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6 Popular Post Office Investment Schemes in India

Know the features of different investment schemes from India Post

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The Indian Post Office offers a number of savings scheme that feature guaranteed returns and many of these offer tax benefits too. Apart from the guaranteed returns Post Office investments are also preferred by many conservative investors because these schemes are backed by the Government of India which reduces investment risks. Read on to know key details about some of the popular post office investment schemes in India. 

1. Post Office Monthly Income Scheme (POMIS)

Officially known as the National Savings Monthly Income Account, the Post Office Monthly Income Scheme (MIS) offers assured returns on lump sum investments made into the account. Below are some of the key features of this post office investment option:

Minimum Investment Amount

Rs. 1000

Maximum Investment Allowed

Rs. 9 lakh (individual)/Rs. 15 lakh (joint account)

Interest Rate (1st April 2023 onwards)

7.4% p.a.

Payout Frequency

Monthly

Maturity

5 years from date of account opening

Premature Withdrawal

Allowed after completion of 1 year

Deposits made into this account do not provide any income tax benefits. Additionally, the interest earned from this post office investment is fully taxable in the hands of the account holders. 

2. Post Office Recurring Deposit

The Post Office Recurring Deposit account is also known the National Savings Recurring Deposit Account. The features of a Post Office RD are similar to recurring deposit accounts offered by banks. Below are some key features of these post office investments: 

Minimum Investment Amount

Rs. 100 per month

Maximum Investment Allowed

No maximum limit

Interest Rate (1st April 2023 onwards)

6.2% p.a. (compounded quarterly)

Deposit Frequency

Monthly

Maturity

Max. 5 years, extension for further 5 years allowed

Premature Withdrawal

Allowed after completion of 3 years from account opening date

Loan Option

Up to 50% of RD account balance can be obtained as loan after completion of 1 year

Similar to the POMIS scheme, there is no tax benefit of deposits being made into a Post Office RD account. The interest earned is also completely taxable in the hands of the investor. 

3. Post Office Time Deposit

The National Savings Time Deposit Account is the official name of the Post Office Fixed Deposit scheme. In many ways, this scheme operates similar to a fixed deposit offered by banks. However, this scheme is backed by the Government of India and the interest rate is decided by the Ministry of Finance. Some of the key features of this post office investment are: 

Minimum Investment Amount

Rs. 1000, higher amounts in multiples of Rs. 100

Maximum Investment Allowed

No maximum limit

Deposit Tenure

Minimum 1 year, Maximum 5 years

Interest Rates (1st April 2023 onwards)

·         6.8% p.a. (1 year a/c)

·         6.9% p.a. (2 year a/c)

·         7.0% p.a. (3 year a/c)

·         7.5% p.a. (5 year a/c)

Premature Withdrawal

Allowed after completion of 6 months from account opening date

Pledging Option

Can be pledged to below authorities:

·         President of India/Governor of State

·         RBI/Scheduled Bank/Co-operative Bank/Co-operate Society

·         Government Company/Local Authority/Public or Private Corporation

·         Housing Finance Company

Extension Option

Allowed for the same period as the initial deposit after the initial deposit matures

The 5-year Post Office FD offers tax benefit of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act similar to a tax-saver FD account opened at a bank. The interest earned from this post office investment is taxable irrespective of the deposit tenure.  

4. National Savings Certificate (NSC)

The National Savings Certificate (NSC) is a government-backed tax-saving scheme that is available through any India Post Office. The currently available NSC VIII Issue requires a lump sum investment and the maturity amount including interest is paid out at maturity. Below are some key features of the National Savings Certificate:

Minimum Investment Amount

Rs. 1000, higher amounts in multiples of Rs. 100

Maximum Investment Allowed

No maximum limit, tax benefit limited to Rs. 1.5 lakh in a FY

Deposit Tenure

5 years

Interest Rate (1st April 2023 onwards)

7.70% p.a. (compounded annually)

Closure of Account

NSC account can be closed before completion of 5 years if:

·         Account holder/all account holders are deceased

·         By order of court

·         On forfeiture of pledgee who is a Gazetted officer

Transfer Options

Investment can be transferred if:

·         By order by court

·         If account is pledged to specified authorities

·         To joint holder holder on demise of primary holder

·         To nominee/beneficiary on demise of account holder

Deposits made into National Savings Certificate are eligible for tax benefits and interim interest earned is also eligible for tax deduction. However, the interest earned in the final year is taxable at the income tax slab rate of the account holder.

5. Kisan Vikas Patra (KVP)

Kisan Vikas Patra is a post office investment that has a unique proposition – it doubles your investment after a specific period of time. So, the period of investment changes based on applicable interest rate that is locked in at the time of initial investment. Below are some of the key features of this long-term investment option:

Minimum Investment Amount

Rs. 1000, higher amounts in multiples of Rs. 100

Maximum Investment Allowed

No maximum limit

Deposit Tenure

115 months (based on current interest rate)

Interest Rate (1st April 2023 onwards)

7.50% p.a. (compounded annually)

Closure of Account

KVP account can be closed before maturity if:

·         Sole Account holder/all joint holders are deceased

·         A court orders it

·         On forfeiture of pledgee who is a Gazetted officer

Transfer Options

Investment can be transferred if:

·         Ordered by a court

·         If account is pledged to any specificied authorities

·         To joint holder holder on demise of primary holder

·         To nominee/beneficiary on demise of account holder

Under current rules, Kisan Vikas Patra investments do not offer any tax benefits to the investor. The interest received at maturity is completely taxable in the hands of the account holder. 

