All-in-One Guide on Post Office Saving Schemes

investment

As an investor, there are endless investment options in the market today for you to choose from. But with this plethora of choices comes the question of whether your hard-earned money would be safe in such an investment. This scepticism is often a reason why people still prefer to save in secure and reliable government-schemes. These saving schemes come with the comfort of a sovereign guarantee and thus are easy-to-trust. The most popular of such schemes are the Post Office Saving Schemes. Read on for an All-in-One Guide on Post Office Saving Schemes. 

What are Post Office Saving Schemes?

The postal chain of the country, India Post offers a few deposit avenues for investors, these schemes are referred to as  Post Office Saving Schemes. Introduced with an aim of not only offering investment avenues but also for inculcating savings discipline among Indians, these schemes are suitable for almost all economic classes in the country. 

Different types of Savings Schemes under Post Office Investments 

Currently, there are 9 saving schemes introduced by the government, these are: 

  1. Post Office Savings Account
    Quite similar to a bank account, in a post office, a savings account can be opened too. And just like a bank, the interest you receive is calculated on the basis of the balance in a savings account. Let us take a look at the main features of this scheme:
    1. A single adult, joint account of up to 3 adults, a guardian on behalf of a minor or a minor above 10 years can also invest in this scheme
    2. Only a single account can be opened by a single individual
    3. In a joint account, if one holder passes away, the surviving holder will be the sole holder. If in case the holder has a single account in his/her name, then the Joint account has to be closed
    4. A nominee has to be appointed at the time of purchase of the scheme
    5. A withdrawal that would reduce the balance below INR 500 will not be permitted
    6. In a month when the between the 10th and the last day of the month is below INR 500, no interest will be paid
    7. The rate of interest is prescribed by the Ministry of Finance
       
  2. 5-Year Post Office Recurring Deposit Account (RD)
    If you wish to deposit small and steady amounts of money, opening a 5-year-old RD with the post office might be a good way to invest.  With the help of periodic deposits, you can create a substantial corpus. You can open any number of accounts. A single adult, joint account of up to 3 adults, a guardian on behalf of a minor or a minor above 10 years can also invest in this scheme. Let us take a look at the main features of this scheme:
    1. An account can be opened by either paying through cash or a cheque. The date of deposit by cheque would be the date of clearance of cheque
    2. If an account is opened before 15th of a month, the subsequent deposit shall be made up to 15th day of the month
    3. In case you make a monthly default and not make the payment, you would first have to pay the defaulted deposit, default-fee and the current month deposit
    4. In case of more than four defaults, in case of monthly payments, the account will be discontinued. Though it can be revived within two months, failure to do so will lead to the closing of the account 
    5. After 12 regular instalments, a loan of 50% of the balance can be taken. The rate of interest would be  2% + RD interest rate applicable to the RD account
    6. If you wish, the account may be extended for 5 more years. An application would have to be submitted at the concerned PO
    7. In case of death of account holder, the nominee can claim the balance of the RD account 
  3. Post Office Time Deposit Account (TD)
    A single adult, or joint account of up to 3 adults, or a guardian on behalf of a minor or a minor above 10 years can invest in this scheme. Similar to a bank FD, the post office also deal with time deposits for 1,2,3 and 5 years, the rate of interest offered is given below:
Period (Per Account)1 year2 years3 years 5 years
Rate of Interest5.5%5.5%5.5%6.7%


Let us take a look at the main features of this scheme:

  1. Any number of accounts may be opened
  2. Investments can be started with deposits of INR 1,000 or multiples of INR 100 
  3. Interest is payable yearly
  4. No deposit can be made before 6 months of the date of deposit
  5. An extension of the TD account can be made, 
    1. 1-year TD= within 6 months of maturity
    2. 2-year TD= within 12 months of maturity
    3. 3 or 5-year TD= within 18 months of maturity
  6. Post Office Monthly Income Scheme Account (MIS)
    With this scheme you can invest a certain amount of money and earn a specific interest on a monthly basis, the maximum amount being INR 4.5 individually and INR 9 lakhs when invested jointly. This scheme can be invested in from any post office across the country.  Let us take a look at the main features of this scheme:
    1. There is a lock-in period of 5 years, for the quarter ending 30 June 2020, an interest rate of 6.6% per annum is payable on a monthly basis
    2. As this is a fixed income scheme, your money will no be subject to market risk
    3. Though the returns may not be inflation-beating, you still earn more than regular fixed deposits
    4. Only Indian residents can opt for this scheme, NRIs are not eligible
    5. You can start an account on the behalf of a minor. When the child turns 18, a conversion for the account in his name can be requested
    6. You can open more than one accounts, however, the total deposit cannot go beyond INR 4.5 lakhs
    7. The account can be transferred to a different post office if you are moving to a different city/residence
    8. There is no TDS applied 
    9. In case of an early withdrawal, you would have to keep in mind:
      1. Withdrawal before 1 year- No Benefits
      2. When closing account between first and third year- Whole deposit refunded after 2% penalty
      3. When closing account between third and fifth year- Whole corpus will be refunded after 1% penalty
         
