The post office offers various types of deposit schemes for those looking to invest. These instruments are also known as small savings schemes. The USP of these schemes is their sovereign guarantee, i.e., they are backed by the central government. Some of these schemes such as NSC, SCSS etc. also offer tax-saving benefits under section 80C of the Income-tax Act.

Interest rates on these schemes are reviewed and fixed every quarter by the government. Here is a look at these schemes in detail:

Senior Citizen Savings Scheme (SCSS)

Senior citizens, i.e., those aged 60 years and above, can invest in Senior Citizen Savings Scheme to earn regular interest income. Interest earned on deposits under this scheme is payable quarterly. There is a lock-in period of five years for the principal but premature withdrawal is allowed after the completion of one year after paying a penalty. Currently, the maximum that can be invested in this scheme by any individual is capped at Rs 15 lakh.

The account can be opened singly or jointly with your spouse. Deposits above Rs 1 lakh will be accepted via cheque only. The scheme qualifies for tax break under section 80C. Click here to read all about the Senior Citizen Savings Scheme.

Sukanya Samriddhi Yojana (SSY)

This scheme comes under the ‘Beti Bachao Beti Padhao’ campaign and enjoys exempt-exempt-exempt (EEE) tax status. This means that the investment amount, the interest earned and maturity amount all are tax exempt. Parents or legal guardians can open only one account per girl child and a maximum of two accounts in the name of two different girl children.

The maturity amount is payable after the completion of 21 years. Penalty will be levied if the minimum amount required is not deposited in a single financial year. Click here to know all about Sukanya Samriddhi Yojana.

Current interest rates on Post office deposit schemes

Instrument Interest rate (%) from 01.07.2020 Min amt (Rs) Max amt (Rs)
Senior Citizen Saving Scheme 7.40 1000 15 lakh
Sukanya Samriddhi Account 7.60 250 1.50 lakh
Public Provident Fund 7.10 500 1.50 lakh per annum
5 Yr NSC – VIII Issue 6.80 1000 No limit
Time Deposit# 5.50-6.70 1000 No limit
Post Office Monthly Income Scheme 6.60 1000 Single: 4.50 lakh
Post Office Monthly Income Scheme 6.60 1000 Joint: 9 lakh
Kisan Vikas Patra 6.90 1000 No limit
Recurring Deposits 5.80 100 No limit
Savings Account 4.00 500 No limit

Public Provident Fund (PPF)

The PPF is another popular investment avenue which gets the exempt-exempt-exempt tax status. Although it comes with a lock-in period of 15 years, partial withdrawal is allowed from the seventh year. The loan facility is also available from the third year. Click here to know how to open PPF account.

Note that the PPF account cannot be attached by a person or entity in lieu of unpaid debt or liability. Even a court order or decree cannot make a person liable to pay off his debts using money from PPF accounts. Click here to know about lesser known facts about PPF.

5-year NSC VIII Issue

National Savings Certificates (NSC) come with a lock-in period of five years. Investment in this scheme can be made either singly, jointly or on behalf of a minor. The scheme also qualifies for tax deduction under section 80C. Here the interest is not paid but rather re-invested. The re-invested interest is also eligible for deduction under section 80C (except for 5th year).

Post office time deposit (POTD)

Post office also accepts time deposits which are similar to a bank FD. A Term Deposit (TD) can be placed for any of the four tenures- 1, 2, 3, and 5 years. Even a minor above the age of 10 years can invest in the scheme. A five-year time deposit also offers tax benefit under section 80C. Click here to read how to invest in post office time deposit.

Post Office Monthly Income Scheme (POMIS)

POMIS only offers monthly interest payment to investors. Individuals (singly or jointly) or minors aged 10 years and above can invest in the scheme. The scheme has a tenure of five years. The interest will be auto-credited into the investor’s savings account at the same post office. The premature withdrawal facility can be availed after the completion of one year by paying some penal amount.

Kisan Vikas Patra (KVP)

If you wish to double your investment amount, then you can look to invest in KVP. As for other small savings schemes the rate of interest is reviewed quarterly by the government and the time period in which the money invested doubles, therefore, varies with this interest rate. The rate and the time period normally remain fixed for one quarter.

Post office recurring deposits (RD)

To invest small fixed amounts of money at regular intervals, one can open a 5-year RD account with the post office. There is no limit on the number of accounts that can be opened. There is a default fee of Rs 0.05 for every Rs 5 of deposit. After 4 regular defaults, the account will be discontinued but can be revived within two months.

Rebate is offered on deposits made six months or more in advance of the due date. Post maturity, the RD account can be extended for another five years.

Post office savings account

Like a bank savings account, one can also open a savings account with a post office and interest is paid on the balance in the savings account by the post office. Account can be opened with cash only with minimum of Rs 20 and no maximum limit. For a non-cheque facility account, minimum balance to be maintained is of Rs 50. To avail the cheque facility, minimum balance of Rs 500 is to be maintained.

Source:- economictimes