6. Mahila Samman Savings Scheme

The Mahila Samman Savings Scheme was announced in Budget 2023 and it is specifically available to women or minor girl child. This scheme has been opened for deposits on 1st April 2023. Below are some key features of this post office investment:

Minimum Investment Amount

Rs. 1000, higher investment in multiples of Rs. 100

Maximum Investment Allowed

Rs. 2 lakh (cumulative limit)

Interest Rate (1st April 2023 onwards)

7.50% p.a. (quarterly compounding)

Maturity

After 2 years from date of account

Withdrawal Option

Up to 40% of eligible account balance can be withdrawn after completion of 1 year from date of account opening

Premature Closure

Allowed in specific cases like:

·         Compassionate grounds like life threatening disease of account holder/demise of guardian of minor account holder

·         After 6 months of account closure

·         Death of account holder

This post office investment does not offer any tax benefits and can only be opened by a woman for herself or a guardian on behalf of a girl child. 

Other Investments Available Through the Post Office

Apart from the above mentioned options, a few other investments that you can make through the post office are – the Senior Citizens Savings Scheme and the Public Provident Fund. As a result of the popularity of these investments, they can currently be availed not just through the post office but also through public sector banks and leading private sector banks in India. 

Why Should You Go for a Post Office Investment Scheme?

Indian post office investment schemes come with numerous benefits, and here are a few, have a look at them -

  • Easy Transferability

Post office investment accounts can be easily transferred from one India Post Office branch to another in case the investor relocates to anywhere in India.

  • Competent Interest Rate and Low Risk

The interest rate offered by post office schemes is highly competitive and usually even higher than competing schemes offered by banks and other financial institutions. In addition, there is very minimal risk involved in post office investment plans because the government backs them.

  • Tax Benefits

Many Indian post office investment schemes offer tax benefit on investments made under Section 80C of the Income Tax Act, 1961. However, the tax rules on interest earned can vary from one type of investment to another.

  • Diverse Products for Different Investment Needs

These POI schemes cater to the unique needs of different investors. The different investment schemes vary from each other in their deposit limits, tax implications and return on investments. 

  • Long-Term Benefit

A majority of post office investments are for the long-term and allows the investor to diversify their investment portfolio by offering fixed returns with minimal risk. 

  • Diverse Products for Different Investment Needs

These POI schemes cater to the unique needs of different investors. The different investment schemes vary from each other in their deposit limits, tax implications and return on investments. 

  • Long-Term Benefit

A majority of post office investments are for the long-term and allows the investor to diversify their investment portfolio by offering fixed returns with minimal risk. 

Frequently Asked Questions (FAQs)

Q. Which post office scheme is suitable for five years?

The choice of investment for a 5-year tenure would depend on the individual needs of the investor. Available investment options that mature in 5 years include – Post Office RD, 5 year Post Office FD and National Savings Certificate (NSC).

Q. Is there a post office scheme available for students?

Yes, students above 18 can invest in any post office investment schemes. Younger students can make post office investments with parent/guardian as joint holder.

Q. Is it required to pay taxes in post office schemes?

Not all post office investments offer tax benefits. So in some cases, you may have to pay taxes on interest earned from the schemes. The tax rules however vary from one investment to another.

Q. Is it possible to transfer money from the post office to a bank account?

You can transfer the money from the post office to a bank transfer account. You can also pick it up in cash from the physical location of an India post office.

Q. Can we check the post office account online?

Yes, you can check your post office account online; the Indian post office enables its account holders’ access to their account details with the help of an internet banking facility.

 

Sources:

https://www.indiapost.gov.in/VAS/DOP_PDFFiles/Savings%20Bank/National%20Savings%20Time%20Deposit%20Scheme%202019%20English.pdf

https://www.indiapost.gov.in/VAS/DOP_PDFFiles/Savings%20Bank/National%20Savings%20Recurring%20Deposit%20Scheme%202019%20English.pdf

https://www.indiapost.gov.in/VAS/DOP_PDFFiles/Savings%20Bank/National%20Savings%20Time%20Deposit%20Scheme%202019%20English.pdf

https://www.indiapost.gov.in/VAS/DOP_PDFFiles/Savings%20Bank/National%20Savings%20Certificates%20(VIIIth%20Issue)%20Scheme%20%202019%20English.pdf

https://www.indiapost.gov.in/VAS/DOP_PDFFiles/Savings%20Bank/Kisan%20Vikas%20Patra%20Scheme%20%202019%20English.pdf

https://www.indiapost.gov.in/VAS/DOP_PDFFiles/MSSC/Mahila_Samman_Savings_Certificate_2023_English.pdf

https://economictimes.indiatimes.com/wealth/invest/post-office-schemes-interest-rates/articleshow/96986256.cms?from=mdr

https://fi.money/blog/posts/what-are-meaning-and-benefits-of-post-office-investment-schemes 

 

ARN No : May23/Bg/02

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