Post Office Tax Saving Schemes

Updated: 11-04-2025 13:11:27 PM

Post Office Small Savings Schemes offer tax benefits u/s 80C of the Income Tax Act 1961 that you can avail with ease in urban and rural areas alike. Read more to know about this scheme in detail.

Eligibility Criteria

• Any Indian citizen above 18 years can open a savings account under post office tax saving scheme either individually or on behalf of a minor
• Joint account can be opened by two or three adults

Comparison of Post Office Tax Savings Schemes

Names of PO Tax saving Schemes	Interest Rate	Min Tenure	Min Investment Amount
Post office Savings Account	4.0% p.a on Individual & Joint A/c	–	Rs.20
National Savings Recurring Deposit Account	6.7% p.a (Quarterly compounded)	5 year	Rs.10 per month
National Savings Time Deposit Account	1 year: 6.9% 2 year: 7% 3 year: 7.1% 5 Year: 7.5%	1 year	Rs.100
National Savings Monthly Income Account	7.4% p.a	5 years	Rs.20
Senior Citizen Savings Scheme Account	8.2% p.a	5 years	Cash: Below Rs.1 lakh in multiples of Rs.1000 Cheque: Rs.1 lakh or above
Public Provident Fund Account	7.1% p.a	15 years	Rs.100
Sukanya Samriddhi Account	8.2%  p.a	21 years	Rs.250

Note: The interest rates are revised periodically and notified by the government from time to time. 

List of Tax Saving Post Office Schemes

Post office Savings Account

A savings account can be opened to earn a fixed rate of interest, not just with a bank but also with a Post Office. This account can only be opened through cash. Other main features of this scheme are given below:

Like with a bank, one can also open a savings account with a post office and earn fixed rate of interest. This account can only be opened through cash. Other main features of this scheme are given below:

• Minimum balance to be maintained is different for cheque and non-cheque facility account. In case of non-cheque, it is Rs.50 whereas for cheque facility account, it is Rs.500
• Subscribers can choose their nominee for the account 
• Nomination facility is available under this scheme
• Only one account can be opened in one post office
• The account holder must initiate a transaction, either deposit or withdrawal, in three financial years in order to keep the account active
• Individual needs to do at least one transaction of deposit or withdrawal in three financial years to keep the account active (To keep the account active an individual has to record at least one transaction in three financial years. This can be a deposit or a withdrawal)
• Interest earned is tax free up to Rs.10,000 per year from financial year 2012-13

National Savings Recurring Deposit Account (5 year Post office Recurring Deposit Account)

In a PO recurring deposit scheme, one needs to invest a fixed amount of money at regular intervals for five years. After 5 years, the maturity amount (principal amount plus interest earned) is paid back to the individual. Listed below are some of the main features of this scheme:

• One can open multiple accounts in the post office
• One needs to invest monthly and if subsequent deposit is not made up to the prescribed day, a default fee will be charged
• Individual can avail rebate on advance deposit of at least 6 installments

National Savings Time Deposit Account (Post Office Time Deposit Account)

Similar to Fixed Deposits that are offered by banks, one can open a term deposit account in the Post office for any of the four tenures available-1, 2, 3 and 5 years. Just like bank FD, one can also open a term deposit account in the Post office for any of the four tenures available-1, 2, 3 and 5 years. When the PO term deposit account matures, the same account will be automatically renewed for the period it was initially opened for. For e.g. 2 years PO Term deposit account will be renewed for 2 years and interest rate on the day of maturity will be applicable.

Note: In this scheme, interest is payable annually but calculated quarterly

National Savings Monthly Income Account (Post Monthly Income Scheme Account)

This scheme offers monthly interest to investors where the interest amount will be auto-credited into their savings account at the same post office. Main features of this saving scheme are discussed below:

• Joint account can be opened by two or three adults. The maximum investment limit in single account is Rs.4.5 lakh and Rs.9 lakh in joint account
• Investor can open multiple accounts in any post office subject to maximum investment limit by adding balance in all accounts
• Premature withdrawal facility is available after the completion of one year after deducting 2% from the deposit amount

Note: From 1.12.2011, the maturity period is 5 years

Senior Citizens Savings Scheme Account (SCSS)

This Post Office tax saving scheme is only meant for senior citizens i.e. those aged over 50 (retired defense employees) can invest in this particular scheme and earn regular interest which is payable quarterly. 

