Various post office schemes, interest rates, tenure and benefits

One of the reasons for the popularity of post office scheme investment in our country is its reliability and risk-free and guaranteed returns, which are guaranteed by the Government of India. But not only this, various post office schemes include savings schemes with high interest rates, which also offer tax benefits, so post office schemes stand tall even in an era where people are looking for maximum return on investment.

One of the distinguishing features of post office schemes is that they are not as risky as capital markets and also get tax benefits of up to ₹1.5 lakh under Section 80C of the Income Tax Act. There are around 1.54 lakh post offices across the country, where you get guaranteed returns with 100 percent security. This article discusses the features, interest rates, tenure and benefits of various post office schemes.

Post Office Scheme:

Post Offices run various schemes like,

• Post Office Recurring Deposit
• Fixed or Time Deposit
• Post Office Monthly Income Scheme (MIS)
• National Savings Certificate (NSC)
• Senior Citizen Savings Scheme (SCSS)
• Kisan Vikas Patra (KVP)
• Public Provident Fund (PPF)
• Sukanya Samriddhi Yojana (SSY)
• Mahila Samman Samukhya Patra

In case of post office schemes, the government reviews the interest rates every quarter

Post Office Savings Account

A post office savings account is similar to a normal bank savings account, where the money is deposited at a post office. The features of a Post Office Savings Account are as follows:

• Only one account can be opened in a post office and the account can be transferred from one post office to another post office.
• In this case also customer can open single or joint account.
• The interest rate on Post Office Savings Account is 4% and is fully taxable. However, no TDS is deducted in this case.
• An account can also be opened in the name of a minor above 10 years.
• The minimum balance for this account is ₹50/-, but you need to deposit a minimum of ₹500/- within a year.
• Under Section 80TTA of the Income Tax Act, total taxable income up to Rs.10,000/- earned in a savings account including interest in a financial year is exempt.

Post Office Receipt Deposit

The Post Office Recurring Deposit (PORD) scheme, also known as the ‘National Savings Recurring Deposit’, is a preferred investment for investors.

This scheme is a savings scheme for 5 years i.e. total 60 monthly installments. Deposits in this scheme earn interest at a compounded rate on a quarterly basis. There is no TDS on the interest and income tax is levied as per the individual tax slab of the investor.

Features of this scheme are:

• Multiple accounts can also be opened under this scheme or two adults can open a joint account and the account can also be opened in the name of the minor.
• RD account can be transferred from one post office to another post office.
• This Recurring Deposit (RD) in post office is basically for 5 years.
• The interest rate of this scheme is 6.7% per annum, which earns interest compounded quarterly.
• RD Investor can invest any amount with a minimum of ₹100/- per month and multiples of ₹10/- There is no upper limit for investment in this case.
• A monthly deposit is required to keep this account active. If the deposit is not made by the due date, a fee of ₹1/- per ₹100/- of value (or a proportionate amount for other values) is levied for each month of delay.
• Partial withdrawal of up to 50% of the balance is possible after one year in case of this account.

Post Office Fixed/Time Deposit

There are total four types of tenors in case of Post Office Fixed Deposit Account namely 1 year, 2 years, 3 years and 5 years respectively.

The interest rate for this account depends on the tenure and the interest is calculated quarterly and paid annually. The interest rates from 1st April to 30th June 2024 for the financial year 2024-25 are:

Other features of this scheme are:

• Account can be opened with minimum investment of ₹1000/- and multiples of 100 can be invested. There is no upper limit of investment in this case.
• In this case also a single holding or joint holding account can be opened and investments can be made in the name of the minor.
• On maturity the depositor can renew again for the same term.
• No deposit can be withdrawn before the expiry of minimum period of 6 months from the date of account opening.
• TD account can be prematurely closed by submitting a prescribed application form along with pass book to the concerned post office.
• The Fixed Deposit Account is eligible for exemption under Section 80C of Income Tax for a tenure of 5 years.

Post Office Monthly Income Scheme Account (MIS)

‘Post Office Monthly Income Scheme’ (POMIS) is an investment scheme. With this scheme, you will get guaranteed fixed monthly income through a one-time investment. The interest rate of this scheme is 7.4%, which is one of the highest earning schemes and the interest is paid every month.

The features of MIS scheme are as follows:

• Any person can open a single or joint MIS account.
• A minor can also invest in this scheme. If the minor is above 10 years of age, he can manage the account himself.
• Accounts are transferable to any post office across the country.
• Minimum investment in case of MIS account is ₹1000/- and maximum of ₹9 lakh in a single account and ₹15 lakh in a joint account.
• MIS account currently earns you an interest rate of 7.4% per month, which is a fixed and guaranteed income.
• Investor can open more than one MIS account, provided the aggregate balance of all accounts does not exceed ₹9 lakh.
• In case of joint account in this scheme all the holders will have equal share.
• The maturity period of this account is 5 years. Then you can withdraw or reinvest the invested money.
• There is no major tax benefit in this scheme Interest received on monthly basis is a part of taxable income. But there is no TDS on interest received.

