Post Office Saving Schemes: What You Should Know While Planning Your Investment

My late grandfather spent a considerable amount of his retired life in the post office. As a young girl, I often wondered what it was about the post office that fascinated him so much. I knew he wasn’t writing or receiving any letters.

The fact that the Department of Posts offer many different investment schemes is one of the major reasons why many retired and senior citizens prefer this form of investment.

From Public Provident Fund (PPF) to Senior Citizen Savings Scheme to income tax-saving five-year deposits, the investment schemes are many.

Here’s a look at some of the schemes and their features:

1. Post Office savings scheme

• Account can be opened by cash only
• Minimum balance to be maintained in a non-Cheque facility account is INR 50/-
• Cheque facility available if an account is opened with INR 500/- and for this purpose minimum balance of INR 500/-in an account is to be maintained
• Nomination facility is available at the time of opening and also after opening of account
• Account can be transferred from one post office to another
• At least one transaction of deposit or withdrawal in three financial years is necessary to keep the account active
• Deposits and withdrawals can be made through any electronic mode at CBS (Core Banking) post offices.
• Post Office savings accounts also come with an ATM facility.
• 4 percent interest rate is payable annually.

2. 5-Year Post Office recurring deposit account (RD)

• The account can be opened by cash / Cheque. In case of Cheque, the date of deposit shall be date of presentation of the Cheque
• Nomination facility is available at the time of opening and also after opening of account

Account can be transferred from one post office to another

• One withdrawal up to 50% of the balance allowed after one year
• If in any Post Office RD account, there is a monthly default amount. The depositor has to first pay the defaulted monthly deposit alongwith a default fee, and then pay the current month deposit.
• This scheme comes with an interest rate of 6.9 percent per annum.

3. Post Office Time Deposit Account

• The interest rate under Post Office Time Deposit Account is payable annually but calculated quarterly. The current interest rate on one to five-year deposits are as follows:
1-year account – 6.6%
2-year account – 6.7%
3-year account – 6.9%
5-year account – 7.4%
• There is no maximum deposit limit.
• The investment under 5-Year Post Office Time Deposit Account qualifies for the benefit of Section 80C of the Income Tax Act.
• The account can be transferred from one post office to another.

4. Post Office Monthly Income Scheme Account

Post Office Monthly Income Scheme or MIS is a popular investment scheme wherein an individual invests a particular amount and gets an assured monthly income in the form of interest.

• The account may be opened by an individual.
• The account can be opened by cash/Cheque, and in case of Cheque, the date of realisation of Cheque in the Govt. account shall be the date of opening of the account.
• Nomination facility is available at the time of opening and also after the opening of the account.
• The account can be transferred from one post office to another.
• Any number of accounts can be opened in any post office subject to maximum investment limit by adding balance in all accounts.
• Interest can be drawn through auto credit into savings account standing at the same post office, through PDCs or ECS.
• Can be prematurely en-cashed after one year, but before three years at the discount of 2% of the deposit and after three years at the discount of 1% of the deposit. (Discount means a deduction from the deposit.)
• This scheme comes with an interest rate of 7.3% per annum payable monthly.

5. Senior Citizens Savings Scheme (SCCS)

• An individual of the Age of 60 years or more may open the account.
• An individual of the age of 55 years or more but less than 60 years who have retired on superannuation or under VRS can also open account subject to the condition that the account is opened within one month of receipt of retirement benefits and the amount should not exceed the retirement benefits.
• Maturity period is five years.
• A depositor may operate more than one account in an individual capacity or jointly with a spouse (husband/wife).

The account can be opened by cash for the amount below INR 1 lakh and INR 1 Lakh and above by cheque only.

• In case of Cheque, the date of realisation of Cheque in Govt. account shall be the date of opening of the account.
• Nomination facility is available at the time of opening and also after the opening of the account.
• The account can be transferred from one post office to another.
• Interest can be drawn through auto credit into savings account standing at the same post office, through PDCs or Money Order.
• In case of SCSS accounts, quarterly interest shall be payable on the 1st working day of April, July, October and January. It will be applicable at all CBS Post Offices.
• Premature closure is allowed after one year on deduction of an amount equal to1.5% of the deposit & after two years 1% of the deposit.
• TDS is deducted at source on interest if the interest amount is more than INR 10,000/- p.a.

6. 15-year Public Provident Fund Account

• An individual can open account with INR 100/- but has to deposit minimum of INR 500/- in a financial year and maximum INR 1,50,000/-
• A joint account cannot be opened.
• The account can be opened by cash / Cheque, and In case of Cheque, the date of realisation of Cheque in Govt. account shall be the date of opening of the account.
• Nomination facility is available at the time of opening and also after the opening of the account. The account can be transferred from one post office to another.
• Maturity period is 15 years but the same can be extended within one year of maturity for further five years and so on.
• Maturity value can be retained without extension and without further deposits also.
• Premature closure is not allowed for 15 years.
• Deposits qualify for deduction from income under Sec. 80C of IT Act.
• Interest is completely tax-free.
• Withdrawal is permissible every year from the seventh financial year from the year of opening account.
• Loan facility available from 3rd financial year.

With the new financial year around the corner, we hope that this consolidated list will help plan your year better.

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