• Post last modified:October 1, 2020
  • Reading time:15 min(s) read

Department of Posts working under the Ministry of Communications, Government of India offers a variety of deposit schemes to individuals as per their needs with a large distribution network of more than 1.50 lakh post offices. Many depositors prefer post office deposit schemes for investment due to its credibility, vast distribution network, Tax benefits & High deposit rates.

About the Department of Posts/India Post

Department of Posts (DoP) also known as India Post works under the Ministry of Communications, Government of India, and has long been part of India’s development story. It touches the lives of millions of people daily through Communication services, Investment & Insurance Services.

The department has a large network of 1,55,531 post offices across the country and is divided into 23 circles for administrative purposes. India post is the most extensive postal network worldwide.

Can I open a Savings Account in a Post Office?

  • The savings account can be opened in the post office and it is similar to the saving accounts of the banks. The account can be opened in the name of an individual, a Joint account(maximum 2 adults), a minor over the age of 10 years, or a guardian on behalf of a minor/person of unsound mind.
  • The Post office Savings account can be opened with a deposit of Rs. 500 (Rupees five hundred). Further, the minimum balance requirement is also Rs. 500.
  • The interest payable on the Post office Savings account is 4.00% per annum. It is higher than the savings account interest offered by most large banks. The interest received on saving account is tax-free up to an amount of Rs. 10000 (Rupees Ten Thousand) during a financial year.
  • The account holder shall make at least one transaction in 3 financial years to keep the account operative.
  • Chequebook, ATM, transfer of account from one post office to another, Nomination & Intra Operable Netbanking/Mobile banking, etc. facilities are available in the account. With Intra Operable net banking the account holders can transfer money to any core banking enabled post office saving bank (POSB) account immediately.
  • To transfer money to accounts of other banks, the account holder may link the POSB account to their existing India post payments bank (IPPB) account or may open an IPPB account.

5 Years Post Office Recurring Deposit (RD) Scheme

EligibilityThe Post office Recurring Deposit (RD) account can be opened in the name of an individual, a Joint account(maximum 2 adults), a minor over the age of 10 years, or a guardian on behalf of a minor/person of unsound mind.
DepositThe account can be opened with a minimum deposit of Rs. 100 (Rupees one hundred) and any amount in multiples of Rs, 10 (Rupees Ten). There is no upper limit for deposits.   The subsequent deposits are to be made up to 15th of next month in case the RD account is opened up to the 15th day of a month and till the last working day of next month in case the account is opened after the 15th day of a month.   The default fees @ 1 Rupee for every 100 Rs of the deposit is charged in case the subsequent deposits are not made as prescribed above.  
Facilities availableNomination, transfer of account from one post office to another, Online deposit through Intra Operable Netbanking/Mobile banking, Online deposit through IPPB savings account, etc. facilities are available in the account.
Loan against DepositLoan up to 50% of the amount can be availed after one year from the date of deposit. The loan along with interest can be repaid in lump sum any time during the tenure of the deposit.
Premature ClosureThe Post office Recurring Deposit account can be closed prematurely after three years from the date of opening of the account.
MaturityThe account matures after 5 years from the date of opening & is extendable by a further period of 5 years.

Post Office Time Deposit (TD) Scheme

EligibilityThe Post office Time deposit (TD) account can be opened in the name of an individual, a Joint account(maximum 2 adults), a minor over the age of 10 years, or a guardian on behalf of a minor/person of unsound mind.
DepositThe account can be opened with a minimum deposit of Rs. 1000 (Rupees one thousand) and any amount in multiples of Rs, 100 (Rupees One hundred). There is no upper limit for deposits. The deposit can be made for the various tenure of 1 year, 2 years, 3 years & 5 years. Investment under Time Deposit of 5 years is eligible for tax benefits under Section 80 C of income tax act up to an amount of Rs. 1.50 lacs.
InterestThe interest rates on deposit of various tenues are as detailed under:   Period of Deposit (years) Interest Rate (%) is
1 year – 5.5 %
2 years – 5.5 %
3 years – 5.5 %
5 years – 6.7 %.
The interest under the scheme is paid on an annual basis with quarterly compounding. The interest is credited to saving account of the account holder
Tax implicationsInvestment under the scheme for 5 years is eligible for deduction under Section 80C of the income tax act up to an amount of Rs. 1.50 lacs.
Facilities availableNomination, transfer of account from one post office to another, online account opening through Intra Operable Netbanking/Mobile banking, etc. facilities are available in the account.
Premature ClosureThe Post office Time Deposit account is allowed only after 6 months from the date of opening of the account.  In case the account is closed before one year, the interest rate applicable for saving deposits is paid to the account holder.

Post Office Monthly Income Scheme (MIS)

EligibilityThe Post office Monthly Income Savings (MIS) account can be opened in the name of an individual, a Joint account(maximum 2 adults), a minor over the age of 10 years, or a guardian on behalf of a minor/person of unsound mind.
DepositThe account can be opened in multiples of Rs. 1000 (Rupees one thousand). The maximum investment allowed under the scheme is Rs. 4.50 lacs (Rupees Four lacs fifty thousand) for single account & Rs. 9.00 lacs(Rupees Nine Lacs) for Joint account.
InterestThe interest payable under the scheme is 6.60% per annum with monthly payout into the savings account of the depositor.   If the monthly interest is not claimed by the account holder, saving account interest rate is paid on the unclaimed amount.
Facilities availableNomination, transfer of account from one post office to another, facilities are available in the account.
Premature ClosureThe Post office Monthly Income Savings (MIS) account can be closed prematurely after one year but before three years from the date of opening of an account with a penalty of 2% of the deposit & after three years with a penalty of 1% of the deposit.
MaturityThe account matures after 5 years from the date of opening.

Senior Citizens Savings Schemes (SCSS)

EligibilityThe account under the Senior Citizens Savings Scheme can be opened by persons over the age of 60 years.The persons aged 55 years or more but less than 60 years are eligible subject to the condition that the person has retired on superannuation or under Voluntary retirement scheme (VRS) and that the account is opened within one month of receipt of retirement dues.Defense personnel over the age of 50 years are also eligible to open the account subject compliance of other guidelines of the scheme.The account can be opened in an individual capacity or joint name with a spouse.
DepositThe account under the Senior Citizen Saving Saving Scheme can be opened with a minimum deposit of Rs. 1000.00 (Rupees One Thousand) and in the multiples of Rs. 1000 thereof subject to the condition that the maximum deposit does not exceed Rs 15.00 lacs (Rupees Fifteen Lacs) or retirement benefits whichever is lower.A depositor may open more than one account subject to the condition that the deposit in all the accounts shall not exceed the maximum limit allowed under the scheme. The excess amount (if any) is refunded to the depositor.
InterestThe interest on deposits under the scheme is notified by the Government every quarter. The latest Senior Citizen Saving Scheme interest rate for the period from 01/07/2020 to 30/09/2020 is 7.40%. The interest under the scheme is compounded & paid every quarter.
Tax implicationsInvestment under the Senior Citizen Saving Scheme is eligible for deduction under Section 80C of the income tax act up to an amount of Rs. 1.50 lacs. In case the amount of interest exceeds Rs. 50000 (Rupees Fifty Thousand) during an FY, TDS is deducted at source.
Facilities availableNomination & transfer of account from one post office to another etc. facilities are available in the account.
Premature ClosurePremature closure of the SCSS account is allowed with the following penalties: If the account is closed within 1 year from the date of opening, the interest paid in the account is recovered and the balance is paid to the depositor.If the account is closed after 1 year but before 2 years, a penalty of 1.50% is imposed on the deposit made under the scheme i.e. an amount equal to 1.50% of deposit is deducted and the balance is paid to the depositor.If the account is closed after 2 years, a penalty of 1.00% is imposed on the deposit made under the scheme i.e. an amount equal to 1.00% of deposit is deducted and the balance is paid to the depositor.   No penalty is levied for an extended period of 3 years if the account is closed after one year from the date of extension.
MaturityThe account matures after 5 years from the date of opening & is extendable by a further period of 3 years.

