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Post Office Savings Scheme – Types and Benefits


The roots of the Indian postal system trace back to the British era, with its establishment in October 1854. Originating as a means to facilitate mail delivery, the post office has since transformed into a multifaceted institution. Notably, it has extended its services to encompass a range of financial offerings, including banking, insurance, and investments. This evolution has positioned the post office as a pivotal player in the financial landscape of India.

One distinctive feature of the post office savings schemes lies in their sovereign guarantee, backed by the government, offering not only financial security but also tax-saving benefits under Section 80C of the Income Tax Act. This article delves into the historical journey and contemporary significance of the post office savings schemes in India.

What is the Post Office Savings Scheme?

The post office savings scheme, as its name implies, encompasses a range of savings instruments designed to provide investors with reliable and risk-free returns. Opening a savings account within the post office framework in India is a straightforward process, offering options such as fixed or recurring deposit policies coupled with enticing fixed interest rates. This scheme proves advantageous for investors seeking secure avenues to earn a fixed interest on their deposited amount at regular intervals.

While it shares similarities with traditional bank or NBFC accounts, the post office savings scheme distinguishes itself by being directly under the purview of the central government, instilling an added layer of security. Moreover, the extensive reach of the post office network, spanning both distant and rural regions, ensures greater accessibility, especially for the most marginalized sections of Indian society. This widespread presence underscores the scheme’s inclusivity and its role in fostering financial inclusion across diverse demographics.

Types of Post Office Savings Scheme

Investing wisely is crucial for financial stability, and the Indian Post Office provides a range of savings schemes tailored to meet diverse investor needs. What’s particularly reassuring is that these schemes come with the backing of the Government of India, guaranteeing returns for investors. Additionally, many of these schemes offer tax exemptions under Section 80C, providing relief of up to Rs. 1,50,000.

Let’s delve into some of the noteworthy Post Office saving schemes:

Post Office Savings Account (SB)

The Post Office Savings Account operates much like a typical bank savings account but is managed by the post office. You can open only one account at a time with a single post office, and transferring the account between post offices is allowed. Additionally, accounts can be opened in the name of minors, providing a versatile savings option for guardians. The account falls under a non-cheque facility.

The Post Office savings account offers an interest rate of 4%, and it’s important to note that the interest earned is fully taxable. However, unlike some other investments, there is no Tax Deducted at Source (TDS) deducted on the interest earned.

For account maintenance, a minimum balance of Rs. 50/- is required under the non-cheque facility. Furthermore, individuals can enjoy a deduction of Rs. 10,000 per annum on the total savings account interest, including interest from the Post Office savings account. This deduction is possible under Section 80TTA of the Income Tax Act, 1961.

The Post Office Monthly Income Scheme (POMIS)

This unique investment option assures a fixed monthly income for investors who make a lump sum deposit. Here’s a detailed overview:

  • Any resident individual can open a Monthly Income Scheme (MIS) account in either a single or joint holding pattern. Minors, if aged over 10 years, are also eligible to invest, and they can even operate the account.
  • The minimum investment required is Rs. 1000, making it accessible for a wide range of investors. For a single holding account, the maximum investment limit is Rs. 9 lakh, while joint accounts have a higher limit of Rs. 15 lakh.
  • The current interest rate for MIS in the post office is 7.4% per annum, paid monthly. The maturity period for this scheme is 5 years.
  • For instance, if Mr. Suresh invests Rs. 2,00,000 in the Post Office Monthly Income Scheme, he would receive Rs. 1233 every month as interest for 5 years. The principal amount would be returned at the end of the tenure. The monthly interest received can also be reinvested in post office recurring deposits.
  • Investors can hold multiple accounts, with a combined maximum investment of Rs. 9 lakh. In joint accounts, each holder has equal shares. Following the example, Mr. Suresh could open a joint account with his wife for a maximum amount of Rs. 7 lakh.
  • The scheme provides liquidity by allowing investors to withdraw the deposit after 1 year. However, there are penalties for early withdrawals: 2% on the deposit if withdrawn between 1 year and 3 years, and a 1% penalty on withdrawals after 3 years.
  • Accounts are transferable from one post office to another nationwide. While there is no significant tax benefit, it’s important to note that the interest received on a monthly basis is considered part of the taxable income. There is no Tax Deducted at Source (TDS) on the interest payout, and deposits are exempt from wealth tax.

