Saving Schemes of Indian Post Office

In this post, you will get to know about details of Saving Schemes related to Indian post:

post office saving schemes

Before we start, we want to give you a little introduction to the Indian Postal Department. Indian post is 164 years old and the most widely distributed postal system of the world with 155,015 post offices. With services like letter post, parcel service, EMS and deposit schemes, it has an annual revenue of around 1.8 Billion USD (2016).

A. Different saving schemes of Indian post office:

Now, let’s start with the different saving schemes provided by Indian post office one by one.

1) Post Office Savings Account 

This is the most basic saving schemes similar to saving account in any Indian bank.

Interest Rate:

  • 4.0 % per annum both on individual and joint accounts

Minimum Amount and Balance:

  • To open a non-cheque facility account, you need minimum INR 20/.
  • To open a cheque facility account, you need minimum INR 500/-.
  • For the non-cheque facility account, you need to maintain a minimum balance of INR 50/-.
  • For cheque facility account, you need to maintain a minimum balance of INR 500/-.
  • To keep the account active, you need to make at least one transaction of deposit or withdrawal in three financial years.

Account Opening Details:

  • A post office saving account can be opened by cash only.
  • You can open both individual(single) and joint account as per your requirement.
  • The joint saving account can be opened by two or three adults.
  • A single saving account can be converted into a joint saving account and vice versa.
  • Account nomination facility is available both at the time of opening the account and anytime after opening the account.
  • Any saving account can be transferred from one post office to another post office.
  • Only one saving account can be opened at one post office branch.
  • The saving account can be opened in the name of minor but only a minor of 10 years and above age can operate that saving account.

Other Facilities:

  • Cheque facility is available in the saving account and can be availed both at the time of opening the account and anytime after opening the account.
  • Deposits and withdrawals can be done through any electronic mode in CBS Post offices.
  • ATM facility is available.

Tax Exemption:

  • Interest earned through saving account is Tax-Free up to INR 10,000/- per year starting from the financial year 2012-13.

2) 5-Year Post Office Recurring Deposit Account (RD)

In recurring deposit accounts, you need to deposit a specific amount every month to the account for the prescribed time period. On the maturity of this account, you get the deposited amount with payable interest.

Interest Rate:

  • 6.9% per annum, compounded quarterly.
  • By default, this recurring deposit is for five years. Although it can be continued for another 5 years on year to year basis.

Minimum and Maximum Amount:

  • The monthly recurring deposit amount should be minimum of INR 10/-.
  • The recurring monthly deposit amount should be in multiples of INR 5/-.
  • There is no maximum limit on the deposit amount.

Account Opening Details:

  • This account can be opened by cash or cheque.
  • If the account is opened by cheque, the opening date of such deposit account would be the date of presentation of the cheque.
  • You can open both individual(single) and joint deposit account as per your requirement.
  • Any single account can be converted into joint and vice versa.
  • The joint deposit account can be opened by two adults.
  • Just like the saving account, nomination facility is available both at the time of opening and anytime after opening the account.
  • Any number of deposit accounts can be opened in any post office branch.
  • Also, this deposit account can be transferred from one post office branch to another post office branch.
  • The deposit account can be opened in the name of minor buy only a minor of 10 years and above age can open and operate the account.

Recurring Deposit Process:

  • If the account is opened before 15th of a calendar month, then subsequent deposit can be made up by 15th of the next calendar month.
  • It the account is opened after 15th of a calendar month, then subsequent deposit can be made up by the last working day of the next calendar month.
  • If the subsequent deposit is not made within the prescribed days, a default fee will be charged.
  • This default fee is INR 0.05 for every INR 5.
  • After 4 consecutive defaults in paying the deposit amount, the deposit account will become discontinued.
  • The discounted account can be revived within the next two months, but if the account is not revived within this time period, no further deposit can be made.
  • In case of any monthly default amount,​ the depositor has to first pay the defaulted monthly deposit with default fee and then pay the current month deposit. This will be applicable to both CBS and non-CBS Post offices. For example, if your recurring monthly deposit amount is INR 200 and in the previous month you deposited only INR 150, then in the current month you have to pay:
    • The default amount of previous month –  INR 50
    • Default fee – 0.05 on every INR 5 –  INR 10
    • The total payable amount for the current month – [200 + 50 + 10] = INR 260
  • In case the deposited are made by cheque, the date of credit of cheque into Government accounts would be the date of deposit.
  • You can withdrawal up to 50% of the balance after one year of the opening of a deposit account. You can easily repay this amount in one lump sum along with interest at the prescribed rate at any time during the life of the deposit account.
  • In case of death of the depositor, the nominee will get full maturity value only in the denomination of INR 50.

