Interest Rates of Post Office Small Savings Schemes: Indian Post is one of the most popular postal chains in the country. It is best known for its postal and courier services nationwide. The India Post controls the overall postal chain of the country, and it also provides various saving schemes for the public. With the rapid advancements in the communication fields and the inventions of the mobile phone, e-mails, and texts, the Indian post saw a downfall in the past years. But, the banking and the depository services of the India post became popular among the public for their attractive interest rates and yields.
In recent times, managing funds and finances have become the most challenging for individuals. Most people do not have any idea about investments and saving schemes, making it difficult for them to save money for their future. To increase investment activities and inculcate saving habits in Indians, the Government of India introduced various saving schemes under the Postal services.
The several savings and depository services available for the public under India Post are called Post Office Saving Schemes. These were introduced to increasing investment activities among the public, thereby providing them with high yields. The depository services are provided by every branch of India post across the country.
This article will discuss various post-saving bank schemes, their interest rates, benefits and other terms related to Post Office Savings Schemes.
What are Saving Schemes?
Savings schemes can be defined as the instruments that help individuals manage their finances and provide investment opportunities to help them achieve their financial goals over a given period. The Government introduced these savings schemes to inculcate saving discipline among individuals and to provide risk-free investment opportunities. The savings earned from these schemes can be used for different purposes such as children’s education, marriage or other emergencies.
Types of Post Office Saving Schemes
The India Post provides various saving schemes as per the requirement of the public, and these schemes are both short-term and long-term. They provide an easy investment opportunity to the public. Presently, the Post Office provides nine different types of Postal Saving Schemes that cater to the needs of every individual. Let us discuss each Post Office Saving Scheme in detail.
- Post Office Savings Account: This is the first and the most common saving scheme under the Post Bank. This account is just like other savings bank accounts, but the only thing that separates it from the regular savings bank account is its holding and operating with a Post Office. Like other savings bank accounts, these accounts can also be transferred from one Post office to another. The interest rate on these savings account is also 4% per annum. The Post Office Savings Account can be opened just by depositing ₹20, but one has to maintain a minimum balance of ₹50 in the account.
- Post Office Monthly Income Scheme: Post Office Monthly Income Scheme or POMIS is another saving scheme offered by the post office that assures a guaranteed monthly income on a small investment made by the investor. Any Indian resident can open an MIS account with the post office. Even a minor can also open an MIS account, and if the minor is above 10 years of age, He/she can even operate the account. One can open an MIS account with a minimum amount of ₹1,500 and a maximum of ₹4,50,000 individually. But, if one opens an MIS account jointly, the maximum amount of deposit becomes 9 lakhs. The Post office offers an interest rate of 6.6% per annum under the POMIS with a maturity period of 5 years. POMIS scheme also offers liquidity of investment within a year. However, the bank charges 2% as a penalty on the investment if it is withdrawn between 1-3 years.
- Post Office Recurring Deposit Account: Recurring Deposit Account is another saving and investment instrument offered by the post office, where a person deposits a certain sum at monthly intervals for over 5 years. A recurring deposit account yields a 5.8% interest per annum that is compounded quarterly. If a person fails to pay the monthly instalment of nay month, he/she can be charged with a late fee of 5 paise for every 5 rupees. Recurring deposit accounts allow a 50% withdrawal after 1 year of investment.
- Post Office Time Deposit Scheme: It is another saving scheme offered by the Post Bank. Under this scheme, a person can invest a lump sum for 1, 2, 3, and 5 years of period. The time deposit yield different rates of interest depending on the tenure of the investment. For 1, 2, and 3 years of time deposit, the interest rate is 5.5%, but for 5 years, it is 6.7%. The minimum investment in a time deposit is ₹200, and there is no upper limit. The best feature of a time deposit is that a person can hold as many time deposit account as he/she wants. If a person invests for 5 years in a time deposit, he/she can claim deduction under section 80C of the Income Tax Act.
- Kisan Vikash Patra: Kisan Vikash Patra is another saving scheme that provides an annual interest rate of 6.9% on investment. Any citizen of India can invest in Kisan Vikash Patra with a minimum investment of ₹1,000. The amount invested under the saving scheme doubles every 10 years and 4 months. The Kisan Vikash Scheme are easily transferrable and can also be endorsed to third parties. The scheme offers the liquidity of cash after 2.5 years, starting from the date of investment.