National Savings Recurring Deposit Account (RD)

The Post Office Recurring Deposit (RD) is a dependable investment avenue characterized by monthly contributions over a fixed period of 5 years, featuring a 6.7% per annum interest rate compounded quarterly.

  • For investors committing to a monthly investment, a 5-year tenure would yield returns, as an example, of Rs. 1,13,659 for an RD account with a monthly investment of Rs. 10,000.
  • This scheme accommodates small investors, enabling contributions as low as Rs. 100 per month and any amount in multiples of Rs. 10, with no upper limit for investment. It caters to diverse needs, allowing joint accounts for two adults and facilitating accounts in the name of minors.
  • Transferability is a key feature, allowing RD accounts to be moved conveniently between post offices, and enhancing accessibility.
  • In cases of missed monthly investments, a default fee of 1 rupee for every 100 rupees is applicable. The scheme offers flexibility by permitting partial withdrawals of up to 50% of the balance after a year.
  • Despite no Tax Deducted at Source (TDS) on interest from post office RD, income is taxable based on individual tax slabs. This investment avenue proves to be an excellent choice for risk-averse investors seeking systematic and risk-free monthly savings.

National Savings Time Deposit Account (TD)

The Post Office Time Deposit offers investors various tenure options with different interest rates effective from October 1, 2023. The available tenures are 1 year, 2 years, 3 years, and 5 years, with corresponding interest rates of 6.9%, 7%, 7%, and 7.5%, respectively.

Investors can start with a minimum investment of Rs. 1000, and there is no upper limit, providing flexibility for individuals with different investment preferences. Accounts can be opened either in a single holding or joint holding pattern, and investments in the name of minors are also permitted.

Transferability is a notable feature of this scheme, allowing account holders to move their accounts from one post office branch to another across India. Upon maturity, the time deposit automatically renews for the same tenure with the prevailing interest rate on the day of maturity.

One significant advantage is the tax benefit associated with the 5-year post office time deposit. Investments in this scheme qualify for a deduction under Section 80C of The Income Tax Act, 1961

National Savings Monthly Income Account (MIS)

Paying a substantial 6.6% interest rate, the MIS has a minimum investment of ₹1000. There’s a maximum limit of ₹4.5 lakhs for individual accounts and ₹9 lakhs for joint accounts. It’s considered a reliable wealth management option due to centralized monitoring and safety.

Senior Citizens Savings Scheme Account (SCSS)

The Senior Citizen’s Savings Scheme is designed for individuals above 50 years of age. Retired defense employees and those who have taken voluntary retirement after 55 can also open an account within a month of receiving retirement benefits.

  • Investors can deposit up to Rs. 30 lakh in the scheme, with investments allowed in multiples of Rs. 1,000. Individuals can hold multiple accounts either in their name or jointly with a spouse.
  • The scheme offers a competitive interest rate of 8.2% per annum, paid quarterly. For instance, a Rs. 15 lakh investment would yield a quarterly interest of Rs. 30,750.
  • The Senior Citizen’s Savings Scheme has a fixed maturity period of 5 years. However, investors can extend their accounts in blocks of three years after the initial maturity period.
  • While premature withdrawals are allowed, a penalty of 1% of the deposit amount is applicable if the account is closed before the completion of one year from the investment date.
  • Investments in SCSS are eligible for tax deduction under Section 80C of The Income Tax Act. However, it’s important to be aware that TDS (Tax Deducted at Source) is applicable if the interest earned exceeds Rs. 10,000 in a year.

Public Provident Fund Account (PPF)

The Public Provident Fund (PPF) is designed as a long-term investment with a fixed maturity period of 15 years, currently offering an annual interest rate of 7.1%, compounded yearly. Here are the key features and benefits of the PPF:

