Post Office Investments include a number of saving schemes that provide a high rate of interest as well as tax benefits and most importantly, carry the sovereign guarantee of Indian Government. All these schemes are tax exempt under Section 80C, i.e. tax exemption up to Rs. 1,50,000 is allowed. Some small saving schemes offered by Post Office are Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), National Savings Certificate (NSC), Post Office Time Deposit for a 5 Year Term and Senior Citizen Savings Scheme (SCSS).
Note: The interest rates are reviewed every quarter by the Government for these schemes.
Investing in Post Office Time Deposit, Post Office Recurring Deposit, Post Office Monthly Income Scheme, National Savings Certificate (NSC) and Kisan Vikas Patra (KVP) in a given quarter will carry the rate in that quarter for the lock-in entire tenure of the savings scheme.
|Small Savings Scheme||Interest Rate||Tax Deduction on Investment?|
|Post Office Savings Account||4.0%||No||Yes|
|Post Office Recurring Deposit||7.2%||No||Yes|
|Post Office Monthly Income Scheme||7.6%||No||Yes|
|Post Office Time Deposit (1 year)||6.9%||No||Yes|
|Post Office Time Deposit (2 year)||6.9%||No||Yes|
|Post Office Time Deposit (3 year)||6.9%||No||Yes|
|Post Office Time Deposit (5 year)*||7.7%||Yes||Yes|
|Kisan Vikas Patra (KVP)||7.6%||No||Yes|
|Public Provident Fund (PPF)||7.9%||Yes||No|
|Sukanya Samriddhi Yojana||8.4%||Yes||No|
|National Savings Certificate||7.9%||Yes||No|
|Senior Citizens Savings Scheme||8.6%||Yes||Yes|
*For 5 year tax-saver deposits, Interest rates for Q3, FY 2019-20 (October-December 2019)
Please note that interest rates are reviewed every quarter by the Government for these schemes. Investing in Post Office Time Deposit, Post Office Recurring Deposit, Post Office Monthly Income Scheme, National Savings Certificate (NSC) and Kisan Vikas Patra (KVP) in a given quarter will lock-in the rate in that quarter for the entire tenure of the savings scheme. However for Public Provident Fund (PPF) and Sukanya Samriddhi Yojana, the revised rate will be applicable in the concerned quarter and so on. In other words, the applicable rate keeps changing.
In this article we have mentioned the interest rates for October to December 2019.
- Post Office Saving Scheme for Senior Citizen – Senior Citizen Saving Scheme (Details Below)
- Post Office Saving Scheme for Girl Child – Sukanya Samriddhi Yojna (Details Below)
Post Office Savings Account
- This account is like a savings account with a bank, except that it is held with a post office.
- Only one account can be opened with one post office and can be transferred from one post office to another.
- You can also open an account in the name of a minor. The interest rate is 4% and is fully taxable. However no TDS is deducted on the same.
- Under the non-cheque facility, minimum balance which is required to be maintained is Rs.50/-
- However a deduction of Rs 10,000 per annum is available on your total savings account interest including post office savings interest under Section 80TTA of the Income Tax Act, 1961.
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Post Office Monthly Income Scheme (POMIS)
- Unique scheme which offers guaranteed fixed monthly income on the lump sum investment made by the investor
- Any resident individual can open the MIS account in a single or joint holding pattern. A minor can also invest in this scheme. If minor is of more than 10 years, then he can even operate the account
- Minimum limit for investment is Rs. 1500 and maximum investment limit is Rs. 4.5 lakhs in single holding account and Rs. 9 lakhs for joint accounts under the Monthly Income Scheme of Post Office
- Currently ,the MIS interest rate in post office is 6.6% per annum payable monthly with the maturity period of 5 years
For example, Mr. Suresh invests Rs. 2,00,000 in Post Office Monthly Income Scheme. He will receive Rs. 1068 every month as an interest for 5 years. He will receive back the deposit on completion of the tenure. Amount so received monthly can also be further invested in post office recurring deposits.
- Investors can hold multiple accounts with maximum investment of Rs. 4.5 lakh by combining balances in all the accounts. Joint accounts will have equal shares from all holders. If we continue with the above example, Mr. Suresh would be able to open a joint account with his wife for a maximum amount of Rs. 2.5 lakh
- The scheme also offers liquidity by allowing investors to withdraw the deposit after 1 year. However, there will be a penalty of 2% on deposit if withdrawn between 1 year-3 years and 1% penalty on withdrawals after 3 years
- Accounts are transferable from one post office to another across the country
There is no major tax benefit in this scheme. Interest received on a monthly basis is a part of the taxable income. There is no TDS on the interest payout and deposits are exempt from wealth tax. This Scheme is a preferable choice for risk-averse investors looking for regular monthly income.
