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Post Office Saving Schemes-Types, Interest Rates & Benefits

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Synopsis:

Post office saving schemes provide great options to those who want a fixed return over a period of time. Moreover, such schemes are backed by the Government of India. Hence, they are risk-free in nature.

Post office schemes offer anywhere between 4% and 8% interest per annum. Hence, they offer a great alternative to savings with a bank. They are one of the most accessible investment avenues as well because you can find post offices anywhere in India. Besides, many post office schemes offer tax benefits on interest up to a point.

Post Office Saving Schemes

Post office saving schemes are one of the most popular avenues of investment for millions of people in India. These schemes are offered by the Indian Postal Service and they provide a guaranteed return. You may wonder as to how they provide a guaranteed return. These schemes are backed by the Government of India. In other words, they have a sovereign guarantee. Hence, they are risk-free.

Within the larger category of post-office saving schemes, certain schemes provide tax-savings benefits under the Section 80C of the Income Tax Act. These schemes provide around 4-8% interest per annum. Overall, there are three main benefits of post office saving schemes. One, they offer guaranteed returns. Two, they offer a competitive interest rate. Third, some of them provide tax-savings.

List of Post Office Saving Schemes and their Interest Rates    


Scheme

Interest Rate

Minimum Investment (₹)

Maximum Investment (₹)

Eligibility

Tax Implications

Post Office Savings Account

4.0%

500

No limit

Individuals including minors

Interest is exempt from tax up to ₹10,000

National Savings Recurring Deposit Account

6.7%

100 per month in the multiples of 10

No limit

Individuals including minors

-

National Savings Time Deposit Account

6.9%-7.5%

1,000 and multiples of 100

No limit

Individuals including minors

Section 80C deduction on deposit for 5 years

National Savings Monthly Income Account

7.4% per annum payable monthly

1,000

Maximum ₹4.5 lakhs for a single account and ₹9 lakhs for a joint account

Individuals including minors

Interest earned is taxable. There are no deductions on the deposits as per Section 80C

Senior Citizen Savings Scheme Account

8.2% per annum (compounded annually)

1,000

Maximum ₹30 lakhs

Persons older than 60 years. And, those older than 50 years and who have taken VRS or superannuation are also eligible.

There are tax benefits on deposits under this scheme. As per Section 80C, TDS is deducted if the interest earned is higher than ₹50,000

Public Provident Fund Account (PPF)

7.1% per annum (compounded annually)

500

Maximum ₹1.5 lakhs per financial year

Individuals and minors

For deposits, interest earned is tax-free, as tax relief is available under Section 80C

Additional Read: What is Demat Account: Importance, Features and Types

Process to Apply for a Savings Scheme in Post Office  

If you want to apply for a savings scheme in a post office, please follow these steps:

  1. Visit the post office in your vicinity: You should find the post office nearest to you. You also need to ensure that it offers the saving schemes you want.

  2. Get the application form: After finalising the scheme you want, you should get the application form to apply for it. You can get it at the counter of the nearest post office.

  3. Fill the form: Now, you have to fill the form by providing all the required details. After filling the form, you must go through it at least once.

  4. Submit the form: Having filled out the form, you need to submit it. While submitting, you have to provide the required documents and the initial deposit amount. Each scheme can have different criteria for the minimum deposit amount. Hence, you need to meet the criteria while applying for a scheme.

  5. Receive the account certificate/passbook: After your application is processed, you will get the account certificate/passbook, which will confirm your investment.

Documents Required for Post Office Saving Schemes

The documents required may vary from scheme to scheme. However, the following documents are always needed:

  1. Properly-filled application form: You need to provide this form and ensure that all the details you have entered are absolutely correct.

  2. Proof of Identity: A government-issued ID card, like Aadhar, Voter’s ID, or Passport.

  3. Proof of Address: This can be in the form of a bank statement or a rental agreement. However, you can also provide your Aadhar, Voter’s ID, or Passport for this purpose.

  4. Passport-size photographs: A few passport-sized photographs are required to apply for a post office saving scheme.

  5. Proof of Age: Certain post office saving schemes have age-related restrictions. Hence, you need to submit proof of age, which can be your SSC certificate or any other official document that has your date of birth.

  6. Nomination form: A nomination form has to be submitted in the case of unforeseen events.

Additional Read: What is Trading Account: Definition, Types & Benefits

Advantages of Investments in Post Office Schemes  

The main benefits of investing in post office schemes are explained below:

  • Simple Investment Process: The process of applying to a post office scheme is extremely simple. All you have to do is visit the nearest post office and follow a simple process.

  • Easily Accessible: You can find the branches of post offices even in small villages in India. Hence, these schemes are easily accessible.

  • Long-term Benefits: These schemes offer competitive interest rates. Some of them even offer tax savings. Hence, over time, you can create a sizeable fund by investing in post office schemes.

  • Risk-free and Competitive Interest Rates: As these schemes are backed by the Government of India, they offer a risk-free return because you are assured that you will get your interest and principal back. Besides, the interest rates offered are competitive when compared to the return on other fixed-interest options available.

  • Customized Products to Suit Investor Needs: Post office saving schemes have several options based on your age and requirements. For example, there are separate schemes for senior citizens and separate schemes for individuals under the age of 60.

Conclusion

If you invest in the Indian stock market and risk management is one of your goals, then you should consider post office saving schemes. These schemes have a sovereign guarantee. Hence, they are risk-free. Their extremely low risk can balance out the risks you will take by investing in equities. Hence, they can be a great investment option if risk management is your objective.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

For All Disclaimers Click Here: https://bit.ly/3Tcsfuc

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Frequently Asked Questions

What are the different types of post office saving schemes in India?

Answer Field

There are several kinds of post office saving schemes in India. For example, the Post Office Savings account scheme offers a 4% per annum interest rate. Besides, you can open this account with a minimum investment of just ₹500. Then, there is a Post Office Recurring Deposit Account Scheme, which requires a minimum deposit of ₹100 per month and offers an interest rate of 6.7% per annum compounded quarterly.

How can I invest in post office saving schemes online?

Answer Field

You can invest in such schemes online through the India Post Payments Bank (IPPB) or through the official Post Office e-Services portal.  You will have to open an account with the IPPB by either downloading its app or accessing its website. You will have to complete the KYC process as well.

What is the current interest rate for post office saving schemes?

Answer Field

The interest rates vary from scheme to scheme. For example, the National Savings Time Deposit Account scheme pays 6.9%-7.5% per annum interest rate. However, the National Savings Monthly Income Account scheme pays 7.4% per annum interest payable monthly.

Are post office saving schemes tax-free?

Answer Field

Certain post office saving schemes are tax-free up to a point, while others are not. For example, in the case of a Post Office Savings Account (POSA), interest up to ₹10,000 is eligible for tax exemption, if you are less than 60 years of age. However, the exemption limit is ₹50,000 for senior citizens (60 years and above).

Which post office saving scheme is the best for senior citizens?

Answer Field

If you are a senior citizen, you can consider the Senior Citizen Savings Scheme, which offers 8.2% per annum interest (compounded annually). Under the tax laws, a TDS is deducted on this scheme if the interest earned is higher than ₹50,000.

How do I withdraw money from a post office saving scheme?

Answer Field

You can withdraw your money offline by visiting the post office branch where you have your account. You have to just fill out a withdrawal slip and follow a simple process. You can withdraw your money online in case you have linked your post office savings account to IPPB or have an IPPB Savings Account.

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