  • The investment tenure for PPF is fixed at 15 years, and it accrues an interest rate of 7.1% per annum, compounded annually.
  • Regarding the investment limits, the maximum amount allowed for contribution in a financial year is Rs. 1,50,000. Investors can start with a minimum of Rs. 500, and they have the flexibility to make contributions either as a lump sum or in installments.
  • Contributions made to the PPF are eligible for deduction under Section 80C of the Income Tax Act. This deduction, however, is subject to an overall limit that includes various other investment options.
  • There are no specific age restrictions for opening a PPF account. This makes it accessible to individuals of all age groups.
  • PPF accounts can only be opened in a single holding form. Additionally, investors have the option to invest in the name of a minor without exceeding the maximum limit, combining balances from all accounts.
  • Upon completion of the initial 15-year period, the maturity period can be extended in blocks of 5 years, and this extension can continue indefinitely.
  • Premature closure of a PPF account is allowed only after 5 years and under specific circumstances such as serious ailments or higher education. Partial withdrawals are permissible after 5 years from the end of the year in which the account is opened.
  • Starting from the second financial year and up to the fifth year of account opening, investors can avail a loan facility.
  • Investments in PPF offer tax efficiency as they qualify for deduction under Section 80C, and the interest earned is fully tax-free. However, it’s important to note that PPF interest needs to be reported in the income tax return.
  • PPF is particularly suitable for investors seeking tax exemption, the safety of principal, and tax-free returns.

Sukanya Samriddhi Account (SSA) 

Sukanya Samriddhi Yojana (SSY) is a specialized scheme designed to benefit the girl child. Currently, it offers an attractive interest rate of 8% per annum, compounded annually. The key features of the scheme include:

  • The scheme allows a minimum investment of Rs. 1,000 and a maximum of Rs. 1,50,000 in a financial year. A minimum investment is required every year for 15 years from the date of account opening.
  • Investments in the Sukanya Samriddhi Account qualify for tax deduction under Section 80C, up to Rs. 1.5 lakh per annum. The interest earned and the maturity amount are both tax-free.
  • The investment matures after 21 years from the date of opening or upon the girl child’s marriage after reaching 18. Closure is mandatory if the girl child becomes an NRI or loses Indian citizenship.
  • The account can only be opened in the name of the girl child by her parents or legal guardians. The girl’s age should be 10 years or less at the time of opening the account.
  • Only one account can be opened in the name of a girl child. A parent or guardian can open a maximum of two accounts for two different girl children.
  • Failure to deposit the minimum amount in a financial year incurs a penalty of Rs. 50.
  • Premature closure is allowed by the girl child upon attaining the age of majority (18) for marriage or higher education. Partial withdrawals (not exceeding 50% of the balance) are permissible after the girl child turns 18.
  • Parents or guardians can avail of a tax benefit under Section 80C for the invested amount.
  • Maturity proceeds are paid to the girl child and are entirely tax-free in her hands.
  • The SSY scheme has gained popularity, particularly in rural India, as it serves as a crucial means to provide financial security to the next generation of women in the country.

National Savings Certificates (VIIIth Issue) (NSC) 

The National Savings Certificate (NSC) is a savings instrument with a maturity period of 5 years. It offers an interest rate of 7.7% per annum, compounded half-yearly but payable at maturity. This means that an investment of Rs. 1,00,000 will yield Rs. 1,44,903 after 5 years.

  • There is no maximum limit on investment, and the minimum amount that can be invested is Rs. 1000. Investors can choose denominations of Rs. 100, Rs. 500, Rs. 1,000, Rs. 5,000, and Rs. 10,000.
  • The NSC Certificate can be purchased in various forms: a single holding, joint holding (up to 3 adults), by a guardian on behalf of a minor or a person of unsound mind, or by a minor above 10 years in their own name.
  • Investing in NSC offers tax benefits under Section 80C of The Income Tax Act. The interest on NSC is deemed to be reinvested under Section 80C, making it tax-deductible, except for the interest in the final year of the NSC.
  • NSC certificates can be pledged as security for availing bank loans, providing an additional avenue for financial flexibility.
  • The certificates are transferable, allowing for a one-time transfer from one person to another during the investment tenure.
  • NSC is regarded as a risk-free and tax-efficient saving scheme, making it suitable for long-term and traditional investors with a conservative risk appetite.

Kisan Vikas Patra (KVP)

Kisan Vikas Patra offers a fixed interest rate of 7.5% annually, compounded annually. This means that the invested amount will double approximately every 115 months, making it a long-term savings option.