Post Office Recurring Deposit
- Post office RD is basically a monthly investment for a fixed period of 5 years with an interest rate of 5.8% per annum (compounded quarterly).
- On completion of the fixed tenure of five years, RD account with Rs. 10,000 invested every month will fetch you Rs. 3,256.48
- Post Account RD helps a small investor by allowing them to invest as little as Rs.10 per month and any amount in multiples of Rs.5. There is no upper limit for the investment.
- Joint accounts can also be opened by two adult individuals. Account can also be opened in the name of minor. Multiple accounts can also be opened.
- RD can be transferred from one post office to another.
- There is default fee of 5 paise for every 5 rupee in case if you miss on any monthly investment.
- The account offers flexibility by allowing a partial withdrawal upto 50% of the balance after a year.
There is no TDS on interest from post office RD. However, income is taxable in the hands of investor as per their individual tax slab. It’s one of the best investment choices for every investor who is looking for risk-free investment avenue to save some amount every month systematically.
Post Office Time Deposit
- Post office time deposit comes with different tenure options for investment. Current rate of interest applicable is below:
|Tenure||Rate (w.e.f. 1.04.2020)|
|1 year Time Deposit||5.5%|
|2 year Time Deposit||5.5%|
|3 year Time Deposit||5.5%|
|5 year Time Deposit||6.7%|
- The minimum amount that can be invested is Rs. 200. There is no upper limit. There is no restriction on the number of accounts one can hold.
- Accounts can be opened in single holding or joint holding pattern. An investment in the name of minor is also allowed.
- Accounts can be transferred from one post office branch to another across India.
- Once the time deposit is matured, it will automatically renew for the same tenure again with the prevailing rate of interest on the day of maturity.
- There is a tax benefit for the investment made in the 5 year post office time deposit. The investment qualifies for the deduction under Section 80C of The Income Tax Act, 1961.
Kisan Vikas Patra
- KVP offers an interest rate of 6.9% compounded annually. It can be purchased from any post office.
- The invested amount doubles every 124 months (10 years and 4 months).
- Investment is available in denominations of Rs.1,000, Rs. 5,000, Rs.10,000 and Rs. 50,000. Investment comes with the minimum limit of Rs.1,000 and with no maximum limit.
- Certificates are easily transferable and can be endorsed to third person.
- Certificate is comparatively liquid in nature as it offers encashment facility after 2.5 years of investment.
There is no tax deduction on the principal amount invested and interest on the KVP is also taxable. The scheme is thus not tax-efficient. It works for new and small investors from remote areas who do not have access to other financial products.
Senior Citizen’s Savings Scheme
- The minimum age of entry is 60 years for SCSS. Someone who has taken voluntary retirement after 55 years of age can also open this account within a month of receiving the retirement benefits. The amount invested in such cases should not exceed the value of corpus received on retirement.
- Maximum limit of investment allowed per individual (combined balances in all account) is Rs. 15 lakhs. The investment amount can be in multiples of Rs.1000.
- An individual can hold multiple accounts in his name or in joint holding with his spouse.
- Current rate of interest offered is 7.4 % per annum payable on the first working day of each quarter. The deposit has a maturity period of 5 years. For an instance, if you invest Rs. 12 lakh in this scheme today, you will be receiving quarterly interest of Rs. 94,800.
- The scheme also allows premature withdrawals of deposits after a year with a penalty of 1.5%. Penalty of 1 % is levied after 2 years of deposit.
- Account can be extended for three more years after the scheme matures.
- Investments are eligible for tax deduction under Section 80C of The Income Tax Act. However, tax will be deducted at source if the amount of interest exceeds Rs.10,000 in a year.
Public Provident Fund (PPF)
PPF is a long-term investment for a period of 15 years currently offered at an interest rate of 7.1% per annum (compounded yearly). The maximum amount under this scheme is Rs. 1,50,000 in a financial year. Moreover, the deposit is qualified for deduction from income under Section 80C of the Income Tax Act.
- PPF is a long-term investment for a period of 15 years currently offered at an interest rate of 7.9% per annum (compounded yearly).
- There is no minimum or maximum age of account opening.