3) Post Office Time Deposit Account (TD)

Unlike recurring deposit account, this is a one-time payment account. On the maturity of this account, you get the deposited amount plus the payable interest. Interest is paid annually here.

Interest Rate:

  • In this Interest is paid annually but calculated quarterly.
  • It can be opened for a time period of one, two, three and five years.
  • Here are the different interest rates, effective from July 2018.
Period Interest Rate
One Year Time Deposit Account 6.6%
Two Year Time Deposit Account 6.7%
Three Year Time Deposit Account 6.9%
Five Year Time Deposit Account 7.4%

Minimum and Maximum Amount:

  • Minimum deposit amount is INR 200/-.
  • There is no maximum limit.

Account Opening Details:

  • Similar to the recurring deposit account, this time deposit account can also be opened both by cash and cheque.
  • In case of account opening through cheque, the date of credit of cheque in Government account would be the date of account opening.
  • You can open both individual(single) and joint deposit account as per your requirement.
  • The joint time deposit account can be opened by two adults.
  • A single time deposit account can be converted into joint and vice versa.
  • Nomination facility is available both at the time of opening the time deposit account and after the opening.
  • Any time deposit account can be transferred from one post office branch to another post office branch.
  • Any number of time deposit accounts can be opened in any post office.
  • The time deposit account can be opened in the name of minor but only a minor of 10 years and above age can operate the account.

Time Deposit Process:

  • When a time deposit account is matured, it will be automatically renewed for the period for which it was initially opened. This is applicable to all CBS post offices.
  • For example, upon maturing, a three-year time deposit account will be automatically renewed for another three years. Interest rate which is applicable on the date of maturity will be applied to the renewed time deposit account.

Tax Exemption:

  • Only a 5-year time deposit is qualified for the benefit of Section 80C of the Income Tax Act.

 

4) Post Office Monthly Income Scheme Account (MIS)

Similar to time deposit account, this is a one-time payment account. The only difference is, in the above time deposit account, the interest is paid annually whereas, in MIS, the interest is paid monthly. Hence, it is called the monthly income account.

Interest Rate:

  • The interest rate is 7.3% per annum, payable monthly. (Effective from January 2018)

Minimum and Maximum Amount:

  • The minimum amount for opening the MIS account is INR 1500/-.
  • Any investment should in the multiples of INR 1500/-.
  • The maximum investment limit is INR 4.5 lakh for the single/individual accounts and INR 9 lakh for the joint accounts.
  • An individual can invest a maximum of INR 4.5 lakh in MIS (including his share in the joint accounts).
  • In each joint account, each joint holder has an equal share.

Account Opening Details:

  • The MIS account can be opened by both individuals and joint parties, as per the requirement.
  • A joint MIS account can be opened by either two or three adults.
  • All joint account holders have an equal share in each joint account.
  • Any single MIS account can be converted into a joint account and vice versa.
  • An MIS Account can be opened by both cash and cheque. In case of account opening through cheque, the date of credit of cheque in Government account will be the date of opening of the account.
  • Nomination facility is available in MIS account. It is available both at the time of the opening the time and later.
  • An MIS account can be transferred from one post office branch to another branch.
  • A single person can open multiple numbers of MIS accounts in any post office branch. The sum total of balance of all these accounts should not exceed the maximum investment limit.
  • An MIS account can be opened in the name of a minor but only a minor of 10 years and above age can operate the account.

Deposit Process:

  • The maturity period of all MIS accounts is 5 years, effective from 1.12.2011.
  • In case of non-CBS post offices, the interest from MIS account can be drawn through auto credit into the savings account at the same post office, through PDCs or ECS.
  • In the case of CBS post offices, the monthly interest from MIS account can be credited into the saving account standing at any other CBS post offices.
  • An MIS account can be prematurely encashed after one year. If it is enchased before 3 years, there will be 2% deduction from the deposit and if it is encashed after 3 years, there will be 1% deduction from the deposit.