As the name suggests this Post Office tax saving scheme is only meant for senior citizens i.e. those aged over 50 can invest in this particular scheme and earn regular interest which is payable quarterly. Currently, the maximum amount that can be invested by an individual is Rs. 30 lakh. This saving scheme qualifies for tax benefits under section 80C. Main features given below:

• Multiple accounts can be opened in any post office subject to maximum investment limit
• Lock-in period of 5 years is applicable but premature withdrawal is allowed after one year. However, in case the account is closed before the expiry of one year of opening the account, 1% of deposit amount is deducted as penalty.
• After maturity, the account can be extended in multiple blocks of 3 years each and in such cases, investor can close this account any time after that without any deduction.

Note: Individuals above 55 years or more but less than 60 years who have retired can also open this account. However, it should be opened within three months of receipt of retirement benefits and the amount should not exceed the amount of retirement benefits.

Know more about the Senior Citizen Savings Scheme

Public Provident Fund Account (15 year PPF)

PPF holds a record of having maximum number of investors amongst all of the schemes made available by the post office. There is a lock-in period of 15 years under this scheme. The account holder can withdraw partially from the account after the 7th year and avail loan from the third year. Premature closure is not allowed before 15 years. Other main features are given below:  

It is a very popular investment scheme and has a lock in period of 15 years. Individual can withdraw partially from the 7th year and one can avail loan from the third year. Premature closure is not allowed before 15 years. Other main features are given below:  

• Joint account cannot be opened but one can open another account in the name of minors which is subject to maximum investment limit
• This account can be opened with Rs.100 but a deposit of minimum Rs.500 must be made in a financial year
• Nominees can be elected at the time of opening and after opening the account
• Nomination facility is available at the time of opening and after opening the account

Also Read: PPF accounts

Sukanya Samriddhi Account

This scheme is listed under the ‘Beti Bachao Beti Padhao’ campaign and parents or legal guardian can open this account in the name of a girl child. The investment amount, interest earned and maturity amount are exempted from tax. Main features of this account are given below:

• Account can be opened up to the age of 10 years from the date of birth and can be closed after the girl child completes 21 years
• Maturity amount is payable after the completion of 21 years
• Premature closure of the account is allowed after the completion of 18 years provided that the girl child is married
• Account will be discontinued in case a minimum Rs.250 is not deposited in a financial year
• Account will be discontinued even if a minimum Rs.250 is not deposited in a financial year

Read More: Sukanya Samriddhi Yojana (SSY): Interest Rate, Benefits & Tax Rules

Note: All of these schemes are available via post offices and require limited paperwork

Advantages of Post Office Tax Savings Schemes

• One can easily enroll in these tax-saving schemes and earn a fixed return
• Post Office Tax-saving schemes are suitable for rural as well as urban investors who are unwilling to indulge into tiring paperwork
• It is best suited for rural as well as urban investors who look for limited paperwork and government guaranteed returns
• It will benefit investors who are seeking fixed returns as Post office RD and term deposits will help them create corpus by investing a fixed amount for a particular tenure
• It will benefit investors who look for fixed returns as Post office RD and term deposits will help them create corpus by investing fixed amount for a particular tenure 
• Individuals can choose and elect their nominees for the respective accounts
• Nomination is facility available under this scheme
• Public Provident Fund and Sukanya Samriddhi Yojana are the only two Post Office Savings Schemes which fall in the EEE (investment amount, interest earned and maturity amount are exempted from tax) category.

FAQs

Q1. How to open a post office savings account?

Post office savings account can be opened by adults, or on behalf of minor. For that, you need to:

• Obtain a form from the nearest post office or online
• Submit the duly filled and signed form along with other requisite documents
• Pay the minimum amount as per the chosen scheme
• After the KYC is done, your deposit account will be opened for you

Q2. What are the Tax exemptions on Post office savings Schemes?

Investment of up to Rs.1.5 lakh qualifies for tax deduction under section 80C of the Income Tax Act. The tax treatment of interest and maturity amount varies from scheme and scheme and is stated below:

• Post office Savings Account: Under section 80TTA, interest income earned from savings account up to Rs.10,000 is tax deductible from the gross income.
• PPF/ Sukanya Samriddhi Yojana: The proceeds from these schemes are tax-free.
• Senior Citizen Savings Scheme: Interest earned is taxable and as per section 80TTB of the I-T Act, it allows for a deduction up to Rs.50,000 in respect of interest income from deposits.
• Post office time deposit scheme: The interest income is taxable and there is no tax benefit under section 80C on PO Term deposits with less than 5 year tenure.

Q3. Are there any risks in these schemes?  

No, Post office tax saving schemes provide risk-free returns on the investment as they are backed by the sovereign government and ideal for people with low-risk appetite.

Read More : Sukanya Samriddhi Yojana (SSY): Interest Rate, Benefits & Tax Rules