  • It’s available for purchase at any post office, making it accessible to a wide range of investors.
  • Investors can start with a minimum amount of Rs. 1,000, and there is no maximum limit. Investments can be made in multiples of Rs. 100, providing flexibility.
  • Certificates are easily transferable, allowing for endorsement to a third person. Moreover, investors have the flexibility to encash their investment after 2.5 years, making it a relatively liquid option.
  • While there is no tax deduction on the principal amount, it’s essential to note that the interest earned on KVP is taxable

PM CARES for Children Scheme, 2021

For children who have lost both parents due to the COVID-19 pandemic, an account is opened with a deposit of ₹10 lakhs. A monthly stipend of ₹4000 is provided until the age of 18, followed by interest-earning as per the monthly income account scheme until the age of 23.

These post office savings schemes cater to various financial goals and provide secure avenues for investment. It’s essential to explore each option carefully and choose the one that aligns with specific needs and objectives.

Small Savings Scheme Interest Rate Tenure Tax Deduction on Investment Interest Taxable
Post Office Savings Account 4.0% NA No Yes
Post Office Recurring Deposit 6.7% 5 Years No Yes
Post Office Monthly Income Scheme 7.4% 5 Years No Yes
Post Office Time Deposit (1 year) 6.9% 1 Year No Yes
Post Office Time Deposit (2 year) 7.0% 2 Years No Yes
Post Office Time Deposit (3 year) 7.0% 3 Years No Yes
Post Office Time Deposit (5 year) 7.5% 5 Years Yes Yes
Kisan Vikas Patra (KVP) 7.5% 30 Months Lock-in period No Yes
Public Provident Fund (PPF) 7.1% 15 Years Yes No
Sukanya Samriddhi Yojana 8% 21 Years Yes No
National Savings Certificate 7.7% 5 Years Yes No
Senior Citizens Savings Scheme 8.2% 5 Years Yes Yes

Post Office Schemes Fee

The fee schedule for Post Office Investment Schemes is outlined as follows:

Service Fee (in INR)
Duplicate Passbook Issue Rs. 50
Deposit Receipt or Issue of Statement Rs. 20 per case
Issue of Passbook in Lieu of Lost or Mutilated Certificate Rs. 10 per registration
Cancellation or Change of Nomination Charges Rs. 50
Account Transfer Fee Rs. 100
Pledging of Account Rs. 100
Issue of Cheque Book (for Savings Bank account) Nil: Up to 10 leafs in a calendar year
Rs. 2 per cheque leaf thereafter
Cheque Dishonour Charges Rs. 100

Note: Tax, as applicable, shall also be payable on the above service charges.

Advantages of a Post Office Savings Scheme

Investing in Post Office Savings Schemes comes with several advantages that make them an appealing option for a wide range of investors.

  • One key advantage lies in the simplicity of the documentation and enrollment procedures. Post Office investment schemes are designed to be accessible, with minimal paperwork, catering to both urban and rural investors through Post Offices nationwide.
  • Another significant benefit is the competitive interest rates offered by Post Office Savings Schemes, ranging from 4% to 8.2%. These rates are comparable to those offered by banks, providing investors with a lucrative option. Moreover, the inherent risk in these investments is minimal, given the government’s backing.
  • Tax exemption is an additional advantage associated with most Post Office Saving Schemes. Under Section 80C, investors can enjoy tax rebates on the deposit amount. Certain schemes, such as Sukanya Samriddhi Yojana (SSS) and Public Provident Fund (PPF), go a step further by offering tax exemption on the interest earned, making them popular choices as tax-saving and income tax-saving schemes.
  • The diversity of products available caters to a wide range of investment needs. Investors can choose from various schemes that differ in deposit limits, tax implications, and return on investment, allowing for flexibility based on individual requirements.

How To Open a Post Office Savings Account

Opening a post office savings account is a straightforward process. Here are the steps for both in-person and online account opening:

In-Person Account Opening

  • Visit your nearest post office.
  • Obtain the account opening form of your choice.
  • Submit the necessary documents along with the completed form.
  • Your account will be created immediately upon verification.

Required Documents for In-Person Account Opening

  • Relevant account opening form
  • KYC registration form
  • PAN card, Aadhar, driver’s license, Voter ID for identity verification
  • The amount to be deposited
  • Job card or Proof of Employment (where applicable)

Online Account Opening

  • Get approval for internet banking from your nearest post office (may take up to 24 hours).
  • Visit the official Internet Banking portal of the Post Office or use the IPPB app.
  • On the POB Products page, select the Savings Account of your choice and click on ‘Apply Now.’
  • Fill in all the required details such as name, date of birth, permanent address, etc.
  • Upload all the necessary documents for verification.
  • Review your form and click on ‘Submit.’