National Saving Certificates (NSC) VIII Issue Account

EligibilityThe National Saving Certificates (NSC)can be purchased by an individual, Joint account(maximum 3 adults), a minor over the age of 10 years, or a guardian on behalf of a minor/person of unsound mind.
DepositThe minimum investment under the scheme is Rs. 1000 (Rupees one thousand) and any amount in multiples of Rs, 100 (Rupees Hundred). There is no upper limit for investment.  
InterestThe interest payable under the scheme is 6.80% per annum with yearly compounding. The interest is paid on maturity
Tax implicationsInvestment under the National Saving Certificatesscheme is eligible for deduction under Section 80C of the income tax act up to an amount of Rs. 1.50 lacs. Further, the interest accrued on deposits is also eligible for deduction under Section 80C of the IT act. The interest earned on deposit under the scheme is completely tax-free.
Facilities availableTransfer of certificate from one person to another (once during the tenure of certificate) is allowed under the Scheme.
MaturityThe certificate matures after 5 years from the date of purchase.

Kisan Vikas Patra (KVP) Account

EligibilityThe Kisan Vikas Patra(KVP) can be purchased by an individual, Joint account(maximum 3 adults), a minor over the age of 10 years, or a guardian on behalf of a minor/person of unsound mind.
DepositThe minimum investment under the scheme is Rs. 1000 (Rupees one thousand) and any amount in multiples of Rs, 100 (Rupees Hundred). There is no upper limit for investment.  
InterestThe interest payable under the scheme is 6.90% per annum with yearly compounding. The interest is paid on maturity
Facilities availableNomination facility, Transfer of certificate from one person to another & from one post office to another is allowed under the Scheme.
MaturityThe current maturity period is 10 years and 4 months. The amount invested doubles on maturity.

Sukanya Samriddhi Account

EligibilityThe account under Sukanya Samriddhi Scheme can be opened in the name of a girl child below the age of 10 yearsby any of the Guardians.Only one account can be opened in the name of a girl child. The accounts can be opened for a maximum of two girl children in a family. More than two accounts, under the Scheme, in a family can be opened in case of the birth of Twin Girls or triplets in the 1st or 2nd order of birth or both except the case where 1st order of birth resulted in two or more girl children.
DepositThe account under Sukanya Samriddhi Scheme can be opened with a deposit of 250.00 Rupees (Rupees Two Hundred & fifty). Further, the depositor is required to deposit a minimum of 250.00 Rupees in the account during a financial year.The deposits can be made in the multiples of 50 (fifty) subject to a maximum of Rs. 1.50 lacs (One lac fifty thousand) during a Financial year.The deposits can be made for 15 years (Fifteen years) from the date of opening of the Sukanya Samriddhi account.In case the minimum amount of Rs. 250.00 is not deposited during a financial year, the account is considered to be “Under Default”. The account under default can be regularized by paying a penalty of Rs. 50.00 per year & by depositing the minimum required amount of Rs. 250.00 for the period of default.
InterestThe interest on deposits under Sukanya Samriddhi Yojana is notified by the Government quarterly. The latest rate is 7.60%. The interest under the scheme is compounded annually.
Tax implicationsThe deposits under the scheme are eligible for deduction under Section 80C of the Income-tax act subject to a maximum of Rs. 1.50 lacs (Rupees One lac fifty thousand) during a financial year. The interest on the deposit is tax-free
Facilities availableTransfer of account from one post office to another, Online deposit through Intra Operable Netbanking/Mobile banking, Online deposit through IPPB savings account, etc. facilities are available in the account.
Premature ClosurePremature closure of Sukanya Samriddhi Account is allowed: In case of unfortunate death of account holder. In this case, the applicable rate of interest under the scheme shall be paid till the date of death of the account holder and after that, the rate applicable on the post office saving account is paid till the closure of the account.   On compassionate grounds to provide medical support in case of any life-threatening disease to the account holder or in case of death of guardian where the operation of the account is no longer possible for the account holder. The closure under this scenario is allowed only after completion of five years from the date of opening of the account.
MaturityThe Sukanya Samriddhi Account matures after 21 years from the opening of the account.