- Senior Citizen Savings Scheme: The Senior Citizen Saving Scheme or SCSS is an investment scheme under the postal services offered to citizens above the age of 60 years. A person who is 55 years of age can also benefit from the scheme if h/she has taken voluntary retirement. The investment amount under this scheme can be only in multiples of 1000, and the maximum investment can be ₹15 lakhs. The account under the scheme can also be held and operated jointly. The Scheme provides an annual interest of 7.4% payable on the 1 day of each quarter. The scheme also facilitates premature withdrawals after a year and with a penalty of 1.5% of the investment.
- Public Provident Fund: Public Provident Fund is a Long term investment instrument offered by the Post bank. The maturity period of the investment is 15 years. The scheme offers 7.1% interest per annum compounded yearly. The minimum investment for the scheme is ₹500, and the maximum is ₹1.5 lakh per year. The Scheme allows one time or monthly deposit of the investment amount.
- National Savings Certificate: National Savings Certificate or NSC is an investment policy with a maturity period of 5 years and offers a yearly interest of 6.8%. The interest under the scheme is compounded semi-annually. A person can start investing in NSC with a minimum of ₹500, and there is no maximum limit to the investment. The certificates acquired under NSC can be used as security against bank loans.
- Sukanya Samriddhi Scheme: It is one of the most benefitting schemes under the Postal services. It was introduced by the Government of India to help girl children. The saving scheme offers the highest interest rate, which is 7.6% per annum. The minimum investment is ₹1,000, and the maximum investment is ₹1.5 lakhs per year. The investment amount shall be deposited yearly or monthly for 15 years, and after 15 years, the investment will continue to earn interest till maturity. The maturity period of the scheme is 21 years from the date of opening.
Comparison of Interest Rates And Taxability of Post Office Savings Scheme
In the above paragraphs, we discussed savings schemes and the types of saving schemes offered by Post Offices. Now let us compare the interest rates of these saving schemes and discuss their taxability.
|Name Of The Scheme||Interest Rates||Taxability|
|Post Office Savings Account||4.0% per annum, compounded annually||Taxable amount is exempted up to ₹50,000 on the total interest.|
|Post Office Monthly Income Scheme||6.6% per annum, payable monthly||The interest earned under the scheme is fully taxable.|
|Post Office Recurring Deposit||5.8% per annum, compounded quarterly||TDS is not applicable on the interest earned under the scheme, But interest is taxable as per an individual’s tax slab.|
|Post Office Time Deposit Scheme (5 years Tenure)||6.7% per annum||Tax savings up to ₹1.5 lakhs per annum, under section 80 C on a 5-year term deposit.|
|Kisan Vikash Patra||6.9% per annum, compounded annually||TDS is applicable on the interest earned, and the interest amount is exempted on maturity.|
|Senior Citizen Savings Scheme||7.4% per annum, compounded annually||Tax savings up to ₹1.5 lakhs per annum under section 80 C and TDS savings up to ₹50,000 on the total interest earned.|
|Public Provident Fund||7.1% per annum, compounded annually||A maximum deposit of 1.5 lakh is exempted under the Income-tax.|
|National Savings Certificate||6.8% per annum, compounded half-yearly||Tax relaxation up to ₹1.5 lakhs per annum.|
|Sukanya Samriddhi Scheme||7.6% per annum, compounded annually||A deposit of up to 1.5 lakhs is exempted. The interest earned on maturity is tax-free.|
Importance of Post Office Savings Schemes
Post office savings schemes are essential for an individual as well as the country’s economy for the following reasons:
- The first importance is that these savings schemes are risk-free and reliable as the Government backs them. These savings schemes offer the best and most profitable investment options to an individual to mobilise their funds.
- Secondly, these savings schemes offer the most attractive and reasonable rates of return to the investors. The rates of these schemes are revised every 3 months by the Ministry of Finances.
- The Savings Schemes under India Post are easy to open with very minimal documentation and quick enrolment.
- The savings schemes are designed for every individual across the different economic strata of the country.
- The post office savings scheme offer high tax benefits to the investors, which make it more attractive.