Aadhar and PAN Card 

As per the latest notification from the Ministry of Finance, providing Aadhaar number and PAN is now mandatory for opening any new Post Office scheme or account. Here are the key points:

Account Opening Requirements

  • Aadhaar number and PAN are mandatory for opening a new Post Office scheme or account.
  • If you don’t have an Aadhaar card, you must provide proof of application or enrollment for Aadhaar at the time of account opening. The Aadhaar number must be furnished to the Accounts Office within 6 months from the account opening date.

Existing Post Office Accounts

  • For existing post office accounts without an Aadhaar number, it must be submitted within 6 months from 1st April 2023.
  • Suppose PAN was not submitted at the time of opening the account. In that case, it must be submitted within 2 months from the occurrence of any of the following events, whichever is earliest:
  • Balance in the post office account exceeds Rs. 50,000
  • Aggregate credits in the account in any financial year exceed Rs. 1 lakh
  • Aggregate withdrawals and transfers in a month exceed Rs. 10,000

Consequences of Non-Compliance

Failure to submit Aadhaar within 6 months or PAN within 2 months will render the post office account inoperational until the Aadhaar number and/or PAN is provided to the accounts office.

Minimum and Maximum Savings Limits

The minimum deposit amount in post office savings schemes varies based on the type of account:

Post Office Savings Scheme Minimum Deposit Amount Maximum Deposit Amount (if applicable)
Savings Bank Account ₹50
Recurring Deposit (RD) Account ₹100
Time Deposit (TD) Account ₹1000 No maximum limit
Public Provident Fund (PPF) ₹500 to ₹1.5 lakh per financial year
Senior Citizens Savings Scheme (SCSS) ₹1000 to ₹15 lakhs
Sukanya Samriddhi Account (SSA) ₹250 to ₹1.5 lakhs per financial year
National Savings Certificate (NSC) ₹1000 No maximum limit
Kisan Vikas Patra (KVP) ₹1000 No maximum limit
PM CARES for Children Scheme No minimum deposit required

Encashment and Partial Withdrawal

The premature closing of post office savings schemes has varying conditions:

Post Office Savings Scheme Premature Closure Conditions Deductions/Charges
RD Account After 3 years Varies
TD Account Within 6 months Varies
POMIS Account 1% deduction after 3 years, 2% deduction before 3 years 2% deduction if closed before 1 year
SCSS Account Deductions range from 1.5% before 3 years to 1% between 3 to 5 years No benefits if closed before 1 year
PPF Account Allowed after 5 years with a 1% deduction in specific circumstances Deduction on account of specific conditions
SSA Account Allowed after 5 years on compassionate grounds with no deductions No deductions
NSC Can’t be closed prematurely, except with a court order or death of holders
KVP Account No premature withdrawal deductions after 2.5 years
PM CARES for Children Scheme No premature closure

Note: Specific terms and conditions may apply, and it’s advisable to refer to official documents or contact the post office for the most accurate and up-to-date information.

FAQs About Post Office Savings Scheme

Yes, withdrawals can be made from any post office. The account holder can withdraw anytime, maintaining a minimum balance of Rs. 500 for a generic account.

Maximum cash withdrawal is Rs. 10,000 per day. Using a post office ATM card, up to Rs. 25,000 can be withdrawn per day.

Yes, the Indian Post Office provides Internet banking for account holders. Register with valid KYC documents and an active DOP ATM card to access account details online.

Yes, Post Office investments are safe with a sovereign guarantee. They are tax-exempt up to a certain limit, and specific schemes like PPF and Sukanya Samriddhi Yojna offer tax benefits on returns.

Yes, students above 18 can avail of all schemes except the Senior Citizen Savings Scheme. Sukanya Samriddhi Yojna is specifically designed for female students, offering maturity benefits when they turn 21.

Minimum balances vary for different accounts:

  • SB (cheque account): Rs. 500
  • SB (non-cheque account): Rs. 50
  • Post Office MIS Schemes: Rs. 100
  • TD: Rs. 100
  • Public Provident Fund: Rs. 500
  • Senior Citizen Savings Scheme: Rs. 1000
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