Post Office Schemes

The main financial services offered by the Department of Posts are the Post Office Savings Bank. It is the largest and oldest banking service institution in the country. The Department of Posts operates the Post Office Savings Scheme function on behalf of the Ministry of Finance, Government of India. Under this scheme, more than 20.50 crores savings account are operated. These accounts are operated through more than 1,54,000 post offices across the country

Indian Post offers several Savings Schemes which are:
  • backed by the Government of India
  • safe, secure and risk-free investment options
  • not deducting any Tax at Source ( NO TDS)
  • providing nomination facility
  • transferable to any Post Office anywhere in India
  • offering attractive rates of interest.


TYPES OF POST OFFICE SCHEMES

Following are schemes offered by post office:

(1) Recurring Deposit Account (RDA):

  • Amount of Investments: min - Rs. 10 p.m. or any amount in multiples of Rs. 5
  • Amount of Investments: max - No maximum limit
  • Payment Terms: The deposit shall be paid as monthly installments
  • Maturity Terms: One withdrawal is allowed after one year of opening a post-office RDA or You can withdraw up to half the balance lying to your credit at an interest charged at 15%
  • Returns: The PO RD offer a fixed rate of interest, currently at 8.40 %p.a. compounded qtr.
  • Tax Considerations: Interest is liable to tax however there is No TDS from interest


(2) Post Office Monthly Income Scheme (MIS):

  • Feature: MIS provides a source of regular income on a long term basis
  • Amount of Investments: Rs 15,000/- and above
  • Returns: The post-office MIS gives a return of 8.50% plus a bonus of 5 per cent on maturity*.
  • Maturity: The duration of MIS is 5 years. However, premature closure of the account is permitted any time after the expiry of a period of one year of opening the account.
  • Tax Considerations: Interest is liable to tax however there is No TDS from interest
  • Other considerations: Only one deposit is permitted and Only individuals can open the account


*for accounts opened before 1st December 2011, not payable thereafter



(3) Time Deposit:

  • Features: Time Deposit is a banking service similar to a Bank Fixed Deposit offered by Department of post, Government of India at all post office counters in the country. This scheme is meant for those investors who want to deposit a lump sum of money for a fixed period.
  • Amount of Investment: minimum- Rs 200; maximum- no limit
  • Maturity: Time Deposits can be made for the period of 1 year, 2 years, 3 years and 5 years.
  • Returns: This investment option pays annual interest rates of 8.20%, 8.30%, 8.40% and 8.50% respectively, compounded quarterly.
  • Tax Considerations: Interest is liable to tax however there is No TDS from interest


(4) Senior Citizen Scheme:

  • Features: "Senior Citizens Savings Scheme" is launched for Citizens of 60 years of age and above. Citizens who have retired under a voluntary or a special voluntary retirement scheme and have attained the age of 55 years are also eligible, subject to specified conditions
  • Maturity: Maturity period of the deposit will be five years, extendable by another three years.
  • Returns: The deposit will carry an interest of 9.30% per annum
  • Tax Considerations: Interest is liable to tax however there is No TDS from interest


(5) Public Provident Fund:

  • The rate of interest is 8.80% p.a. compounded annually w.e.f. 1st April 2012.
  • The minimum deposit is 500/- p.a
  • The maximum is Rs. 1,00,000/- p.a
  • Interest is totally tax free.
  • Tax saving instrument under section 80C.
  • Loan facility available from third year.
  • The Public Provident Fund Scheme is a statutory scheme of the Central Government of India.
  • The Scheme is for 15 years.


w.e.f. 1.12.2011 w.e.f. 1.4.2012
Savings Deposit 4.0 4.0
1 year Time Deposit 7.7 8.2
2 year Time Deposit 7.8 8.3
3 year Time Deposit 8.0 8.4
5 year Time Deposit 8.3 8.5
5 year Recurring Deposit 8.0 8.4
5 year SCSS 9.0 9.3
5 year MIS 8.2 8.5
5 year NSC 8.4 8.6
10 year NISC 8.7 8.9
PPF 8.6 8.8
 

Post Office MIS



   Salient Features

  • Interest rate of 8.20% per annum payable monthly.

  • 5% bonus also payable on maturity (for accounts opened before 1st December 2011), for accounts opened after 1st December 2011 no bonus payable on maturity.

  • Maturity period is 5 years.