  7. Senior Citizen Savings Scheme (SCSS)
    The Senior Citizen Savings Scheme (SCSS), is a scheme for the citizens above the age of 60 years. A plan that offers a steady income, financial safety and tax benefits, SCSS is a very popular plan among the seniors. Retirees who are above 55 years and have applied for Voluntary Retirement Scheme, VRS can also apply for this scheme. Let us take a look at the main features of this scheme:
    1. Retired defence personnel can apply for this scheme after the age of 50 years
    2. An individual alone or with the spouse can invest in this plan
    3. INR 15 lakhs or an amount less than the amount one receives on retirement, whichever is less, maybe invested
    4. For amounts less than INR 1 lakh cash deposits can be made, however, for deposits over INR 1 lakh, only cheques are accepted
    5. Any number of accounts may be opened, however, the total amount must not breach the limit of investment
    6. The Ministry of Finance reviews the rate of interest every quarter. The rate of interest in October 2019 was 8.6% per annum
    7. The tenure of each scheme you opt for is 5 years
    8. At the time of maturity of the scheme, at the end of 5 years, you need to submit the Closure Form, along with your Passbook. If you wish to extend the plan for 3 more years, you can do so by filling in a request for an extension
  8. 15-year Public Provident Fund Account (PPF)
    Introduced in 1968 with the aim to mobilise small investments, PPF is a savings-cum-tax saving investment. It helps you build a corpus while letting you save on annual taxes. If you are looking for guaranteed returns, then you can open a PPF account. Let us take a look at its main features:
    1. Any citizen of India can invest in this scheme. NRIs and HUFs are not eligible
    2. Considered to be one of the most preferable schemes, PPF is available with a lock-in period of 15 years. Though partial withdrawal after 5 years is also an option
    3. The minimum investment is as low as INR 500 per year and the maximum limit is INR 1.5 lakhs, which can be done as a lump sum or in instalments
    4. Once a year deposits are mandatory, else the account may be closed. The deposits can be made in cash, through cheque, Demand Draft or an online transfer
    5. The account can be for a sole member, there are no joint account holders in a PPF. however, a nominee may be designated
    6. A loan can be taken against the PPF account between the third and fifth year
    7. Under Section 80C of the ITR, a tax rebate disallowed for an amount up to INR 1.5 lakhs
    8. For withdrawal of the balance, you have to fill in the application form along with Form C and submit it with the bank that holds your account
       
  9. National Savings Certificates (NSC)
    This scheme can be opened with any post office and it comes with a 5 year lock-in period. A secure and low-risk investment, it can be bought for a minor, an individual or as a joint account. Though there is no upper limit of purchase, however, note that you can earn a tax break only up to INR 1.5 lakhs under the Income Tax Act. There is a rate of interest earned by the certificates, the current rate being 6.8% annually. Let us take a look at the main features of this investment scheme:
    1. Presently, NSC VIII Issue is open for subscription
    2. Investments can be started with deposits of INR 1,000 or multiples of INR 100. The amount can be increased later on
    3. NSC is considered as collateral for secured loans
    4. The interest that you get is reinvested by default
    5. A family member, even minors, may be appointed as a nominee
    6. There is no TDS on the maturity amount
    7. There is no provision of an early withdrawal, however in case of death of the investor or in case there is a court order, a request may be accepted

       
  10. Kisan Vikas Patra (KVP)
    Kisan Vikas Patra (KVP), is a saving avenue that allows you to gradually accumulate wealth without any fear of financial risks. While encouraging a disinclined and long-term investment, the scheme comes with a fixed tenure of 124 months (10 years 4 months) and doubles up your investment. Let us take a look at its main features:
    1. A single adult can open an account or up to 3 adults can open a joint account. It may be opened on the behalf of a minor, or by a minor over 10 years of age
    2. A minimum deposit of INR 1000 is required, there is no upper limit, however, for deposits over INR 50,000 PAN details would be required
    3. You are free to open any number of accounts under this scheme
    4. The rate of interest is reviewed by the government regularly, however, the rate and time for one quarter remain fixed, for the financial year 2019-2020 is 6.9%
    5. It is a low-risk saving option and very suitable to park money safely and receive assured returns
    6. Applicants who are residents of India are eligible, however, NRIs and HUFs are not eligible
    7. Post-maturity withdrawal is tax-exempted at source
    8. Individual account holders can avail a loan at a lower interest rate
       
  11. Sukanya Samriddhi Yojana Accounts (SSYA)
    Introduced under the initiative, “Beto Bachao-Beti Padhao”, Sukanya Samriddhi Yojana aims to benefit the girl child. The parent/ guardian of a girl less than 10 years of age can open an SSY account. Along with a high rate of interest, the scheme also comes with tax benefits. Its main features are:
    1. A family can open only 2 SSY accounts, one for each girl
    2. The account can be opened through a post office or a public or a private bank
    3. The government fixes and reviews the rate of interest every quarter
    4. Under Section 80C, the principal amount, the interest and the benefits are tax-exempted up to INR 1.5 lakhs
    5. Partial withdrawal can be made after the child attains the age of 18 years or clears her 10th standard
    6. Once an account is opened, it would mature in the following situations:
      1. After 21 years of the opening of the account
      2. In event of her marriage after she turns 18 

Comparative Table of Various Post Savings Schemes in India 

The following table will help you in making a comparative study of the various schemes discussed above:

SchemeRate of InterestMinimum Amount of InvestmentMaximum Amount of InvestmentWho can buy the Scheme?Tax Benefits
Post Office Savings Account4% p.a.INR 500 for opening, Subsequent deposits not less than INR 10No Maximum LimitResident Indians, Adults and MinorsStarting from FY 2018-19 interest is upto INR 50,000 tax-free 
5-Year Post Office Recurring Deposit Account5.8% per annum (Compounded quarterly)INR 100 per monthNo Maximum LimitResident Indian, Adults and MinorsNo tax benefit are available
Post Office Time Deposit Account

1st, 2nd and 3rd year – 5.5% p.a.

5th Year – 6.7% p.a.

INR 200No LimitIndividualThe investment is tax-free U/S 80C up to INR 1.5 lakhs a year
Post Office Monthly Income Scheme Account 6.6% per annum (Payable Monthly)In multiples of INR 1,000

For one account holders – Rs 4.5 lakh

Joint account holders – Rs 9 lakh

Individual/ Joint Account up to 3 adults/ Minors No 80C benefit for deposit in PO MIS. Even interest is taxable
Senior Citizen Savings Scheme 7.4% per annum (Compounded Yearly)INR 1,000INR 15 lakhs,  over a lifetime

Single: Above 60 years


 

Above 55 yrs for VRS


 

Above 50 yrs for defence personnel

The investment is tax-free U/S 80C up to INR 1.5 lakhs a year

 

TDS would be deducted for interest earned more than INR 50,000 p.a. However, if 15H is submitted, no TDS would be deducted. 

15-year Public Provident Fund Account 7.1% per annum  (Compounded Yearly)INR 500, per financial yearINR 1.5 lakh per financial year

Any Indian Citizen / Guardian on behalf of a minor


 

Above 50 yrs for defence personnel


 

The investment is tax-free U/S 80C up to INR 1.5 lakhs a year +

Interest earned in tax-free. This is an EEE investment

National Savings Certificates 


 

5 Years NSC VIII Issue

6.8% (Compounded Yearly, but paid at maturity)


 

INR 1,000 increases to INR 1389.49 in 5 years

INR 1,000 and in multiples of INR 100No limitIndividual/ Joint Account up to 3 adults/ MinorThe investment is tax-free U/S 80C up to INR 1.5 lakhs a year
Kisan Vikas Patra

6.9% (Compounded Yearly)


 

Invested amount doubles in 124 months (10 years 4 months)

INR 1,000 and in multiples of INR 100No limitIndividual/ Joint Account up to 3 adults No specific tax benefit. Interest as well as maturity benefit is taxable
Sukanya Samriddhi Accounts7.6% (Compounded Yearly)

INR 250


 

Subsequent deposits INR 50 

INR 1.5 lakh per financial yearParent/guardian of Girl Child, up to 10 yearsThe investment is tax-free U/S 80C up to INR 1.5 lakhs a year +
Interest and maturity benefit is also tax free. This is an EEE investment

Benefits of Post Office Saving Schemes

Having discussed the features of all the post office Saving Schemes, let us take a look at the various benefits they bring with them:

  • Simplified Investments
    Extremely easy to enrol, most of these schemes are simple to understand. All the schemes are suitable for rural as well as urban investors, who wish to put in their hard-earned money in risk-free schemes. Minimum paperwork is required for these schemes and as they are backed by the government they bring with them a sense of security and authenticity. Their simplicity and credibility make them a much-preferred option of investing.
  • Long-Term Investments
    These schemes are more future-oriented and thus, they are a great option for people who have long-term goals such as retirement, or their child’s education or wedding.
  • Tax Benefits
    Most of these schemes bring you tax benefits under Section 80C of the Income Tax Act. Schemes such as PPF, Sukanya Samridhi Yojana even provide tax exemption on the interest that has been earned.
  • Rate of Interest
    Ranging from 4% to 9%, the rate of interest that these schemes offer is a great way to earn if you wish to invest in low-risk investment options
  • Something for Everyone
    The Post Office Saving Schemes bring a lot of variety, thus making it suitable for almost all kinds of investors. There are also many schemes available, where you can open any number of accounts and in some schemes, there is no upper limit of investments. Such flexibility makes these plans apt and appropriate for just about everyone.

Who can Invest in Post Office Saving Schemes?

The investors who want to invest in a no-risk scheme for a long term would find post office saving schemes to be the most appropriate for themselves. These schemes are also apt for someone who wants to start the investment with a small amount and wants to keep investing slowly and steadily. People planning retirement, or their child’s education or wedding would also consider such schemes to be safe. The affordability and flexibility of these plans make them suitable for just about everyone.

How to open/apply for Post Office Saving Schemes?

Applying for or opening an account in the post office is simple. Once you make up your mind, which scheme you wish to invest in, you just need to follow the steps given below:

  • Visit your nearest Post Office
  • From the post office, get the application form for the scheme you wish to invest in, you can also download the forms for all these schemes from the official website, or simply click https://www.indiapost.gov.in/Financial/pages/content/post-office-saving-schemes.aspx 
  • You then need to fill in these forms carefully and submit them back to the office along with the required photographs and documents
  • While submitting the forms, you would also have to make a deposit of the required amount 

KYC Norms of Post Office Saving Schemes

KYC, or Know Your Customer, guidelines are issued with the objective to prevent money laundering or financing terrorist activities or using post office schemes for criminal elements. KYC procedures help the Post Office banks in understanding and knowing their customers better.

The Post Office KYC policy includes the four following elements:

  • Customer Acceptance Policy
    To ensure that no accounts are made in an anonymous or fictitious name
  • Risk Management
    Depending on the money invested the accounts are classified as:
    • Low Risk 
      Amount up to INR 50,000
    • Medium RIsk
      Amount above INR 50,000 till INR 10 lakhs
    • High Risk
      Amount above INR 10 lakhs
  • Customer Identification Procedure
    Applicable to all saving schemes, the account holders photographs and certain documents are to be submitted at the time of investment, such as
    • Identification Proof - Passport, Driving License, PAN Card, Ration Card, Aadhar Card, School Mark Sheet, Voter ID
    • Address Proof - Telephone Bill, Electricity, Ration card, Aadhar Card, Passport, Salary Slip, Bank Statement, ITR File
      Note: For High-Risk Schemes, more proofs may be asked for
    • Attestation of Copies - The photocopies of all the required documents need to be self-attested. In case the depositor/depositors are illiterate the documents can be attested by a Gazetted Officer/ Sarpanch/ Chief Postmaster/ Postman
  • Monitoring of Transactions, Record Keeping and Reporting
    All post offices maintain a record of all transactions that take place in the accounts
     

Conclusion
When you are prepared for your future, it gives you the confidence to lead a comfortable life. As you collect and save a part of your earnings for a long-term period you move towards a secured financial future

The aim of introducing Post office Saving Schemes was to provide avenues for investment to all economic classes in the country. These schemes are simple and easy to operate and thus, are preferred by the investors who wish to invest safely, systematically and regularly. 

 

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