Post office is one of the oldest institutions in India, having been founded during the British era in October 1854. Initially, its sole purpose was to deliver mail (post), but it has since expanded to offer a variety of other financial services, including banking, insurance, and investments. The greatest benefit of these programs is their sovereign guarantee or government backing. Some post-office savings plans provide tax-savings benefits under Section 80C of the Income Tax Act, which is a delight for investors.
Table of Content
Savings Schemes Under Post Office Investments
1. Post Office Savings Account
- A ₹500 deposit is required to start a post office savings account.
- Domestic customers can open accounts under either single or joint ownership.
- Deposits in the post office account earn an annual interest rate of 4%.
- On request, you can get a chequebook, an ATM card, e-banking and mobile banking services, and other services with the account. At the end of each fiscal year, interest is credited.
- Individuals can deduct interest up to ₹10,000 from net taxable income earned from their Post Office Savings Account under Income Tax Act Section 80TTA.
2. 5-Year Post Office Recurring Deposit Account (RD)
- The term of this RD account is five years.
- You can agree to a minimum fixed monthly deposit payment of ₹100 and receive interest at a rate of 6.5% p.a.
- Quarterly interest is compounded.
- After completing 12 installments without default, you can obtain a loan of up to 50% against the deposit available in the account.
3. Post Office Time Deposit Account (TD)
- There are four tenure options for post office time deposit accounts: one year, two years, three years, and five years.
- This account accepts a minimum deposit of ₹1,000.
- The interest is calculated quarterly but due annually.
- The investment in the account with a five-year maturity period will be eligible for the Section 80C deduction.
- The Post Office TD account can be pledged as security to scheduled or cooperative banks.
- Deposits cannot be withdrawn until six months have passed from the date of deposit.
4. Post Office Monthly Income Scheme Account (MIS)
- A single account can accept deposits of up to ₹9 lakh and a joint account can accept deposits of up to ₹15 lakh.
- Through this account, you can earn 7.4% p.a. in interest and receive a monthly fixed income from the scheme.
- POMIS has a 5-year maturity period.
- You cannot close the account before one year has passed. Premature closure for more than one year may result in penalties.
The interest income from a post office TD/RD is earned at the end of the term, but interest from a post office MIS is received monthly during the scheme’s tenure.
5. Senior Citizen Savings Scheme (SCSS)
- This is a government-backed retirement plan that allows you to make a single lump sum deposit.
- The deposit might range between ₹1,000 and ₹30 lakh.
- The account can be opened either separately or jointly with your spouse.
- For the second quarter of fiscal year 2023-24, the program offers an annual interest rate of 8.2%. The interest is due every three months.
- Individuals above the age of 60 may open this account.
- Retired employees between the ages of 55 and 60, as well as retired military personnel between the ages of 50 and 60, can open an account if they invest their retirement benefits within one month of receiving them.
This scheme’s investment is deductible under Section 80C of the Income Tax Act.
6. 15-Year Public Provident Fund Account (PPF)
- PPF is popular among salaried individuals as an investment and retirement strategy because it provides income tax deductions of up to ₹1.5 lakh every fiscal year under Section 80C.
- The account requires a minimum deposit of ₹500 and a maximum deposit of ₹1.5 lakh.
- The account is valid for 15 years from the date it was opened. To keep the account operational, you only need to pay ₹500 per fiscal year.
- The program provides a yearly compound interest rate of 7.1%. The interest earned on this account is also tax-free.
- The amount invested in a PPF is deductible under Section 80C of the Income Tax Act.
- The investor has the option to extend the account for another five years.
7. Kisan Vikas Patra (KVP)
- The attraction of this strategy is that you can double your investment over the account’s tenure.
- This account requires a minimum deposit of ₹1,000. According to the rates in effect for the second quarter of fiscal year 2023-24, the relevant interest rate is 7.5% p.a.
- The account is valid for 120 months (10 years). During this period, the money invested is doubled. In 120 months, a ₹1 lakh investment in KVP will rise to ₹2 lakh.
