Introduced under an indispensable agenda of savings and investments, the Central Government of India has brought different schemes backed up with the sovereign guarantee. While there are schemes that offer various deposit measures, there are some schemes which offer tax benefits to the investors. In this article you will get an insight of the top 5 Post Office schemes to get Tax rebates under the Section 80C of Income Tax Act. These will be beneficial for you if you plan to stay in the old regime of income taxation.
The interest rates associated with these schemes are revised by the Government every 3 months to a year. And the best part is that by depositing a small amount over a certain of time, you can actually get higher returns than other saving accounts or FD schemes.
Top 5 Post Office Schemes (Benefits under Section 80C)
Here is an overview table with different characteristics of the schemes that offer tax benefits-
|Parameters||Sukanya Samriddhi Yojana (SSY)||Senior Citizens Saving Schemes (SCSS)||Public Provident Fund (PPF)||Post Office Recurring Deposit (RD)||Post Office Savings Account|
|Current Interest Rate||7.6%||7.4%||7.9%||7.20%||4.0%|
|Entry Age||Below 10 years||55 Years||No Age Limit||10 Years||10 Years|
|Maturity||21 years||5 years||15 years||5 years||21 years|
|Tax Rebate||EEE (Exempt-Exempt-Exempt)||Tax deduction up to Rs.1.5 lakh||EEE (Exempt-Exempt-Exempt)||Tax deduction up to Rs.1.5 lakh||Income up to Rs.10,000 is tax deductible|
|Minimum Deposit||Rs.250 per year||Rs.1000||Rs.500||Rs.10 per month||Rs.20 per month|
|Maximum Deposit||Rs.1.5 lakh per year||Rs.15 Lakh||Rs.1.5 Lakh||No Limit||No Limit|
Sukanya Samriddhi Yojana (SSY)
This is a small savings scheme formulated with an objective of welfare of the girl child. The parent or guardian of the girl child can get a Sukanya Samriddhi Account opened before she reaches the age of 10 years, from post office or bank. The current interest rate for April to June is 7.6%. Under Section 80C of Income Tax Act, Sukanya Samriddhi Scheme is categorised under EEE (Exempt-Exempt-Exempt) tax status. This implies that the principal amount, the interest earned and maturity amount are exempted from tax.
The maturity amount can be redeemed after the age of 21 years. However, premature withdrawals are allowed after the girl reaches the age of 18 years for education purposes only. Moreover, it must be noted that a minimum of Rs.250 must be deposited in SSY account every year and penalty will be charged in case of any kind of deviations.
To know more about Sukanya Samriddhi Yojana (SSY), Interest Rates and Benefits, Click Here
Public Provident Fund (PPF)
The Public Provident Fund is one of the most popular saving schemes regulated by the Central Government of India. The current interest rate for the first quarter of the year 2020 is 7.1%. Like Sukanya Samriddhi Yojana, PPF is also categorised under the Exempt-Exempt-Exempt (EEE) tax status. The interest earned and the principal amount are not just risk free but are also exempted from tax.
The contributions made in PPF account are eligible for tax deductions up to Rs.1.5 lakh under Section 80C of the Income Tax Act, 1961. This scheme has a tenure of 15 years but premature withdrawals can be initiated after the seventh financial year.
Related Article: Public Provident Fund, Eligibility and Interest Rates
Post Office Recurring Deposits (PORD)
Recurring Deposits by Post-Offices provide an investment option wherein the investors can make monthly deposits for a period of 5 years. The interest rate associated with Post-office recurring deposit is 7.2% per annum (compounded annually). For instance, if you invest Rs.10,000 for 5 years in your RD account, then you will get Rs.7,25,051 at the time of maturity.
Moreover, the subscribers of PORD can enjoy tax deductions up to Rs.1,50,000 under Section 80C. There is no TDS on interest earned from this account but the income remains taxable at the hands of the investors as per their tax slab.
Post Office Savings Account (POSA)
Post-offices allow you to open a savings account just like you open one with the Bank. This account can be opened with a minimum deposit of Rs.20 (cash only) and has no maximum limit of the deposit. There is a 4% interest rate which is paid on the balance of the savings account by the post office. While the interest earned is fully taxable, there is no TDS on the amount.
Under Section 80TTA of the Income Tax Act, the income earned from savings account (including Post Office Savings Account) up to Rs.10,000 is tax deductible from gross income. It must be acknowledged that senior citizens with a Post-office savings account will get interest income exemption higher than others. No deductions under 80TTA are allowed for senior citizens.
Click here to know more about Post-office Savings Account
Senior Citizens Saving Schemes (SCSS)
Individuals above the age of 60 and the individuals from the age of 55 to 60 who have opted for voluntary retirement can invest in Senior Citizens Saving Schemes (SCSS). The scheme has a tenure of 5 years and investments are capped at Rs.15 lakh. Currently, this scheme is offering 8.3% interest rate to the subscribers.
Investments in this scheme are eligible for tax deductions under Section 80C of the Income Tax Act. But, if interest earned is more than Rs.10,000 in a year, tax will be deducted at source.
Why should one choose a Post Office Scheme?
There are several benefits provided by Post Office Saving Schemes to the subscribers-
- You can earn good interest amount falling between 4% to 9% on all the Post-office schemes
- These are government backed schemes which come with sovereign guarantee. Thereby, the investments are absolutely risk free
- Most of the schemes formulated by Post-offices give tax benefits to the investors under Section 80C of the Income Tax Act
- You can initiate long-term savings by investing in such schemes as the tenure of most of the POSS is up to 15 years
- The enrollment process as well documentation under these schemes is very easy. You just have to provide a limited set of documents to get yourself started
These are the top five Post-Office Schemes which can be invested in to get Section 80C benefits. For the population of India, these schemes are considered as the most safe, easy, efficient and safe investment options. You can analyse each scheme and the benefits which it offers to finally select the best one for your investment goal.