Post Office Small Saving Schemes in India

Investing in Post Office Small Saving Schemes or Post Office Schemes as we simply refer, is a common practice amongst people of India especially those who look for assured returns. The Government also encourages potential investors to save money out of their monthly earnings and invest wisely so as to have a financially secure after-retirement life.

Although, these Post Office Schemes in India don’t offer high rate of interest. But, their risk free nature usually attracts investors to park their money in such Small Savings Schemes.

The interest rates on these Post Office Savings Schemes are revised by the Government from time to time. Sometimes, there is a reduction in the interest rates which is a point of concern for the small investors.

Through this blog, we have highlighted few of the popular ways of investing your money in such Post Office Savings Schemes.

Before, discussing the important details, let’s have a look at the interest rates for quarter Jan to March’19 which are as follows:

Post Office Savings Scheme	Interest rate 1st Apr-30th Jun'18	Interest rate 1st Jul-30th Sept'18	Interest rate 1st Oct-31st Dec'18	Interest rate 1st Jan-31st March'19	Tax deduction U/s 80C
Post Office Savings Account	4%	4%	4%	4%	No
Post Office Recurring Account (RD)	6.9%	6.9%	7.3%	7.3%	No
Post Office Monthly Income Scheme (MIS)	7.3%	7.3%	7.3%	7.3%	No
Post Office Time Deposit - 1 year	6.6%	6.6%	6.9%	7%	No
Post Office Time Deposit - 2 years	6.7%	6.7%	7%	7%	No
Post Office Time Deposit - 3 years	6.9%	6.9%	7.2%	7%	No
Post Office Time Deposit - 5 years	7.4%	7.4%	7.8%	7.8%	Yes
Kisan Vikas Patra (KVP)	7.3%	7.3%	7.7%	7.7%	No
National Savings Certificate (NSC)	7.6%	7.6%	8%	8%	Yes
Public Provident Fund (PPF)	7.6%	7.6%	8%	8%	Yes
Sukanya Samriddhi Yojana (SSY)	8.1%	8.1%	8.5%	8.5%	Yes
Senior Citizens Savings Scheme (SCSS)	8.3%	8.3%	8.7%	8.7%	Yes

The interest rates on small saving schemes have been provided on “as is basis”. These may

Post Office Small Savings Schemes 

1. Post Office Savings Account:

You can open a Savings Account in Post office as you open it in a Bank. The interest on Post Office Savings Bank account is 4% per annum similar to what most of the banks offer. You just need a small amount of Rs.20 to open a Post Office Savings Account. A minimum balance of Rs.500 needs to be maintained in the account.

• Interest earned in Post Office Savings Bank account also qualifies for Tax deduction Under Section 80TTA. This means, the interest earned upto Rs.10000 is tax free.
• Only one account can be opened in one Post Office.
• Joint account opening facility is also available to Individuals.
• This account can also be opened in the name of a minor.
• You can transfer Post office Savings account from one post office to another.

Post Offices are migrating to Core Banking Solution (CBS). So, you can make deposits and withdrawals through electronic mode in these CBS Post Offices. You will also be issued ATM Debit/Credit Card being a Savings Account holder.

2. Post Office Time Deposits (TD):

Post office Time deposits or Fixed Deposits facility is available at various post offices all over India. Time deposits are the deposits made with the Post Office where the interest is is not received on monthly basis. The interest is payable by Post office annually. But, the same is calculated quarterly. The rate of interest is based on the tenure of the time deposit scheme.

• An individual is eligible to open Time deposit account in Post office.
• A minimum amount of Rs.200 is required for opening this account.
• You can open any no.of Time deposits in different Post Offices.
• Joint time deposit account can also be opened.
• This account can also be opened in the name of a minor.
• You can transfer TD account from one post office to another.

The Post Office Term deposit interest rates are given in the table below:

Time Period	Rate of Interest (From Apr'17 to Jun'17)	Rate of Interest (From Oct'16 to March'17)
1 year TD	6.9%	7 %
2 years TD	7%	7.1%
3 years TD	7.2%	7.3%
5 years TD	7.7%	7.8%

Please note that only 5 year Term deposit in Post Office qualifies for a Tax deduction Under Section 80C of The Income Tax Act.

However, the interest amount earned on Post Office term deposits is taxable income.

3. Post Office Recurring Deposits (RD):

India Post also offers a Post Office Recurring Deposit Scheme where the investor has to make deposits at predefined intervals. These deposits may be monthly or quarterly based on the Post Office Recurring Deposit Scheme. You don’t need to invest a lumpsum amount like fixed deposits/term deposits. The investments have to be done at regular intervals.

You can invest in 5 year Recurring Deposit Scheme and earn interest at 7.3% per annum that is compounded on a quarterly basis.

• An RD Account can be opened with a minimum investment of Rs.10 per month or amount in multiples of Rs.5.
• There is no upper limit for deposit in RD account. So, you can deposit any amount as per your convenience.
• One premature withdrawal of upto 50% is allowed after 1 year of opening of RD account. This means for premature withdrawal, the account should have been active for a minimum of 1 year.
• You can transfer Recurring Deposit account from one post office to another.
• If you open RD account by 15th of a calendar month,the subsequent deposit has to be made by 15th of next month. But, if the account is opened between 16th day and last working day of calendar month, then further deposit can be done upto last working day of next month.

