In many countries, post offices operate not only postal services but also leverage their wide network to extend the reach of financial services and small investments to even those depositors who do not have access to banks. So Postal Savings Schemes (or Post Office Saving Schemes) have been typically regarded as a safe, convenient & widely available method to save money and promote savings among the middle and lower middle class sections of society. The first nation to offer Postal Savings Schemes was Great Britain, followed by Japan, China, Korea, Germany, Brazil, France, South Africa, Sri Lanka, etc.
In India too, post offices offer various savings and investment products on their own or on behalf of the government of India. The most prevalent Post Office Savings Schemes at present are:
- Post Office Savings Account
- Recurring Deposits (RDs)/Term Deposits (TDs)
- Post Office Monthly Income Scheme (POMIS)
- National Savings Certificates (NSCs)
- Kisan Vikas Patra (KVP)
- Senior Citizens Savings Scheme (SCSS)
In addition to the above, Indian post offices also act as nodal points to invest and transact in your Provident Fund Account and newly launched Sukanya Samriddhi Account.
- Public Provident Fund (PPF)
- Sukanya Samriddhi Accounts (SSA)
Types & Features of Postal Savings Schemes
- Post Office Savings Account –Your savings account in a post office is as good as a bank account you maintain with any public sector bank. A Post Office Savings account doesn’t come with a cheque book facility like your normal bank account. You will continue to earn 4% annual interest and interest amount up to ₹10,000 will be exempted from tax under section 80TTA.
- Recurring Deposits (RDs)/Term Deposits (TDs) –Like the RD or FD that you do with a bank, you can make an RD or FD with a post office. Currently the interest rate on recurring deposits RD) and term deposits (TD) stands at 8.40% for all tenures, except fixed term deposit of 5 years tenure where the interest is 8.50% per annum. A 5-year term deposit with a lock-in clause also gives you the benefit of it being treated as investment under section 80C and hence helps you save on tax under section 80C.
- Post Office Monthly Income Scheme (POMIS) –Among the most selling investment products of post offices at one time, POMIS offered a terminal bonus of 10% and then 5%. However, the Post Office Monthly Income Scheme is getting more and more unpopular these days. Compared to the Post Office MIS, today you have better choices in terms of bank Fixed Deposits (FDs) as they bring you a relatively higher rate of interest, better liquidity and quarterly interest payments.
- National Savings Certificates (NSCs) –These are one time lump sum investment products which you can buy at any post office network in India. 5-year NSCs and 10-year NSCs will give you 8.50% and 8.80% respectively in the current financial year. Also, your investment will earn you tax exemption under section 80C.
- Kisan Vikas Patra (KVP) – KVP has been recently re-introduced by the government of India. Your investments in KVP can double your money in 100 months, which gives you an annual return of 8.67% upon maturity. The USP of Kisan Vikas Patra is that the Investment Certificates in this scheme bear no name and hence they are transferrable from one person to another.
- Senior Citizens Savings Scheme (SCSS) –Senior citizens are most concerned about the security of their money. So when it comes to safety and trust, what can be a better source of investment than the Indian Post Office which is fully owned by the Government of India! For senior citizens, Post Offices have special savings schemes where the rate of interest is higher. Recently, the interest rate on Senior Citizen Savings Scheme has also been increased by 0.10% to 9.30% from 9.20% earlier. Though your investment amount will get you a deduction under section 80C, the interest earned is taxable and subject to TDS as well.
Why You Should Invest in Post Office Saving Schemes?
Most of the Post Office Savings Schemes offered by Indian Post Offices have been developed with banks and are hence commonly available with banks also. Post Office Saving Schemes (or Postal Savings Schemes) assure you of Safety, Trust, Return on Investment, Tax Benefits and can be easily obtained from a post office.
The basic principle of investment is that you should diversify your portfolio as much as possible and hence Postal Savings Schemes help enrich your investment portfolio. If you go for riskier products like equity, some part of your money must be put into safe products like Postal Deposits. For a detailed explanation of how we can help you to invest smarter, just give us a call. We will analyse your investment needs and help you with a Postal Savings Scheme that works best for you.
Below is a list of the Postal Savings Schemes we can help you with:
|Scheme||Interest Rate wef 1st April 2015||Maturity Period||Remarks|
|Recurring Deposit||8.40%||5 yrs||Maturity Value is 7465.30% of Monthly Invetsment Amount|
|Term Deposit / Fixed Deposit||8.40%||1 yr||Invetsments in 5year term deposit qualify for tax deduction u/s 80C|
|Mothly Income Scheme||8.40%||5 yrs||Interest Income Taxable|
|National Savings Certificate (NSC)||8.50%||5 yrs||Tax deduction u/s 80C. Maturity Value is 151.62% of principle invetsment|
|8.80%||10 yrs||Tax deduction u/s 80C. Maturity Value is 236.60% of principle invetsment|
|Kisan Vikas Patra (KVP)||8.67%||100 months||Transferable Instrument|
|Senior Citizen Savinngs Scheme (SCSS)||9.30%||5 yrs||Tax deduction u/s 80C, Interest Income taxable, Interest paybale quarterly|