5) Senior Citizen Savings Scheme (SCSS):

This is also a one-time payment saving scheme.

Eligibility Criterion:

  • A citizen of India of the age of 60 years or more.
  • An individual of the age between 55-60 years who have retired on superannuation or under VRS (Voluntary Retirement Scheme) can also open the account. In this case, the account must be opened within one month of receipt of retirement benefits and the deposited amount should not exceed the total amount of retirement benefits.
  • Retired defence personnel with a minimum age of 50 years.

Interest Rate:

  • 8.3% per annum, payable quarterly. (Effective from 1.07.2017).
  • In the first instance, interest will be paid from the date of deposit to end of the ongoing quarter like March 31 (Q1), June 30 (Q2), September 30 (Q3), December 31 (Q4).
  • Afterward, interest will be paid quarterly on March 31 (Q1), June 30 (Q2), September 30 (Q3), December 31 (Q4).
  • The maturity period of SCSS is 5 years.

Minimum and Maximum Amount:

  • For SCSS, there can be only one deposit, in the multiple of INR.1000/-.
  • This one deposit should not exceed INR 15 lakh.

Account Opening Details:

  • For amount less than one lakh, an SCSS account can be opened by cash only.
  • For amount INR 1 Lakh and above, an SCSS can be opened by cheque only.
  • In case of opening through cheque, the date of credit of cheque in the Government account would be date of opening of account.
  • Both single and joint account can be opened in SCSS. A joint account can only be opened with spouse and the first depositor in such joint account will be the investor.
  • A depositor can operate more than one account either in individual capacity or jointly with the spouse (husband or wife).
  • Nomination facility in SCSS is available both at the time of opening and aftwewards.
  • An SCSS account can be transferred from one post office branch to another branch.
  • Any number of SCSS accounts can be opened in any post office. The sum total of balance in all accounts should not exceed the maximum investment limit.

Deposit Process:

  • The maturity period of SCSS is 5 years.
  • In case of non-CBS post office branch, interest from SCSS account can be drawn through auto credit into savings account standing at the same post office, through PDCs or money order.
  • In case of CBS post office branch, interest from SCSS account can be credited into any saving account standing at any other CBS post office branch.
  • The quarterly interest will be payable on the 1st working day of April (for Q1), July (for Q2), October (for Q3) and January (for Q4).
  • Premature closure is allowed after one year. After one year, the deduction will be of 1.5% of the deposit and after 2 years, the deduction will 1% of the deposit.
  • After the maturity period of 5 years, the account can be extended for further three years within one year of the maturity by giving an application in prescribed format.

Tax Exemption:

  • For SCSS account, TDS is deducted at source on interest if the interest amount is more than INR 10,000/- per annum.
  • Investment under this scheme qualifies for the benefit of Section 80C of the Income Tax Act, 1961 from 1.4.2007.

 

6) 15 year Public Provident Fund Account (PPF):

PPF is a long term investment declared by Government of India. It is safe deposit schemes, offering tax exemption and attractive interest rates.

Interest Rate:

  • 7.6​% per annum, compounded yearly (effective from 1.01.2018).

Minimum and Maximum Amount:

  • A minimum INR. 500/- and maximum INR. 1,50,000/- can be deposited in a financial year.
  • The PPF deposits can be made in lump-sum or in 12 instalments.

Account Opening Details:

  • An individual can open the account with INR 100/-.
  • To continue the account, the depositor has to deposit a minimum of INR 500/-.
  • Joint PPF account cannot be opened.
  • PPF account can be opened both by cash or cheque. In case of cheque, the date of credit of cheque in Government account would be the date of opening of the account.
  • Nomination facility for PPF account is available both at the time of opening and afterward.
  • PPF account can be transferred from one post office branch to another.
  • The depositor can open another PPF account in the name of minors, but the sum total balance of all his/her account should not exceed the maximum investment limit of INR 1.5 lakh in a financial year.
  • After the death of the guardian, the minor can not continue the PPF account. It will be closed and refunded.