  • Minimum investment amount is Rs.1500/- or in multiple thereof.

  • Maximum amount is Rs. 4.50 lakhs in a single account and Rs.9 lakhs in a joint account.

  • Premature encashment facility after one year.

  • No TDS.

  • Account can be opened by an individual, two/three adults jointly, and a minor through a guardian.

  • A minor having attained 10 years of age can open an account in his/her own name directly.

  • Non-Resident Indian / HUF cannot open an Account. Minors have a separate limit of investment of Rs. 3 lakhs and the same is not clubbed with the limit of guardian.

  • A separate account is opened for each deposit.

  • Any number of accounts can be opened subject to the maximum prescribed limit.

  • Facility of automatic credit of monthly interest to saving account if accounts are at the same post office.

  • Facility of premature closure of account after 1 year to 3 years @ 2.00% discount.

  • Deduction of 1% if account is closed prematurely at any time after three years.

  • Facility of reinvestment on maturity of an account.

  • Interest not withdrawn does not carry any interest.

  • Maturity proceeds not drawn are eligible to earn savings account interest rate for a maximum period of two years.

  • Account is transferable to any Post Office in India, free of cost.

  • Nomination facility is available.

  • Rebate under section 80 C is not admissible.

  • Most suitable scheme for senior citizens and for those who need regular monthly income.

  • Deposits are exempt from Wealth Tax.


National Saving Scheme


6 Years National Savings certificate 8th Issue


   Salient Features

  • Rs. 1000/- grows to Rs. 1509/- in five years.

  • Minimum investment Rs. 500/-

  • Maximum no limit.

  • Certificates can be pledged as security against a loan to banks/ financial Institutions.

  • A Tax saving investment under Sec 80C

  • Individual or minor can apply

  • Rate of interest 8.40%p.a. compounded half yearly

  • Two adults, individuals, and minor through guardian can purchase.

  • Companies, Trusts, Societies or any other Institutions are not eligible to purchase.

  • Non-resident Indian/HUF cannot purchase.

  • No premature encashment.

  • Annual interest earned is deemed to be reinvested and qualifies for tax rebate for the first 5 years under section 80 C of the Income Tax Act.

  • Maturity proceeds not drawn are eligible to Post Office Savings Account interest for a maximum period of two years.

  • Facility of reinvestment on maturity.

  • Facility of encashment of certificates through banks.

  • Certificates are encashable at any Post Office in India before maturity by way of transfer to desired Post Office.

  • Certificates are transferable to any Post office in India.

  • Certificates are transferable from one person to another person before maturity.

  • Duplicate certificate can be issued for in case the orginal one gets lost, stolen, destroyed, mutilated or defaced certificate.

  • Nomination facility is available.

  • Facility of purchase/payment to the holder of Power of Attorney.

  • Tax Saving instrument - Rebate admissible under section 80 C of the Income Tax Act.

  • Deposits are exempt from Wealth Tax.

  • New type of NSCs with a maturity of 10 years bearing a rate of interest of 8.70% would also be issued.

  • This reduction in the term from 6 to 5 years means you would have your money locked in for lesser time. If you want to stay invested for longer, you can invest in the 10 year NSCs.

Post Office Time Deposit Scheme


    Salient Features

  • Minimum amount of deposit is Rs.200/-.

  • No maximum limit.

  • Account can be closed after 6 months but before one year without any interestp.

  • Facility of redeposit on maturity of an account.

  • No interest is payable on undrawn interest amount.

  • Account can be opened by an individual, two adults jointly and minor through guardian.

  • A Minor who has attained the age of 10 years can open the account in his/her own name to be operated directly.

  • Non Resident Indian / HUF cannot open the account.

  • Any number of accounts can be opened.

  • Two, three and Five years accounts can be closed after one year at a discounted rate of interest.

  • Deposits not drawn on maturity are eligible to saving account interest rate for a maximum period of two years.

  • Account can be pledged as security against a loan to banks/ Government institutions.

  • Accounts are transferable from one Post office to any Post office in India.

  • Rebate under section 80-C is not admissible.

  • Interest income is taxable.

  • Deposits are exempt from wealth tax.

  • No T.D.S.

  • Nomination facility available.

Senior Citizen Scheme


  Salient Features

  • 9% interest per annum payable quarterly.

  • Minimum Deposit: Rs 1000 and multiples thereof.

  • Maximum Limit : 15 Lakhs.