- Please keep in mind that the account’s tenure fluctuates with the interest rate.
- KVP can be pledged as security with either scheduled or cooperative banks.
8. Sukanya Samriddhi Accounts (SSA)
- This is a government program aimed at improving the financial well-being of girls.
- Only girl children under the age of 10 can apply for SSA.
- The account must be opened and maintained by parents or guardians until the girl child reaches the age of 18.
- The minimum deposit is ₹250, with a maximum of ₹1.5 lakh per fiscal year.
- An annual interest rate of 8% is applicable. Every year, interest is calculated and compounded.
- The interest earned is tax-free.
- The guardian can manage the account until the girl child reaches the age of 18.
- You can deposit for a maximum of 15 years from the day the account is opened.
- Deposits made in an SSA account are deductible under Section 80C of the Income Tax Act.
Advantages of the Post Office Investment-Saving Schemes in India
1. Easy to Invest: The savings plans are simple to join and are ideal for both rural and urban investors. These schemes are available to anyone who wants to hedge risk in their portfolio for a fixed good return. Because of their ease of use and accessibility, these investments are a popular savings and investment alternative.
2. Documentation and Procedures: Because the government backs these savings schemes, limited documentation and proper procedures in the post office ensure that they are simple to choose and safe to lock into.
3. Tax Exemption: Most of these programs qualify for Section 80C tax deductions on the deposit amount. A few programmes, such as the PPF and the Sukanya Samriddhi Yojana, exempt the interest earned from taxation.
4. Interest Rates: These plans offer risk-free interest rates ranging from 4% to 9%. The Government of India undertakes these investment possibilities with a low level of risk.
How to Open a Post Office Saving Schemes Account?
Post Office Saving Schemes are appropriate for those with a low risk tolerance. These schemes’ returns are unaffected by market fluctuations, which makes them ideal for risk-averse investors who wish to maximize their savings. You may open a post office savings scheme account online via Internet banking, a mobile application, or by downloading an account opening form.
1. Through Internet Banking
Step 1: Go to the Internet Banking website of the Department of Posts (DOP).
Step 2: Select ‘New User Activation’ from the drop-down menu.
Step 3: Fill in the ‘Customer ID’ and ‘Account ID’ fields and click the ‘Continue’ button. You can also go to your local post office and fill out an application form for Internet banking activation and submit it together with the necessary documentation.
Step 4: After you’ve activated Internet banking, enter your user ID and password to access your DOP Internet banking.
Step 5: On the menu, select the ‘General Service’ tab, then the ‘Service Request’ tab.
Step 6: Click the ‘New Requests’ tab under the ‘Service Request’ section.
Step 7: From the list of available options, choose the type of account you want to open.
Step 8: Fill out the application form and click the ‘Submit’ button.
2. Through Mobile App
Step 1: From the Google Play Store, download and install the ‘India Post Mobile Banking’ app on your mobile device.
Step 2: After successfully logging in, go to the home screen and pick the ‘Requests’ button to start a post office saving account.
Step 3: Fill in the blanks with information such as the deposit amount, duration, the account from which you wish to deposit the funds, nominee, and so on, and then submit.
3. By Downloading the Application Form
Step 1: Go to the post office’s official website and download and print the appropriate application form.
Step 2: Attach all required paperwork.
Step 3: Go to your local post office and present the papers to the relevant officials.
Step 4: Pay the minimum required to open the account/scheme.
Step 5: Postal officials will verify your application, open your account, and provide you with the account passbook.
Documents Required to Open Post Office Savings Scheme
1. Account Opening Form
2. KYC Form (For new customers/changes to KYC information)
3. PAN Card
4. Aadhaar card, if Aadhaar is not made available, any of the following document may be submitted:
- Passport
- Driver’s identification
- Voter ID card
- Job Card issued by MNREGA and signed by a state official
- Letter issues by The National Population Register
- Proof of birth date or a birth certificate is required for minor accounts.