Deposit Process:

  • Maturity period for PPF account is 15 years but it can be extended within one year of maturity for further 5 years and so on.
  • The maturity value can be retained without extension and without further deposits.
  • PPF premature closure is not allowed before 15 years.
  • Withdrawal is permissible every year from the 7th financial year from the year of opening account.
  • Loan facility on PPF account available from the 3rd financial year from the year of opening account.

Tax Exemption:

  • PPF deposits qualify for deduction from income under Sec. 80C of IT Act.
  • Interest earned from PPF account is completely tax-free.

 

7) National Savings Certificate (NSC):

NSC is a fixed investment certificate scheme from Government of India. The below information is for 5 years NSC (VIII issue). NSC (IX issue) 10 years certificate are now discontinued.

Interest Rate:

  • 7.6​​% compounded annually but payable at maturity (Effective from 1.01​.2018).
  • In NSC, INR 100/- grows to INR 144.23​ after 5 years.

Minimum and Maximum Amount:

  • NSC can be brought for a minimum of Rs. 100/-, in multiples of Rs. 100/-.
  • There is no maximum limit of investment in NSC.

Account Opening Details:

  • ​NSC is only for individuals and can not be operated by joint parties.
  • NSC can be purchased by an adult for himself or on behalf of a minor or by a minor.
  • NSC certificates can be transferred from one person to another only once from date of issue to date of maturity.
  • At the time of transfer of NSC certificates from one person to another, old certificates will not be discharged. Only name of the old holder will be rounded and the name of the new holder will be written on the old certificate.

Tax Exemption:

  • Deposits qualify for tax rebate under Sec. 80C of IT Act.
  • The interest accruing annually but deemed to be reinvested under Section 80C of IT Act.

 

8) Kisan Vikas Patra (KVP):

KVP is a low-risk certificate scheme from Indian post office. Initially, it was started to promote long-term investment among the farmers, so it was named as Kisan Vikas Patra. But, now its open to all.

Interest Rate:

  • 7.3​​​% compounded annually (effective from 1.01​.2018).
  • The amount Invested doubles in 118​ months (9 years & 10​ months).

Minimum and Maximum Amount:

  • The minimum investment amount should be of Rs. 1000/- ​ in multiples of Rs. 1000/-.
  • There is no maximum limit of investment.

Account Opening Details:

  • KVP certificate can be purchased by an adult for himself or on behalf of a minor.
  • KVP certificate can also be purchased jointly by two adults.
  • They are also available for a trust but not a Hindu Undivided Family (HUF) and an NRI.
  • Nomination facility is available in KVP certificates.
  • KVP certificate can be transferred from one person to another.
  • KVP certificate can be transferred from one post office branch to another.

Deposit Process:

  • KVP certificate can be encashed after 2 & 1/2 years from the date of issue.
  • KVP certificates can be used as collateral or security to avail secured loans.

Tax Exemption:

  • KVP certificates does not come under Income Tax 80C deductions.
  • KVP certificate returns are completely taxable.
  • TDS is exempted is exempt from withdrawals after maturity period.

9) Sukanya Samriddhi Account:

This scheme is only for girl child aged less than 10 years.

Interest Rate:

  • ​​8.1% per annum (effective from​ 1-01​-2018​​), calculated on yearly basis, yearly compounded.

Minimum and Maximum Amount:

  • One can deposit a minimum of INR. 1000/- and a maximum of INR. 1,50,000/- in a financial year.
  • The subsequent deposit can be made in multiples of INR 100/-.
  • Sukanya Samriddhi deposits can be made in lump-sum.
  • There is no limit on number of deposits either in a month or in a financial year.
  • If minimum Rs 1000/- is not deposited in any financial year, the account will become discontinued. Such discontinued accounts can be revived with a penalty of Rs 50/- per year along with minimum amount required for the deposit for that year.

Account Opening Details:

  • A legal guardian or natural Guardian can open Sukanaya Samriddhi account in the name of a girl child.
  • A guardian can open only one account in the name of one girl child and a maximum of two accounts in the name of two different girl children.
  • Sukanaya Samriddhi account can be opened anytime up to the age of 10 years from the date of birth of the girl child.
  • In the initial years of the of Scheme, one-year relaxation has been given by Government. With this relaxation, for a girl child who is born between 2.12.2003​ &1.12.2004 can open the Sukanya Samriddhi account up to 1.12.2015.