  • The scheme is for 5 years and can be extended for a further period of 3 years.

  • Premature closure facility is available after 1 year with nominal penelaty.

  • Risk free investment.

  • Individual aged of 60 years and above can invest.

  • Retiring employees aged 55 years and above can invest under scheme.

  • A tax saving instrument

  • Joint account can be opened with spouse.

  • Best Return

  • Very Safe investment - A central govt scheme


Objective Of The Scheme

We are all well aware that interest rate on Small Saving Scheme has been reduced to 5% in the last four years. The decline in interest rate was initiated from January 2000.

The interest rate on December 31, 1999 in Monthly Income Scheme was 13% which came down to 8% with effect form March 31,2003. The decrease in the interest rate had a negative impact on the lives of Senior Citizens. The dwindling interest income was cause of concern and hardship for them .Interest income is a lifetime benefit for the senior citizens. The Budget for 2004-2005 had two beneficial aspects, as far as small Saving Schemes are concerned.

The first one is that rates of interest on small savings have been kept stable with no change in rate of interest in any Post Office scheme. The second benefit came with the introduction of Senior Citizen Saving Scheme-2004 offering a higher rate of interest as compare to any other small savings scheme. The scheme has come into operation from August 2, 2004. The main objective of the scheme is to provide relief to the senior citizens and to check the further decline in their interest income.

Public Provident Fund


    Salient Features

  • The rate of interest is 8.60% p.a. compounded annually.

  • The minimum deposit is 500/- p.a

  • The maximum is Rs. 1,00,000/- p.a

  • Interest is totally tax free.

  • Tax saving instrument under section 80C.

  • Loan facility available from third year.

  • The Public Provident Fund Scheme is a statutory scheme of the Central Government of India.

  • The Scheme is for 15 years.

  • One deposit with a minimum amount of Rs.500/- is mandatory in each financial year.

  • The deposit can be in lumpsum or in convenient installments, not more than 12 installments in a year or two installments in a month, subject to total deposit of Rs.1,00,000/-.

  • It is not necessary to make a deposit in every month of the year.

  • The amount of deposit can be varied to suit the convenience of the account holders.

  • The account in which deposits are not made for any reason is treated as discontinued, account and such an account cannot be closed before maturity.

  • The discontinued account can be activated by payment of the minimum deposit of Rs.500/- with default fee of Rs.50/- for each defaulted year.

  • The account can be opened by an individual or a minor through the guardian.

  • Joint account is not permissible.

  • Those who are contributing to GPF Fund or EDF account can also open a PPF account.

  • A Power of Attorney holder can neither open nor operate a PPF account.

  • The grand father/mother cannot open a PPF on behalf of his/her minor grand son/daughter.

  • The deposits shall be in multiples of Rs.5/- subject to minimum of Rs.500/-.

  • The deposit in a minor account is clubbed with the deposit of the account of the guardian for the limit of Rs. 1,00,000/-.

  • No age is prescribed for opening a PPF account.

  • Interest is not contractual but the rate is notified by the Ministry of Finance, Govt. of India, at the end of each year.

  • The facility of first withdrawal in the 7th year of the account subject, to a limit of 50% of the amount at credit preceding three year balance.

  • Thereafter one withdrawal in every year is permissible.

  • Premature closure of a PPF Account is not permissible except in case of death.

  • Nominee/legal heir of PPF Account holder on death of the account holder cannot continue the account.

  • The account has to be closed in such case.

  • The account holder has an option to extend the PPF account for any period in a block of 5 years at each time.

  • The account holder can retain the account after maturity for any period without making any further deposits.

  • The balance in the account will continue to earn interest at normal rate as admissible till the account is closed.

  • One withdrawal in each financial year is also admissible in such account.

  • A PPF account can be opened either in a Post Office or in a Nationalsed Banks.

  • The Account is transferable from one Post Office to another and from Post Office to Bank or from a Bank to a Post office.

  • Account is transferable from one Bank to another bank as well as within the bank to any branch.

  • Deposits in PPF qualify for rebate under section 80-C of Income Tax Act.

  • The interest on deposits is totally tax free.

  • Deposits are exempt from wealth tax.

  • The balance amount in the PPF account is not subject to attachment under any order or decree of court in respect of any debt or liability.

  • Nomination facility is available.

  • The Best option for long term investment.

  • Loans can be taken from PPF account at the rate of 2.00% per year.