For more than 150 years, the Department of Posts (DoP) has been playing a crucial role in our country’s social-economic development. With more than 1,55,000 post offices, the DoP has the most widely distributed postal network in the world. It has been providing the following significant functions:
Delivering mails, parcels, etc. in India and abroad,
Providing various Small Savings Schemes such as SB, RD, TD, MIS, SCSS, PPF, SSA, NSC, KVP.
Providing life insurance cover under Postal Life Insurance (PLI) and Rural Postal Life Insurance (RPLI)
Providing retail services like bill collection, sale of forms, etc.
Besides the above functions, the DoP also acts as an agent for the Government of India in discharging other services for citizens such as MGNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme) wage disbursement, and old age pension payments.
When it comes to a safe and tax-efficient way of investing our hard-earned money, the first option which comes to our mind is Post Office Savings Schemes. Post Office offers a number of savings schemes such as NSC, KVP, PPF, Sukanya Samriddhi Scheme, SCSS etc.
Various Post Office Savings Schemes
Post Office Savings Account(SB)
National Savings Recurring Deposit Account(RD)
National Savings Time Deposit Account(TD)
National Savings Monthly Income Account(MIS)
Senior Citizens Savings Scheme Account(SCSS)
Public Provident Fund Account(PPF )
Sukanya Samriddhi Account(SSA)
National Savings Certificates (VIIIth Issue) (NSC)
Kisan Vikas Patra(KVP)
Features of a Post Office Savings Account(SB)
You can open only one account in your single account
You can open the account with a minimum Rs.500.
You can open the account in your single name or jointly with someone.
You can open the account in the name of a minor who is above 10 years of age or if the minor is below 10 years of age, an account can be opened through a guardian.
You should maintain a minimum balance of INR 500/- . In case, the balance of Rs. 500 not maintained, a maintenance fee of Rs. 100 shall be charged from the account on the last working day of each financial year and after deduction of the account maintenance fee, if the balance in the account becomes nil, the account shall stand automatically closed.
You can avail the cheque facility, ATM facility and net banking facility
Interest earned on savings accounts is Tax-Free up to INR 10,000/- per financial year under section 80 TTA or 80TTB of Income-tax.
You can transfer your account from one post office to another
You should do at least one transaction of deposit or withdrawal in three financial years to keep your account active, else the account becomes Dormant.
You can transfer money between Post Office Savings Accounts, Stop Cheque, etc. Transaction View facility is available through Intra Operable Netbanking/Mobile Banking.
Features Post Office Term Deposits (TDs)
Post office TD can be opened with a minimum of Rs.1,000 and in multiples of Rs.100. There is no maximum limit.
Currently, the Term deposit tenure is 1,2,3, and 5 years.
You can open an account in your single name or jointly with someone.
Minor account can be opened in the minor’s name if the minor’s age is above 10 years of age and in cases below 10 years, a guardian can open an account on behalf of the minor.
You can open the account by cash or through the deposit of Cheque and in case of Cheque the date of realization of cheque in Govt. account shall be the date of opening of account.
You can transfer the TD account from one post office to another
You can opt for annual interest payment to your savings account.
You can convert your single account into Joint and Vice Versa .
5 Years TD is eligible for tax saving purposes under Sec.80C.
You can open any number of TD accounts in any post office.
Interest shall be payable annually and no additional interest shall be payable on the amount of interest that has become due for payment but not withdrawn by the account holder.
You can not close your TD account prematurely before the expiry of 6 months. Post Office Saving Accounts interest rate will be payable if you have closed a TD account between 6 months to 12 months from the date of Opening.
Features of Post Office Recurring Deposit (RD)
You can open the RD account with a minimum of Rs.100 a month and a multiple of Rs.10. There is no maximum limit.
You can open an account in your single name or jointly with someone.
Minor account can be opened in the minor’s name if the minor’s age is above 10 years of age and in cases below 10 years, a guardian can open an account on behalf of the minor.