Deposit Process:

  • Partial withdrawal is allowed in Sukanaya Samriddhi account. This partial withdrawal can be of maximum up to 50% of the balance standing at the end of the preceding financial year.
  • Partial withdrawal can be taken only after the Account holder’s(the girl child) attaining an age of 18 years.
  • Sukanya Samriddhi account can be closed after completion of 21 years.
  • The normal premature closure will be allowed after completion of 18 years​ or the marriage of the account holder girl child.

Tax Exemption:

  • Sukanya Samriddhi account investment are eligible for tax exemption under Income Tax section 80C, subject to a maximum cap of Rs. 1.5 lakh per annum.
  • The interest earned in Sukanya Samriddhi account are completely tax-free.
  • The amount earned after the maturity of this scheme is also completely tax-free.

 

B. Comparison of different schemes:

Name of the Scheme Interest Rate Minimum Investment Maximum Investment Eligibility Criterion Tax Exemption
1. Post Office Savings Account 4.0% per annum INR 20/- No limit Individual and joint account Interest earned up to INR 10,000 per year  is tax-free.
2. 5 year Post Office Recurring Deposit (RD) 6.9% per annum, compounded quarterly INR 10/- per month No limit Individual and joint account NA
3. Post Office Time Deposit Account (TD) One Year – 6.6%

Two Year – 6.7%

Three Year –

6.9 %

Five Year –

7.4%

INR 200/- No limit Individual and joint account 5 year TD qualifies for section 80C of Income Tax
4. Post Office Monthly Investment Scheme (MIS) 7.3% per annum, payable monthly INR 1500/- For Individual account – INR 4.5 lakh

For Joint account – INR 9 lakh

Individual and joint account NA
5. Senior Citizen Savings Scheme (SCSS) 8.3% per annum INR 1000/- INR 15 lakh Senior citizens or individuals between 55-60 years of age who have opted for VRS or attained superannuation – Eligible under section 80C of Income Tax

– TDS deduction on interest earned more than INR 10,000/- per annum

6. 15 Years Public Provident Fund (PPF) 7.6% per annum, compounded yearly INR 500/- per financial year INR 1.5 lakh per financial year Individual Eligible for section 80C under Income Tax
7. National Savings Certificate (NSC) 7.6% per annum, compounded yearly INR 100/- No Maximum Limit Individual Eligible for section 80C under Income Tax
8. Kisan Vikas Patra (KVP) 7.3% per annum, compounded annually INR 1000/- No Maximum Limit Individual NA
9. Sukanaya Samriddhi Account 8.1% per annum, compounded annually INR 1000/- per financial year INR 1.5 lakh per financial year Parent of a girl child aged less than 10 years Eligible for section 80C of Income Tax

 

C. 5 Reasons Why You Should Invest in Post Office Saving Schemes:

Money investment is always a personal choice. It should be mainly based on your goals, risk appetite, and financial strength. We strongly recommend that one should never ever copy the investment choices of someone else. Rather you must asses your goals, risk appetite, financial strength and then perform a detailed analysis of all the options available before making the final decision.

As this post is all about saving schemes of Indian Post Office, here are five reasons why you invest in post office saving schemes:

  • Low Risk:

All the Indian post office saving schemes are of the low-risk profile. If your risk appetite is low or you are looking to diversify your investment portfolio with some low-risk options, you should really consider these schemes.

  • Market Safe:

All the Indian post office schemes are independent of market fluctuations and apt for the people who do not have much knowledge about how to asses mutual funds options or other stocks investment options.  

  • Competitive Interest Rates:

Just like other commercial banks, all post office saving schemes provide competitive interest rates.

  • Tax Exemption:

Majority of the schemes are under Income Tax Exemption. So, if saving tax is your priority, then you should definitely go for these.

  • Wide Post Office Network:

If you are living in a small city or village where commercial banks are not nearby, post office  is your saviour. They have the largest network in India, so if your family resides in a small village, it is easy operate and make transactions in the post office.

 

With this, we wish you the best of investment under post office saving schemes. Do let us know what schemes worked well for you and what do you think of them.

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