Comparison of Post office Deposit Schemes

The comparison of Schemes in terms of Investment requirement, Interest, tenure & tax benefits are as under:

SchemeMinimum/Maximum InvestmentInterestTenureTax Benefits under Section 80C of the IT actInterest eligible for Tax
Post office Savings AccountMinimum- Rs. 500 Maximum – No Limit4.00% per annumNANAYes
5 year Post office Recurring Deposit (RD) SchemeMinimum- Rs. 100 Maximum – No Limit5.80% per annum with quarterly compounding5 yearsNAYes
Post office Time Deposit(TD) SchemeMinimum- Rs. 1000 Maximum – No Limit5.50% – 6.70% per annum with quarterly compounding1 year to 5 yearsDeduction up to Rs. 1.50 lacs is available for TD of 5 years.Yes
Post office Monthly Income Scheme (MIS)Minimum- Rs. 1000 Maximum – Rs. 4.50 lacs for a single account and Rs. 9.00 lacs for Joint account6.60%, The interest is paid on monthly basis.5 yearsNAYes
Senior Citizens Saving Scheme (SCSS)Minimum- Rs. 1000 Maximum –Rs. 15.00 lacs7.40% with quarterly compounding. Paid Quarterly5 years, extendable by 3 yearsDeduction up to Rs. 1.50 lacs is allowed.Yes
Public Provident Fund (PPF) AccountMinimum- Rs. 500 Maximum –Rs. 1.50 lacs7.10% with annual compounding15 years, extendable by 5 years after maturity & so on.Deduction up to Rs. 1.50 lacs is allowed.Exempted
National Saving Certificates (NSC) VIII issue AccountMinimum- Rs. 1000 Maximum – No Limit6.80% with annual compounding5 yearsDeduction up to Rs. 1.50 lacs is allowed (in respect of deposit & accrued interest).Exempted
Kisan Vikas Patra(KVP) AccountMinimum- Rs. 1000 Maximum – No Limit6.90% with annual compounding10 years 4 monthsNAYes
Sukanya Samriddhi Account  Minimum- Rs. 250.00 Maximum –Rs. 1.50 lacs during a financial year for a period of 15 years7.60% with annual compounding21 yearsDeduction up to Rs. 1.50 lacs is allowed during a Financial year.Exempted

What are the Benefits of Post Office Savings Schemes?

  • A high rate of interest: The interest rate under the schemes is higher than the rate offered by most of the large banks on fixed deposits, recurring deposits, etc.
  • Government-Backed Schemes: The Post office deposit schemes are backed by the Government of India. Hence the deposits under the scheme are fully secured. Further, the Department of Posts offers a variety of deposit schemes to individuals as per their needs.
  • Tax Benefits: The deposit under the Senior Citizens Saving Scheme (SCSS), Sukanya Samriddhi Account, National Saving Certificates (NSC)  & Time deposit of 5 years are eligible for tax deduction under section 80C of the IT act up to the extent of Rs. 1.50 lacs under the old tax regime.
  • A low requirement of minimum Deposit: The minimum requirement under the schemes is Rs. 100.00 to Rs. 1000.00, hence the schemes cover the investor of all economic backgrounds.
  • Large Network: The department has a large network of 1,55,531 post offices across the country and hence can be found at every corner of the country.
  • Premature Withdrawal: The premature withdrawal is allowed subject to conditions as discussed above, hence the investor can withdraw the amount in case of exigencies.

Conclusion

Given the Government backing, high rate of interest, tax benefits, low deposit requirements & large distribution network the investor may consider Post office Savings Schemes for Investment.

Sources

https://www.indiapost.gov.in/Financial/pages/content/post-office-saving-schemes.aspx

https://www.indiapost.gov.in/VAS/Pages/AboutUs/AboutUs.aspx

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