Post Office Tax Saving Schemes

PPF is a regular savings scheme that comes with a fixed tenure of 15 years. This is one of the most sought out tax saving schemes owing to its ease of depositing money, higher interest rate and tax rebate on the interest accrued and the withdrawal amount.

Here are some of the salient features of the Public Provident Fund scheme: 

• It can be opened individually or jointly
• A person can have multiple PPF accounts
• The scheme comes with a fixed maturity term of 15 years
• The minimum deposit if Rs.500 and the maximum you can deposit, in all your PPF accounts cumulatively is, Rs.1.5 lakhs
• Loan can be availed after a period of 4 years, to meet emergency situations. 
• Partial withdrawal is allowed after a period of 7 years
• The deposited amount and the interest accrued are all tax free
• The scheme is initially set of 15 years and can be extended for a further period of 5 years if needed

Sukanya Samriddhi Account

Sukanya Samriddhi Yojana Account is a Government of India backed savings scheme designed for parents of girl children. The scheme allows parents to set up a trust for their child's eventual schooling and marriage expenses. It encourages parents to systematically save for their daughter’s higher education and marriage so that the perception of a girl child being a burden on her parents is abolished.

All parents and guardians of girl children under the age of 10 can open this account. Only one account per child is allowed. Parents can open up to two accounts for two of their children (exceptions allowed for twins and triplets). The account is portable anywhere in India and can be accessed at any branch of the post office or the bank.

• Savings account specially designed for parents of girl children.
• Encourages parents to save towards the education of the girl child; introduced as part of the ‘Beti Padhao Beti Bachao’ movement.
• Parents of girl children under the age of 10 can open this account.
• Only 2 accounts allowed per family; exemptions allowed in case of twins or triplets.
• Minimum deposit of Rs.250 per annum and maximum of Rs.1.5 lakhs.
• Tax exemption available on the deposited amount, interest accrued and the withdrawal amount.
• Maximum tenure of the account shall be 21 years from the date of opening of account or the marriage of the girl child, whichever is earlier.
• Deposits allowed for a maximum of 15 years from the date of opening of account.
• Partial withdrawal of up to 50% allowed once the girl reaches 18 years of age.
• Accounts can be opened at your nearest post office or any of the public and private sector banks.
• Deposits into the account can be made via cash, cheque, DD or online transfers.
• The account can be transferred from one post office to another, one bank to another or between post office and banks, upon submission of valid address proof.
• Pre-closure of account is allowed to take care of marriage of the girl child, provided that the girl child has attained the age of 18 and relevant proofs are submitted thereof.

National Savings Certificate (NSC)

National Savings Certificate is like an FD. You deposit a lump sum amount into the account which is held for a minimum period of 5 years. The amount, along with the accrued interest is paid back at the time of maturity.

• The total tenure of the scheme is 5 years.
• One can deposit a minimum of Rs. 1000 and in multiples of Rs.100 thereof.
• This scheme is open to individuals, jointly by 3 persons, minors over the age of 10, a parent or legal guardian under their minor child’s name, also by a legal guardian under the name of a person of unsound mind.
• As per the provisions of the scheme, the interest accrued and withdrawn at the time of maturity is taxable. However, since the accrued interest is reinvested into the scheme during the first four years, they are eligible for tax rebate.
• NSC is transferable to another person. This provision is available only once during the tenure of the scheme.
• The latest interest rate being offered on the scheme is at 7.9%.

Senior Citizen Savings Scheme (SCSS)

The Senior Citizen Savings Scheme (SCSS) is a savings scheme that is backed by government assured returns for senior citizens’ savings. It is a fixed deposit scheme with a tenure of 5 years that gives a higher rate of interest compared to normal FDs. This FD scheme can be availed in all leading public and private sector banks. It is available at India Post Offices too. The scheme can be availed by senior citizens over the age of 60. The investment can also be considered for tax rebate under Section 80C of the Income Tax.

Features of the Senior Citizen Savings Scheme

• The deposit shall be opened with a minimum investment of Rs.1000 or any multiple amount of Rs.1000 not exceeding Rs.15 lakhs.
• The interest rate announced during the investing cycle remains fixed during the maturity period and is not influenced by adjustments in the later quarter.
• Premature withdrawals and closure of accounts - A person can withdraw early from his or her account under Senior Citizen Savings Scheme one year after the launch of the account.
• A person can opt to deposit his or her money in cash if the sum is less than Rs. 1 lakh, but has to pay in check if the amount exceeds Rs. 1 lakh.
• SCSS is a government-sponsored scheme and thus the capital deposited in it enjoys superlative security and assurances.
• The depositor may continue the account again for another term of three years after the period of maturity of five years.
• The deposit made pursuant to these rules shall be liable to interest every quarter as directed by the Government.
• If the interest due on a quarterly basis is not asserted by the account holder, that interest shall not accrue any extra interest.
• The cumulative value of the deposit in a joint account is only due to the first account holder.
• Both the partners can open a separate account and a joint account with each other.
• One person or more than one person can be nominated by the depositor. Nominations made by the depositor can be cancelled or changed.
• The deposit made at the time of the opening of the account shall be deposited on or after the end of five years or at the end of eight years if the account has been extended from the date of the opening of the account.

Post Office Time Deposit (TD)

It is one of the most popular programmes of the postal service for tax exemption. This scheme is a lot like a bank's fixed deposit. Investors may make investments with varying terms, such as 1, 2, 3 and 5 years. Other benefits of this scheme are -

• The maximum term of the scheme is 5 years. 
• An individual can open any number of Post Office Time Deposits, in one or more post offices.
• The minimum amount of savings in time deposit is Rs. 1,000, and there is no upper limit.
• The maximum tax deduction allowed is limited to Rs. 1.5 Lakh (under Section 80C of Income Tax Act, 1961).
• Profit gained in this account is payable under section 80C only if it is a five-year time deposit. Otherwise it would be taxable.
• Investors will not be able to cash their TD until 6 months of opening the account. For early withdrawals within 6 and 12 months, interest rates for the Post Office Savings Scheme shall apply.
• Interest shall be calculated and added annually; no extra interest is payable on the amount of interest that has been due for payment but is not withheld by the owners of the account.
• The annual interest can be added to the account holder's bank account by making an application.
• Investments within 5 years’ term are eligible for benefits under section 80C of the Income Tax Act, 1961.
• A further extension of the TD account can be applied for by the depositor.
• The interest rate applied to the corresponding TD account on the date of maturity shall be applied to the extended term too.
• The TD Deposit cannot be withdrawn within 6 months of opening the account.

Quick Comparison of the Different Tax Savings Schemes available via India Post Offices

What are the advantages of investing in India Post Office Tax Saving Schemes?

The savings schemes under the Post Office are often lucrative given the high interest rate and the government backing they get.

• Simple hassle-free investment process: India Posts have a wide network of branches across the country that enables easier access to the various schemes.
• Reliable & Secure: Since these schemes are backed by the government, the depositors can stay assured that they investments are safe
• Higher interest rates: India Post Office savings schemes offer one of the highest interest rates on savings schemes
• Low initial deposit amount: Post Office savings schemes are aimed at the lower income group of the society. Therefore, most of the savings schemes can be opened with a low initial deposit amount of Rs.50 or Rs.100.

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