deposit
Post office RD is a monthly investment that can be done for a fixed period of 5 years. Here are the salient features of post office RD:
- The ongoing interest rate is 5.8% per annum (compounded quarterly).
- After completion of the mandatory five-year period, an RD account with an initial investment of Rs. 10,000 per month will fetch Rs. 3,256.48
- Post office RD helps a small investor to invest as little as Rs.10 per month and any additional amount in multiples of Rs.5. There is no upper cap for this investment.
- Joint accounts are also allowed to be opened jointly by two adult individuals. An account can also be opened under the name of a minor. Individuals can also opt for multiple accounts.
- RD is allowed to be transferred from one post office to another.
- A default fee of 5 paise is applicable for every Rs. 5 in case if a monthly investment is missed.
- The account comes with the flexibility of partial withdrawal up to 50% of the balance after completion of the 1st year.
Features of Post Office Fixed Deposit
The post office fixed deposit scheme is ideal for conservative investors who want fixed returns on their investment. Here are the top features of the Post Office Time Deposit (POTD) Account:
- Guaranteed by the Government of India, thus investors enjoy the highest level of security
- An account can be opened offline by visiting the nearest post office or online through Post Office Netbanking
- Tax (TDS) is not chargeable on the interest earned by investors
- Deposits made for 5 years are eligible for tax deductions from gross salary during filing of ITR (u/s 80C for up to Rs. 1.5 lakh/FY)
- The deposit can be made individually or jointly (up to 3 members)
- Transferable from one post office to another
- An account can be opened under the name of a minor under valid guardianship
- An individual can open more than one fixed deposit account in any post office
- Nominee addition is possible even after opening the account
How to Apply for a Post Office Saving Scheme?
One can apply for and invest in a post office saving scheme by following the below-mentioned steps:
Step 1 - Visit your nearest post office branch.
Step 2 – Request for the relevant account opening form as per the selected scheme at the nearest post office. Alternatively, you can also download these forms online through the India Post’s official website.
Step 3 - Fill the form with the necessary details and submit it with your KYC document proofs and photographs. You may also need to submit other documents as required by the post office saving scheme.
Step 4 - Complete the enrolment process by depositing the required amount as required in the chosen investment scheme.
Conclusion
Post office interest rates on various savings schemes offer fixed returns to risk-conscious investors who are looking for guaranteed earnings.
FAQs
1. Which saving scheme is best in the post office?
Post offices offer various savings schemes with different interest rates depending on the investment tenure. These savings schemes include savings account, fixed deposit account, recurring deposit account, etc. The interest earnings on these savings schemes are guaranteed by the Government of India.
2. How many years FD will double in the post office?
At the prevailing interest rate of 7%, a post office fixed deposit investment can double in approximately 10 years and four months.
3. Is money safe in the post office?
Post office FD provides the highest safety as the investments are backed by a government guarantee.
4. Do post office schemes provide tax benefits?
Yes, one can avail of tax exemptions and deductions on post office investments. A few schemes enjoy tax deduction either on the deposit amount or the interest earnings or both.
5. Can I withdraw money from any branch of the post office?
Yes, like withdrawals can be made via banks, one can withdraw money from any post office branch across the country.