- Investments are allowed with the minimum amount of Rs. 500 and maximum of Rs. 1.5 lakhs in a financial year. Investments can be made in lump sum or in 12 equal installments.
- Account can only be opened in a single holding form.
- You can invest in the name of minor also without exceeding your maximum limit of investment by combining balances of all your accounts.
- Maturity period can also be extended to 5 more years on completing the period of 15 years. You can keep extending maturity in blocks of five years, indefinitely.
- PPF is a pure long term investment plan with premature closure facility allowed only after 5 years from account opening and only for serious ailments or higher education. Partial withdrawal is also permissible after the expiry of 5 years from the end of the year in which the account is opened.
- Investor can avail loan facility from the 3rd financial year to the 6th year of account opening..
- Investment in PPF account qualifies for tax deduction under Section 80C of The Income Tax Act. It also offers a tax efficient return as its interest is fully tax-free. However you have to report PPF interest in your income tax return.
It is a good scheme for investors who want to get the tax exemption along with safety of principal and tax-free returns.
National Savings Certificate (NSC)
- The NSC has a maturity period of 5 years. The NSC rate of interest is 6.8% per annum compounded half-yearly but payable at maturity. That means, your investment of Rs. 100,000 will yield you Rs. 1,38,949 after 5 years.
- There is no maximum limit on investment with a minimum amount of investment of Rs.100. Investments can be done in denominations of Rs.100, Rs. 500, Rs. 1,000, Rs. 5,000 and Rs.10,000.
- The NSC Certificate can be purchased in single holding or on behalf of a minor.
- Investment in NSC is tax deductible under Section 80C of The Income Tax Act. Interest on NSC is deemed to also be reinvested under Section 80 C and hence tax deductible, except interest in the final year of the NSC.
- NSC certificates can be pledged as security for availing bank loans.
- Certificates are transferable. Transfer from one person to another person is allowed only once during the investment tenure.
NSC is a risk-free and tax efficient saving scheme for long-term and traditional investors with no risk appetite.
Sukanya Samriddhi Scheme
- Sukanya Samriddhi is a scheme introduced for the benefit of the girl child. It currently offers an attractive interest rate of 7.6% per annum compounded annually.
- The minimum amount of investment is Rs.1000 and maximum of Rs.1,50,000 in a financial year. You have to invest at least the minimum amount every year for 15 years from the date of account opening. Thereafter the account will continue to earn interest till maturity.
- Investment in the Sukanya Samridhhi Account is tax deductible under Section 80 C up to Rs 1.5 lakh per annum. The interest on the Sukanya Samriddhi Account is also tax free and the maturity amount is tax free.
- Investment will mature after the completion of 21 years from the date of opening the account or upon marriage of the girl child after attaining the age of 18. The account will also have to be closed if the girl child becomes an NRI or loses her Indian citizenship.
- Sukanya Samriddhi account can be opened only in the name of girl child by her parents or legal guardians. Girl’s age should be 10 years or less on the date of opening the account.
- Multiple accounts cannot be opened in the name of one girl child. A parent/guardian can open maximum of two accounts in the name of two different girl children.
- There will be a penalty of Rs.50 if minimum amount is not deposited in a financial year.
- Premature closure can only be done by a girl child on attaining the age of majority that is 18 years for the purpose of marriage or higher education.
- Girl can also avail partial withdrawal facility (not more than 50% of the balance) after attaining the age of 18 years.
- Parents/guardian can avail a tax benefit for the invested amount under Section 80C of The Income Tax Act. Maturity proceeds are paid to the girl child and are completely tax free in her hands.
This scheme has gained lot of popularity especially in rural India. It’s a good means to provide financial security to the next generation of women in the country.
