Post office small saving schemes have been popular among Indians for their low risk and their easy availability at the nearby India Post Office. Though not all such savings schemes have tax benefits, there are a few Post Office tax saving schemes that you can avail with ease in urban and rural areas alike. The following is a short list of Post office savings schemes that are eligible for deduction u/s 80C of the Income Tax Act 1961.
Comparison of Post Office Tax Savings Schemes*
|PO Small Saving Schemes||ROI||Tenure||Range of Investment (Rs.)||Tax Benefit|
|PO – Time Deposit||7.8%||5 Years||200 – No Limit||Y||N||N|
|NSC||8.0%||5 Years||100 – No Limit||Y||Y||N|
|PPF||8.0%||15 Years||500 – 1.5 lakhs annually (max 12 installments during a fiscal)||Y||Y||Y|
|SCSS||8.7%||5 Years||1,000 – 15,00,000||Y||N||N|
|Sukanya Samriddhi Yojana||8.5%||When the account holder turns 21||1,000 – 150,000 pa||Y||Y||Y|
*The interest rates mentioned above are applicable from the 1st of October onwards. The above facts and figures are for illustrative purposes only and the interest rate/features of scheme are subject to periodic change as per decisions of the Ministry of Finance.
5 Year Time Deposit under Post Office Deposits Rules, 1981
Similar to 5 year tax saver fixed deposit of banks which are eligible for deduction u/s 80 C, 5 year time deposit with post office is also eligible for tax deduction. Following are the basic features of the product :
- Account can be opened and operated individually or jointly.
- No limit on the number of time deposit accounts.
- Minimum investment required is Rs. 200 with no maximum limit on investment.
- Maturity period is 5 years.
- Principal eligible for tax deduction but interest and maturity amount are taxable.
National Savings Certificate Issue VIII (NSC VIII)
This has been one of the most traditional forms of tax saving investments in India. Following are the salient features of the product :
- The scheme is specially designed for resident Indians. HUF and Trust are not allowed to invest in the scheme.
- Certificates of NSC are available in the denomination of Rs. 100, Rs. 500, Rs. 1,000, Rs. 5,000 and Rs. 10,000
- These certificates can be kept as collateral to get loan from banks / financial institution
- It can be held in single form, on behalf of a minor or jointly.
- No TDS applicable to maturity proceeds
- Interest accrued on NSC is deemed to be re-invested u/s 80 C of the Income Tax Act, 1961.
Know more about : National Savings Certificate
Public Provident Fund (PPF) Scheme, 1968
PPF has definitely been the go-to scheme for Indian investors. It has been traditionally considered as one of the safest investments for creating wealth in the long term while offering tax benefits. Stated below are the few key features of PPF:
- This is one of the few investments that is EEE i.e. Exempt, Exempt, Exempt. This implies –
Ø Deposits made can be claimed as tax deduction.
Ø Interest earned on deposits is not taxable.
Ø Amount received on maturity is also tax exempt.
- One can open a PPF account with the post office as well as designated branches of various nationalized banks and with select private sector banks.
- All resident Indians can open a PPF a/c.
- Foreigners, Non Resident Indians (NRIs) and Hindu Undivided Family (HUF) are not eligible to open a PPF account.
- A parent/guardian can open a PPF account in the name of a minor.
- PPF account cannot be held jointly.
- Nomination facility available.
- Only a single PPF account is allowed per person. If a person is found holding more than one account, then immediately the second account is closed and the holder is returned only the principal amount.
- The account matures after the completion of 15 years from the end of the fiscal year in which the account was opened.
- On maturity of 15 years, the account can be renewed for 5 years at a time (with or without additional deposits)
- Premature closure of account is allowed only in certain cases after completion of 5 years.
- From the 3rd to the 6th year, an account holder can avail loan against the amount held in the account subject to key terms and conditions.
- Partial withdrawal of account balance is allowed from the 7th year of account opening subject to various terms and conditions.
- PPF account balance cannot be attached under court order or claimed by a creditor.
Know more about : PPF accounts
Senior Citizen Saving Scheme (SCSS) Account
As the name suggests this Post Office tax saving scheme is only meant for senior citizens i.e. those aged over 60. The following are key details of the scheme:
- An individual above the age of 60 years can open an account.
- An individual aged 55 years can also open a SCSS account provided that the individual has retired on superannuation or voluntary retirement scheme (VRS) and the account is opened within one month of the receipt of retirement benefits and the invested amount should not exceed the retirement corpus.
- This account can be opened in any India Post Office.
- The maximum amount that can be deposited in a single holding account is capped at Rs. 7.5 lakhs.
- In case of a joint holding account, the cap on deposits in a SCSS account is Rs. 15 lakhs.
- An individual can operate multiple accounts in his name whether individually or jointly subject to the cumulative limit (Rs. 7.5 lakhs/Rs.15 lakhs) across all accounts.
- Nomination facility is available at the time of account opening as well as later.
- Interest on this scheme is payable quarterly on the 1st working day of the beginning of every quarter i.e. April, June, September and January.
- The investor has the option to receive interest of the SCSS account through auto credit, post-dated cheques (PDCs) and money order.
- In case of CBS post office then the interest is directly credited to the savings account of the investor.
- Premature closure of the account is allowed after a year by paying a penalty of 1.5% of the deposit amount and after 2 years by paying 1.0% as penalty.
- Tax is deducted at source if interest credit is greater than Rs. 10,000 annualy.
Sukanya Samriddhi Yojana (SSY) Account
This is the latest entrant in the EEE category and is only available to investors with a girl child. Stated below are some of the key features of the Sukanya Samriddhi Yojana:
- A natural or legal guardian can open a SSY account in the name of a girl child.
- This account can be opened up to the age of 10 years of the girl child.
- Initial account deposit for opening the account is Rs. 1000.
- A maximum of one account can be opened in the name of one girl child with a maximum limit of two accounts for two girl children.
- If the girl child is married, then normal premature withdrawal is allowed after the age of 18.
- Partial withdrawal with a maximum limit of 50% of the balance in the Sukanya Samriddhi Yojana account at the close of the previous fiscal is permitted for higher education and marriage only after the account holder turns 18.
- Deposit can be made as a lump sum deposit or multiple times during a year however it should be in multiples of Rs. 100.
- Maximum annual deposit eligible for tax exemption under Section 80C is Rs. 1.5 lakhs.
Public Provident Fund and Sukanya Samriddhi Yojana are the only two Post Office Savings Schemes which fall into the EEE category. While the PPF rates currently stand at 7.6%, Sukanya Samriddhi Yojana investments provide its investors an even more attractive rate of 8.1%.