You can open an RD account for 5 years.
You can open the RD account by cash or Cheque. In case of a Cheque, the date of deposit shall be the date of clearance of the Cheque.
You can transfer your RD account from one Post Office to another Post Office.
You can close your RD account prematurely after three years from the date of opening of the account.
You can make the subsequent deposit up to the 15th day of next month if the account is opened up to the 15th of a calendar month and up to the last working day of next month if the account is opened between 16th day and last working day of a calendar month.
If you do not make a subsequent deposit to the prescribed day, a default fee @ 1 Rs for every 100 rupees is charged for each default
If there are four regular defaults, the account will become discontinued. Such an account can be revived in two months but if not revived within this period, you can not deposit any further in that RD account.
You have to first pay the defaulted monthly deposit with the default fee, if any, and then only you are allowed to pay the current month deposit.
If an RD account is regular, you can make an advance deposit up to 5 years in an account. You can get the rebate on an advance deposit of at least 6 installments (inclusive of month of deposit). You will get a rebate of Rs. 10 for 6 month, Rs. 40 for 12 months for Rs. 100 denomination.
After the 12 monthly installments, one loan up to 50% of the balance is allowed. You can repay the loan amount in one lump sum along with interest at the prescribed rate at any time during the currency of the account.
You can extend the account for another 5 years after its maturity.
Features of Post Office Monthly Income Scheme (MIS)
You can open the MIS account in your single name or in jointly with someone (up to 3 adults).
Minor account can be opened in the minor’s name if the minor’s age is above 10 years of age and in cases below 10 years, a guardian can open an account on behalf of the minor.
You can open the account with a minimum of Rs. 1000 and in multiple of Rs. 1000.
The Maximum deposit can be Rs.4.5 lakh in a single account and Rs.9 lakh joint account.
You can open any number of accounts in any post office provided that the maximum deposit in all accounts is Rs. 4.5 Lakh.
You can convert the single account into a Joint account and Vice Versa.
The maturity period of an MIS account is 5 years.
You can opt for the interest payment credit to your savings account through auto credit.
You cannot prematurely withdraw the deposit amount before 12 months from the date of deposit. If you encash the MIS deposit amount after one year but before 3 years, there will be a deduction of 2% from the principal amount and if the withdrawal is after 3 years the deduction is 1% of the deposit.
Interest shall be paid to you on completion of a month from the date of deposit.
If you do not claim the interest payments every month, such interest shall not earn any additional interest.
Features of Post Office Senior Citizen Savings Scheme (SCSS)
You can open the SCSS account if,
You are above 60 years of age,
or
You are a Retired Civilian Employee above 55 years of age and below 60 years of age, subject to the condition that investment be made within 1 month of receipt of retirement benefits,
or
You are a Retired Defense Employee above 50 years of age and below 60 years of age, subject to the condition that investment to be made within 1 month of receipt of retirement benefits.
You can open the account in your individual capacity or jointly with your spouse.
In a joint account, the whole amount of deposit shall be attributable to the first account holder only.
The minimum deposit in SCSS shall be Rs. 1000 and in multiple of 1000, subject to maximum limit up to Rs. 15 lakh in all SCSS accounts opened by an individual. In case any excess deposit is made in SCSS account, the excess amount will be refunded immediately to the depositor and only the PO Savings Account Interest rate will be applicable from the date of excess deposit to the date of refund.
SCSS deposit qualifies for the benefit of section 80C of the Income Tax Act (up to Rs. 1.5 lakh in a financial year)
The Interest on an SCSS deposit shall be payable on a quarterly basis and applicable from the date of deposit to 31st March/30th June/30th September/31st December.
If you do not claim your quarterly interest, such interest shall not earn additional interest.
You can opt for the interest payment through auto credit into your savings account in the same post office, or through ECS to your other bank’s savings account.