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Interest Rate and Taxability on Different Savings Schemes
The interest rate and taxability on different savings schemes are as follows:
|List of Schemes||Interest Rate and Return||Taxability|
Public Provident Fund
|7.1% p.a. compounded annually||Maximum deposit of Rs. 1,50,000 in a financial year is exempted under section 80C|
Post Office Savings Account
|4.00% p.a. on individual/joint accounts||Interest earned is Tax Free up to Rs. 10,000 p.a. from financial year 2012-13|
Post Office Recurring Deposit Account
|5.8% p.a. on individual/joint accounts||_|
Post Office Times Deposit Account
|5.5% (1 to 3 years) and 6.7% ( 5 year)||The investment under 5 Years TD is qualified for the benefit of Section 80C of the Income Tax Act, 1961 from 1st April 2007|
Post Office Monthly Income Savings Account (MIS)
|6.6% per annum payable monthly||The maximum investment limit is Rs. 4.5 lakh in single account and Rs. 9 lakh in joint account|
|Senior Citizen Savings Scheme||7.4 % per annum*||The maximum limit not exceeding Rs. 15 lakh and the investment under this scheme is qualified for the benefit of Section 80C of the Income Tax Act, 1961 from 1st April 2007|
|Kisan Vikas Patra||6.9% compounded annually||–|
|National Savings Certificate||6.8 % compounded annually but payable at maturity||The deposits are qualified for for tax rebate under section 80C of Income Tax Act and the interest accruing annually but deemed to be reinvested under Section 80C of IT Act|
|Sukanya Samriddhi Accounts||7.6% p.a. calculated on the annual basis||Maximum deposit of Rs. 1,50,000 in a financial year|
Note: *Please refer to the official website of Indian Post for more details of Senior Citizen Savings Scheme.
The above-mentioned interest rates effective from 1st April 2020.
Schedule of Fee
The schedule fee of Post office Investment Schemes are as follows:
- Rs. 50 is charged for the duplicate issued passbook
- The deposit receipt or the issue of statement of account is charged at Rs. 20 in each case
- Issue of passbook in lieu of lost or mutilated certificate is charged at Rs. 10 per registration
- In case of the cancellation or change of nomination, the charges are Rs. 50
- The fee for the account transfer is Rs. 100
- The pledging of account is charged at Rs. 100
- In case the cheque book is issued in savings bank account there is no fee for up to 10 leafs in a calendar year and thereafter at Rs. 2 per cheque leaf
- The charges on dishonour of cheque is Rs. 100
Note: Tax as applicable shall also be payable on the above service charges
FAQs on Post Office Investment
Q1. How do I invest in the post office monthly income scheme?
Ans. Post Office Monthly Income Scheme is a low-risk plan with steady income. One can invest up to Rs.4.5 lakh per month individually and Rs. 9 lakh in a joint account and earn 6.6% interest per annum. In order to invest in a post office scheme, every individual is required to have a MIS account.
Q2. Can I withdraw money from any post office?
Ans. Yes, money can be withdrawn from the Post Office account from any post office. Also, the account bearer can withdraw the money anytime however Rs.50 minimum balance must be maintained in case of a generic account.
Q3. How much can I withdraw from the post office account?
Ans. Maximum Rs.10,000 cash can be withdrawn per day from the post office account. But, with use of post office ATM card, Rs.25000 can be withdrawn per day.
Q4. Can I check my post office account online?
Ans. Yes, Indian Post Office enables its account holders to access their respective account details etc. using the internet banking facility. In order to register yourself under the net-banking, the customer must have a valid indivual or joint account, KYC documents and active DOP ATM card.
Q5. Is Post Office investment safe and tax free?
Ans. Yes, it is safe as investments under Post Office bear sovereign guarantee of Government of India. All these schemes are tax exempt up to a certain limit and some schemes like PPF, Sukanya Samridhi Yojna have tax benefits on returns as well.
Q6. Is there any Post Office Scheme for students?
Ans. All schemes except Senior Citizen Savings Scheme can be availed by students above 18 years. Sukanya Samriddhi Yojna (SSY) is a scheme for girl students where parents have to deposit a set standard of minimum amount or above that matures and is given to the girl child when she turns 21.
Q7. What is the minimum balance required for an account?
Ans. The minimum balance required for an account (post office account) differs from the types of accounts as mentioned below:
|SB(cheque account)||Rs. 500|
|SB (non cheque account)||Rs. 50|
|MIS Post Office Schemes||Rs. 100|
|Public Provident Fund||Rs. 500|
|Senior Citizen Savings Scheme||Rs. 1000|
Q8. How can I get an encashment of certificates / account before maturity?
Ans. The encashment of certificates/account before maturity is as follows:
|NSCs (VIII Issue)||Maturity period 5 years (for certificates issued on or after .01.11.2011). No premature encashment possible.|
|Different Savings Accounts|
|SB||Can be closed at any time|
|RD||Premature closure permissible (after 3 years – only SB rate is permissible)|
|TD||Premature closure permissible (after 6 months)|
|MIS Post Office Schemes||Premature closure permissible (after 1 year)|
|Senior Citizen Savings Scheme||Premature closure (after 1 year)|