Post Office Investment Schemes and their Features

Indian mind set operates on securing the future, thus there are several investment schemes and plans that are reachable to even economically weaker section.

Post office monthly income scheme account (MIS)

  • This scheme offers fixed monthly income upon the investment made by the investor
  • Any individual can open the MIS account single or joint, a child above the age of 10 can also make an investment and operate the account.
  • This scheme offers an interest rate of around 8% payable monthly until the maturity period.
  • An individual can invest with a minimum amount of Rs. 1500 and a maximum of 4 lakhs in single and double the amount for a joint account.
  • An investor can hold multiple accounts with a total combined amount of 4 lakhs.
  • Premature withdrawals charge a certain percentage on a penalty.
  • Accounts can be transferred from one post office to another.
  • This scheme doesn’t offer tax benefit, the interest received monthly is also taxable.

Post Office Recurring Deposit Account

  • This scheme offers investment for a fixed period of 5 years that can be continued for next 5 years or can be continued year to year.
  • It offers an interest ranging between 6.8 %-7.4 %. However, it keeps changing.
  • You can start the investment with as low as 10 rs and can invest in multiples of 5. There is no maximum limit defined for this investment.
  • You have the option to open the joint account.
  • The account can be transferred anywhere across India.
  • If you miss your investment there is a minimal penalty charged.
  • There is a flexibility in withdrawal. After a year a certain amount can be withdrawn.
  • Income is taxable with no tax benefits.

Post Office time Deposit Account

  • It is a scheme offering different tenure options for investment. It can be a year, 2 years and so on depending on the investor’s preference. Interest rates vary with the respect to the length of tenure. Longer tenure offers a higher interest rate.
  • You can open multiple accounts.
  • You can open the account as a single holder or a joint holder.
  • Accounts are transferrable across India.
  • On the maturity of the timely deposit, the account will be renewed automatically for the same time duration and the same interest.
  • This scheme offers tax benefits under section 80C of Income tax act provided the deposit tenure is 5 years.
  • This scheme is similar to the bank fixed deposit, however, there is a difference in interest rate.

Senior Citizen Saving Scheme (SCSS)

  • Minimum age to make investments under this scheme is 60 years. In case someone takes voluntary retirement after 55 years age can also open the account after receiving the retirement benefits.
  • The amount should not exceed the total amount received on retirement.
  • Investment can be done in multiples of Rs. 1000, however, the total amount combining all the accounts should not exceed 15 lakh. The amount might change with the revision in schemes.
  • You can hold an individual account or joint account with your spouse.
  • This scheme offers an interest rate of 8.5% quarterly that is variable.
  • The maturity of deposit is 5 years.
  • There is penalty charged in case of premature withdrawals.
  • The account can be extended for 3 more years after its maturity.
  • Interest paid is taxable beyond 10,000. However, TDS is applicable under section 80C.
  • It’s a suitable option for senior citizen for capital gains as well as monthly income.

Public provident fund (PPF)

  • It is a long term investment for as long as 15 years or more and offered at high interest rate of around 8 %.
  • Investments can be in the form of monthly instalments or a collective amount invested annually.
  • You can invest the maximum amount of 1.5 lakh. PPF qualifies for a tax deduction and the interest earned is completely tax free.
  • It is a single holder account.
  • The account can further be extended for 5 more years after 15 years of maturity.
  • There is no pre-closure option, however, withdrawal is permitted after 7 years.

This account can be opened at the banks also, the process remains the same. It can be changed in between from post office to bank or vice-versa. Since it is a long term investment on reasonable interest rates and also tax free, most of the people make the investment under this scheme and draw the maximum benefits.

National saving certificate (NSC)

  • This scheme offers a maturity period of 5 years and interest as high as 8 %.
  • Minimum investment amount is Rs. 100 and further can be in multiple of 100.
  • It can be opened under a single holder.
  • This certificate is eligible for tax exemption under section 80C and can be used as a collateral for taking loans.
  • Certificates are transferable only once within the tenure.

Post office schemes have different benefits catering to different sections, therefore people who wish to make small investments and savings prefer a scheme under post office investments and gain benefits if not high benefits but definitely some gains.