4. Post Office Monthly Income Scheme (MIS):

Post Office Monthly Investment Scheme is yet another popular scheme offered by the Indian Postal service. So,people looking for a risk free and fixed monthly income scheme often tend to get attracted towards it. The maturity period of Post Office Monthly Investment or POMIS is 5 years.

Premature withdrawal might be allowed subject to certain conditions and penalty. However,minimum investment period should at least be 1 year,if you want to withdraw earlier.

So,by investing your money in POMIS, you get a fixed rate of interest or simply stated,you get fixed monthly income on the amount invested.

• The rate of interest for quarter Jan-March’19 is 7.7 % p.a.
• Monthly income is credited to your savings account.
• An individual can invest a maximum of Rs.4.5 lakhs in POMIS including his share in a joint account.

Type of Account	Minimum Amount ( Rs.)	Maximum Amount ( Rs.)
Single Account	1500	4.5 lakhs
Joint Account	1500	9 lakhs

Interest earned on Post Office Monthly Investment Scheme or POMIS is fully taxable.You don’t enjoy any tax benefits for investing your money in POMIS.

Post Office Monthly Investment Scheme is best suited for risk averse investors who search for investments providing fixed monthly returns.

5. National Savings Certificate (NSC):

National Savings certificates are tax saving instruments where the government accepts deposits from individuals through post offices. You get a fixed rate of interest as decided by the Government every year.

• Resident Individuals are allowed to invest in NSC.
• You can have a 5 year National Savings certificate or NSC.
• The present rate of interest on NSC is 8% p.a.
• The interest on NSC is compounded on a half yearly basis but it is payable at maturity only.
• You can invest a minimum of Rs.100 in NSC.
• There is no maximum limit for investment in National Saving certificate or NSC.
• You can claim a Tax benefit U/s 80C for the principal amount invested. Also, the interest amount that is automatically reinvested is eligible for this deduction.

6. Kisan Vikas Patra (KVP):

Kisan Vikas Patra is a tax saving investment that allows investors to park their funds for a longer duration. KVPs can be purchased through any post office in India. It is quite common investment tool due to its low risk nature and guaranteed fixed returns on maturity.

• KVP can be purchased in the name of resident individual himself or in the name of minor.
• The present rate of interest on KVP is 7.7% p.a. 
• HUF and NRIs cannot invest in KVP or Kisan Vikas Patra. Trusts can invest in KVP.
• Minimum deposit required is Rs.1000.
• There is no upper limit fixed for investment in KVP.
• KVPs are available in denomination of Rs.1000, Rs.5000, Rs.10000 and Rs.50000.
• The lockin period is 2 years and 6 months (2.5 years). You are allowed to withdraw the Principal amount after this period only.
• The amount invested matures in 112 months.
• You are issued KVP certificates that are transferable on completion of requisite formalities.

The interest income on KVP or Kisan Vikas Patra is taxable. There are no tax benefits of investing in KVPs.

7. Public Provident Fund (PPF):

Public Provident Fund or PPF is one of the most popular long term investments in India. Normally,you might have heard of opening a PPF account in a bank. But, you also have the option to open your PPF Account in a Post office as well.

The present rate of interest on PPF is 8% p.a.

• PPF has a long lockin period of 15 years. Although, premature withdrawal may be allowed subject to certain conditions.
• Minimum balance of Rs.500 and a maximum of Rs.1.5 lakhs can be deposited in a PPF Account.
• Amount contributed towards PPF qualifies for Tax deduction under section 80C.
• The interest and maturity amount at the time of withdrawal are tax free.

You can refer our PPF calculator for knowing the interest and the maturity amount of your PPF investments.

8. Sukanya Samriddhi Yojana:

Sukanya Samriddhi Yojana was introduced in order to provide financial security to female children in India. If you have a girl child below the age of 10 years, then you are eligible to open the Sukanya Samriddhi Account.

The interest rate on Sukanya Samriddhi Yojana Account (SSY) is 8.5% p.a.

You can claim Tax deduction U/s 80C upto a maximum of Rs.1.5 lakhs during a financial year.

For details you can refer Sukanya Samriddhi Yojana – Facts You need to Know!

9. Senior Citizen Saving Scheme (SCSS) :

It is a good investment option for senior citizens i.e.this scheme is available only to investors of the age of 55-60 years. The investment limit is Rs.15 lakhs and the tenure of the scheme is 5 years which is extendable to another 3 years. The Interest on Senior Citizen Saving Scheme is usually paid on quarterly basis.

This is a government scheme so is considered as a reliable option for retirees and senior citizens. The interest on Senior Citizen Saving Scheme  is 8.7% p.a.

Senior Citizen Savings Scheme qualifies for tax benefit U/s 80C of Income tax act. You can open any number of accounts subject to maximum investment limit i.e. total amount all the accounts should not exceed the permissible amount.

The lowering of interest rates on the above Post Office Small Saving Schemes is something to worry about. But, still Post office schemes are widely accepted by the different sections of the society to reap assured fixed returns on their investments in the long run.

Are you interested in these post office schemes or you are considering some other investment alternatives also. Feel free to share your valuable feedback in the comment section below!

Have a balanced Financial portfolio that serves dual purpose of:

• Providing financial security and
• Growing your money in the right manner.

Which of the Post Office Small Savings Schemes do you like the most? Do share your valuable feedback. Besides Post Office Small Saving Schemes, there are numerous other ways to park your money. So, based on your risk horizon and priorities, you can explore diversified investment options to earn higher returns.