Senior Citizen Savings Scheme (SCSS)

Senior Citizen Savings Scheme (SCSS) Any person can open this account within one month of retirement after the age of 55 years. The scheme is available for retired defense personnel after the age of 50 years. But note that the investment amount in this scheme should not exceed the corpus value received at the time of retirement.

Salient features of this scheme are:

• The tenure of this scheme is 5 years and the interest rate is 8.2% per annum.
• An individual can have more than one SCSS account and the combined balance of all the accounts can be up to a maximum of Rs.30 lakhs.
• A person can have multiple accounts in his name or jointly with his spouse.
• Investments in this scheme are tax deductible under Section 80C of the Income Tax Act However, if the interest amount exceeds ₹10,000/- per annum, the investment will be tax deductible.
• After the completion of the initial period of 5 years of the scheme, an application can be made for extension for another 3 years.
• A penalty of 1% to 1.5% will be levied for closing the account before maturity after opening the scheme. The later the account is opened, the less the penalty will be.

Public Provident Fund (PPF)

Public Provident Fund (PPF) is a long-term savings scheme, which is very popular for its guaranteed returns and tax benefits. Many people prefer to invest in these funds for the retirement period as it is completely safe and risk free.

Mentioned below are the features of Public Provident Fund:

• Below are the features of Public Provident Fund: PPF tenure is 15 years and interest rate is 7.1%, compounded at the end of the financial year.
• The minimum investment under this scheme in a financial year is ₹500/- and the maximum amount is ₹1,50,000/-.
• PPF account can be opened only in single holding form.
• In this case the maturity period can be extended by another 5 years after completion of 15 years.
• Investment in PPF account is eligible for tax deduction under Section 80C of the Income Tax Act and its interest is fully tax free.

Sukanya Samriddhi Yojana (SSY)

Sukanya Samriddhi Yojana (SSY) is a small savings scheme launched to secure the future of girl child, which currently has a compound annual interest rate of 8.2%.

The salient features of SSY are:

• This account can be opened only for girls aged 10 years and below.
• Minimum investment in this account in a financial year is ₹250/- and maximum is ₹1.5 lakh
• At least minimum amount must be invested every year for 15 years from the date of opening of SSY account. The account will then continue to earn interest till maturity.
• The maturity period of this scheme is 21 years but if the girl gets married after the age of 18 then the scheme will mature.
• The maturity period of this scheme is 21 years but if the girl gets married after the age of 18 then the scheme will mature.
• Multiple accounts cannot be opened in the name of one girl. A parent/guardian can open a maximum of two accounts in the name of two different daughters, but three accounts can be opened in case of twins or triplets.
• Failure to deposit the minimum amount in a financial year will attract a penalty of ₹50/- per annum.
• The account will be managed by the parent till the girl reaches 18 years of age.
• In this case, up to 50% of the available balance at the end of a financial year can be withdrawn.
• Investment income tax on SSY accounts is deductible up to ₹1.5 lakh per annum under Section 80C.
• Interest earned on Sukanya Samriddhi Account is also tax free and maturity amount is tax free.
• The account will be closed if the girl becomes an NRI or loses her Indian citizenship.

National Savings Certificate (NOSC)

National Savings Certificate (NSC) is a fixed income investment scheme that offers low risk and guaranteed returns and tax benefits.

The features of NSC are as follows:

• The tenure of NSC is 5 years and the interest rate is 7.7% compounded annually on maturity.
• The minimum investment in this account is ₹1,000/- and there is no maximum limit.
• In this case you can open a single account or a joint account of up to 3 adults. Besides, this account can also be opened as a guardian of a minor or a mentally ill person aged 10 years or more.
• Investment in NSC is deductible under Section 80C of the Income Tax Act.
• You can pledge NSC certificate as security in case of bank loan.
• This certificate is transferable. But you can transfer it to another person only once during the entire tenure.

Kisan Vikas Patra (KVP)

Kisan Vikas Patra (KVP) is a savings scheme that doubles your investment over a period of time. These KVP certificates can be purchased from post offices as well as designated public sector banks

The features of Kisan Vikas Patra are listed below:

• Kisan Bikas Patra earns interest at 7.5% compounded annually.
• In this case the amount of deposit doubles in 115 months.
• The minimum investment amount in KVP is ₹1000/- and there is no maximum limit.
• Kisan Vikas Patra is transferable, besides you can encash after 2 years 6 months of investment if you want.
• In this case there is no tax deduction on the principal amount invested and interest on KVP is also taxable.

Women’s Honor Savings Card

Mahila Samman Savings Certificate is for women only, launched on 1st April 2023, has a tenure of 2 years and earns interest at 7.5% per annum.

Features of Mahila Samman Savings Paper are:

• In this case only a woman and in case of minor girl her female guardian can open this scheme.
• A minimum of ₹1000/- in this savings account and a maximum of ₹2 lakh in all accounts combined.
• Interest in this account accrues at a quarterly compounding rate and is paid on maturity or closure of the account.
• Account holder can withdraw up to 40% of account balance after one year from the date of account opening.
• Account holder can withdraw up to 40% of account balance after one year from the date of account opening.
• The interest earned on these savings bonds is taxable, meaning you will not get any tax benefits.

Comparison of different post office schemes

Below is a comparison list for the convenience of choosing the suitable scheme from among the various Post Office schemes: