Post Office Interest Rates (2021)

It is a question among the minds of every investor to select the right tool for investing the fund, which is safe, secured and at the same time provides satisfactory returns. If you are more concerned about the safety of the funds, then there cannot be more guarantee than the sovereign government schemes. The most popular among these schemes are the ones that are launched and managed by the post office.

What are the post-office savings schemes?

The Indian Post Office offers certain investment avenues with sovereign backing that ensures the safety of the invested funds. These investment avenues are not only secured but also inculcates the habit of disciplined savings regularly. It has been framed in such a way that it becomes favourable for all sorts of economic classes. There are several types of savings schemes maintained and administered by the postal department. The rates of returns are lower than that of the equity funds, stocks but carry minimal risk of capital loss. The interest rates occasionally change and are announced at the beginning of every quarter. But, once the investment is done, the rate remains the same throughout the tenure. 

Types of savings schemes and their interest rates

At present, there are 9 types of savings schemes managed by the postal department that are currently in circulation. Each of these schemes possesses different features with differing rates of interests. This article will focus on the details of each of these schemes along with their individual interest rates of 2020.

1.   Post Office Savings Account

The rate of interest of Post Office Savings Account is currently 4% p.a. on both individuals as well as joint accounts. The minimum opening balance is INR 500 and there is no maximum limit. The maintenance system of this sort of account is quite similar to that of ordinary savings accounts of banks. The interest is calculated based on the value maintained in the account. Some of the highlighting features of the scheme are as follows:

1. Any single individual or joint holders of up to 3 members, any adult on behalf of a minor or any minor above 10 years of age are eligible for investing in this scheme
2. A single individual can open only one single account
3. In case of a joint account, if one holder dies, the surviving holder(s) will remain the claimer(s). Under any circumstances, if any holder also possesses a single account under the same scheme, then that account has to be closed
4. During the initial investment of the beginning of the scheme, the appointment of at least one nominee is mandatory. 
5. Any withdrawal that will reduce the minimum maintenance limit of INR 500 below that limit is not entertained
6. The interest rate is fixed by the Finance Ministry of the country. The current rate stands at 4% p.a.
7. Since the financial year 2018-’19, the interest earned up to INR 50,000 enjoys tax redemption

2.  Post Office Recurring Deposit 

The recurring deposit account, be it of the bank or post office, encourages small yet regular and steady savings habits. Investing in a 5-year Recurring Deposit account of the Post Office is always considered to be a wise move in terms of financial experts. This ensures regular savings thus resulting in a satisfactory wealth corpus in the long run. An unlimited number of accounts can be opened under this scheme. You can maintain an account of a single individual or a joint account of up to three adult holders, any adult guardian can open it on behalf of any minor below or above ten years of age. The current rate of interest in this scheme is 5.8% p.a. which is compounded quarterly. The minimum investment value is as low as just INR 100 per month. Some of the highlighting features of the scheme are as follows:

1. You can open the account either by paying through cash or cheque. 
2. In case, you begin your investment before the 15th date of any particular month, the subsequent deposit will be made up to that date
3. Under any circumstances, if you fail to make the deposit on any particular month, then in the following month you will have to pay the pending amount, the default fee along with the current month’s payment
4. Under the monthly scheme, if you make four consecutive defaults, the RD account will automatically be discontinued. You can revive it by making the necessary deposits within two months of the discontinuation. Failure to do so will permanently cancel the account
5. After the completion of twelve regular instalments, you are eligible to take a loan of up to 50% of the total account balance. The applicable rate of interest will be 2% above the current RD interest rate
6. On the completion of the five-year tenure, you can also extend the investment tenure to up to five more years. In that case, you need to submit an application to the respective post office
7. If the holder(s) die, then the nominee will be eligible to claim the balance 

1. Post Office Time Deposit Account

This scheme is quite similar to that of the bank fixed deposit. Any single adult individual can invest in this scheme; a joint account with up to three adults can also be maintained; any individual can open it as a guardian on behalf of a minor below or above ten years of age are eligible to maintain this account. The varied time limits of this scheme range between one year, two years, three years and five years. The current rate of interest for the schemes of one, two and three years stands at 5.5% p.a. while the five-year scheme holds an interest rate of 6.7% p.a. Some of the highlighting features of this scheme are as follows:

1. You can maintain an unlimited number of accounts
2. The investment amount is decided on the multiples of INR 100
3. The interest payout is done on a yearly basis
4. You cannot make any deposit before the completion of six months of the initial deposit
5. You can also extend the tenure on maturity. For a one-year TD, you have to extend it within six months of maturity; for a two-year TD, you have to extend it within twelve months of maturity; for a three-year or a five-year TD, the time limit is eighteen months
6. Enjoys tax benefits under Section 80C, up to INR 1.5 lakhs per annum

1. Post Office Monthly Income Scheme Account (MIS)

This is considered to be a very popular scheme that enables you to invest a certain specific amount of funds and earn interest monthly. The maximum investment amount limit is INR 4.5 lakh for an individual account and INR 9 lakhs for joint account. This benefit of this scheme can be accessed from any post office spread across the country. The current rate of interest stands at 6.6% p.a. since April 1st, 2020. The deposited amount of value must be decided in the multiples of INR 1000. In the case of a joint account, each account holder must have an equal share. The account may be closed after five years from the date of opening on submission of an application at the concerned post office. If the account holder dies, then the amount will be received by the legal heir or the nominee. It can be opened by a single individual; a joint account of a maximum of three account holders or any adult on behalf of any minor below ten years of age. Some of the major highlights of the scheme are as follows:

1. The lock-in period is of five years and the interest payout is monthly at the rate of 6.6% p.a.
2. This is a secured fixed income scheme without any market risk
3. The rate of interest is above the standard fixed deposit schemes, yet they are not inflation-beating
4. The NRIs are not eligible for investing in this scheme
5. Multiple accounts can be maintained here although the total amount of investment under the scheme should not exceed the INR4.5 lakh mark in case of individual accounts and INR 9 lakh, for joint accounts
6. This account is easily transferable according to your convenience
7. There is no TDS application
8. It can be premature under certain circumstances—withdrawal before the completion of one year will fetch no benefit; withdrawal between the first and the third year will ensure an entire refund with 2% penalty charge; withdrawal between the third and the fifth year ensures the return of the entire corpus with 1% penalty charge

1. Senior Citizens Savings Scheme (SCSS)

As the name suggests, this scheme has been specially designed for the senior citizens i.e. people above sixty years of age. It ensures a  steady source of income with tax benefits as well as financial security. This scheme can be availed by the early retirees ageing between fifty-five and sixty years, who have already applied for the Voluntary Retirement Scheme. The rate of interest is 7.4% p.a. since 1st April 2020, which is payable from the deposit date of 31st March/30th September/31st December during the first instance and then it is payable on 31st March, 30th June, 30th September and 31st December. During investment, it must be kept in mind that there shall be a single deposit in the multiple of INR 1000 and the maximum limit is INR 15 lakh. The interest payout is on a quarterly basis. In case the total interest income from all the SCSS accounts exceed INR 50000 in a single financial year, then TDS will be deducted from the total paid interest. No TDS is applicable on submission of 15G/H form and the accrued interest remains within the prescribed limit. Some of the highlighting features of the scheme are as follows:

1. Any retired Defence personnel ageing 50 years but below 60 years can avail this scheme
2. Any individual singularly or jointly with the spouse can invest in this scheme
3. The Finance Ministry monitors the interest rate
4. The maximum tenure is of five years
5. The plan can be extended for up to three more years on maturity, by submitting a special request form

1. Public Provident Fund (PPF)

This is a very popular scheme which came into circulation back in 1968. This is a very handy tax-saving-cum-savings investment equipment. This acts as a very convenient method to build up the overall wealth corpus with the benefit of annual tax saving ensuring guaranteed returns at the same time. The current rate of interest stands at 7.1% p.a. which is compounded yearly. The minimum investment value is INR 500 while the maximum limit is INR 1,50,000 in a single financial year. You can make the deposit once in a lump-sum or instalments. If the minimum deposit value is not maintained in any year, then the account will automatically get discontinued. The interest earned through this scheme is tax-free. You can avail the loan benefit between the third and fifth year from the date of account opening. The maximum withdrawal amount is up to 50% during the tenure. No nominee can claim the amount under this scheme on the death of the account holder. Some of the highlighting features of this scheme are as follows:

1. This scheme has been exclusively designed for resident Indians. HUFs and NRIs cannot avail the benefit of this scheme
2. The lock-in period is of fifteen years although partial withdrawal is permissible after five years
3. Throughout the tenure, a deposit of at least the minimum value is mandatory to keep the account active
4. There is no joint account facility under this scheme
5. A loan is granted between the third and the fifth year calculated from the date of account opening
6. A tax benefit of up to INR 1.5 lakh is allowed here, under Section 80C of the ITA
7. On maturity, you can choose to continue the account for up to five more years. However, a discontinued account is not eligible for the extension.

1. National Savings Certificate (NSC)

This is yet another very popular scheme that comes with a lock-in period of five years. Because of security and minimal risk factor involvement, this scheme has become almost indispensable from any investor’s portfolio. It can be opened by any single individual account, a joint account or on behalf of any minor. There is no maximum limit of investment to this scheme, but tax benefit can be earned only up to INR 1.5 lakh under the ITA. The current rate of interest stands at 6.8% p.a. some of the major highlighting factors of the scheme are as follows:

1. Currently, NSC VIII is open for subscription
2. The minimum investment value is INR 1000 and should always be in the multiples of INR 100. There is no maximum limit and can be subsequently increased
3. NSC can be utilised as collateral security for undertaking loans
4. By default, the interest earned automatically gets reinvested
5. No TDS is required on the maturity value
6. Early withdrawal is not permissible, however, on the death of the account holder, it may be allowed with the court order

1. Kisan Vikas Patra (KVP)

This investment scheme allows the building up of overall wealth corpus without any risk of capital loss. Ideal for long-term investment, this scheme comes with a fixed tenure of 124 months. The current interest rate is 6.9% p.a. which is compounded annually. The minimum investment value is INR 1000 and in multiples of INR 100 without any maximum limit. It can be held by an individual, jointly by up to three holders, by a guardian on behalf of a minor or by a minor above 10 years of age. The account gets transferred to the nominee or any other person under special circumstances with the interference of the court. Some of the highlighting features of this scheme are as follows:

1. Unlimited number of accounts can be opened under this scheme
2. This is a low-risk and secured investment avenue
3. The interest rate is revised occasionally by the government
4. This scheme can be exclusively availed by the resident Indians and not by the HUFs and NRIs
5. The earning is tax exempted if withdrawn after maturity
6. The loan facility under this scheme can be availed under a lower rate of interest

1. Sukanya Samriddhi Yojana (SSY)

As the name suggests, this scheme has been exclusively crafted for the benefit of the girl children under the special scheme of “Beti Bachao Beti Padhao”. The parent(s) or the legal guardian of any girl child below ten years of age can open this account. Not only does it come with an enhanced interest rate, but this scheme also allows tax benefits. The current rate of interest stands at 7.6% p.a. which is compounded annually. The minimum investment amount is INR 250 while the maximum limit is INR 150000 in a single financial year. The deposit may be done in instalments or a lump-sum. You can open only one account in the name of one girl child with a maximum of two accounts per family. Build a corpus for your daughter with Sukanya Samridhi Yojana.

Some of the highlighting features of the scheme are as follows:

1. You can open the account not only from any post office but also from any bank too
2. The tax exemption limit is up to INR 1.5 lakh under Section 80C for the principal, the interest earned as well as the benefits
3. Partial withdrawal is permissible if the girl attains eighteen years or clears her 10th standard
4. The maturity tenure is decided either after 21 years of the opening of the account or during the marriage of the girl after she attains 18years.

Post Schemes Interest Rates at a glance

This is in short a comprehensive guide regarding the current interest rates of all the post office schemes that are currently in circulation in the country. There are other investment opportunities also available.