If total interest in all SCSS accounts exceeds Rs.50,000/- in a financial year, Interest is taxable and TDS shall be deducted from the total interest paid. You can submit form 15 G/15H if your income is not above the prescribed limit and no TDS will be deducted.
You can close your SCSS account prematurely at any time after the date of opening:
* If you close your account before 1 year, you will not get any interest, and if any interest paid in the account shall be recovered from principle.
* If you close your account after 1 year but before 2 years from the date of opening, an amount equal to 1.5 % will be deducted from the principal amount of your SCSS deposit.
* If you close your SCSS account after 2 years but before 5 years from the date of opening, an amount equal to 1 % will be deducted from the principal amount of the SCSS deposit.
However, if you have extended your SCSS account, you can close your SCSS account after the expiry of one year from the date of extension of the account without any deduction.
On maturity, you can close your account after 5 years from the date of opening.
In case of the unfortunate death of the account holder, the account shall earn interest at the rate of the PO Savings Account from the date of death. If the spouse is a joint holder or a sole nominee, the account can be continued till maturity if the spouse is eligible to open an SCSS account and does not have another SCSS Account.
You can extend your SCSS account for a further period for 3 years from the date of maturity to one year. Such extended account shall earn interest at the rate applicable on the date of maturity.
Public Provident Fund (PPF)
You can open the PPF account if you are a resident Indian.
PPF can be opened by a guardian on behalf of a minor/ person of unsound mind.
You can deposit a minimum of Rs. 500 and a maximum of Rs. 1.50 lakh in a Financial. The maximum limit of Rs. 1.50 lakh shall be inclusive of the deposits made in his/her own account and in the account opened on behalf of minors.
You can deposit the amount in the PPF account in any number of installments in a financial year in multiple of Rs. 50 and maximum up to Rs. 1.50 lakh.
You can open the account by cash or cheque. In case of the cheque deposit, the date of opening of the account or the subsequent deposit in the account shall be the date of realization of cheque in Govt. account.
A PPF deposit qualifies for the deduction under section 80C of Income Tax Act.
If you fail to deposit the minimum amount of Rs.500/- in your PPF account in any financial year, your PPF account shall become discontinued. Any Loan or withdrawal facility is not available on discontinued accounts. You can revive your discontinued account before the maturity of the account by depositing minimum subscription (i.e. Rs. 500) + Rs. 50 as the default fee for each defaulted year. Please note that the total deposit in a year shall be inclusive of deposits made in respect of years of default of previous financial years.
Interest on a PPF account is notified by the Ministry of Finance on a quarterly basis. The interest shall be calculated for the calendar month on the lowest balance in the account between the close of the 5th day of the month and the end of the month.
The PPF Interest is credited to the PPF account at the end of each Financial year.
Interest earned on a PPF account is tax-free under Income Tax Act.
You can take a loan against your PPF deposit account after the expiry of one year from the end of the FY in which the initial subscription was made. For example, if the PPF account is opened during 2019-20, you can take a loan against this account in 2021-22. You can take loan before the expiry of five years from the end of the year in which the initial subscription was made. You can take a loan up to 25% of the balance to your credit at the end of the second year immediately preceding the year in which the loan is applied. (i.e. if loan taken during 2022-23, 25% of balance credit on 31.03.2021). You can take only one loan in a Financial Year and the second loan shall not be provided till the first loan is not repaid.
If you repaid the loan within 36 months, an interest rate of 1% per annum shall be applicable and If you repay the loan after 36 months, the interest rate Of 6% per annum shall be applicable from the date of loan disbursement.
You can take one withdrawal during a financial year after five years excluding the year of account opening. For example, if a PPF account is opened during 2020-21 the withdrawal can be taken during or after 2026-27. Or you can withdraw the amount up to 50% of the balance at the credit at the end of 4th preceding year or at the end of the preceding year, whichever is lower. For example, you can withdraw from PPF account in 2016-17, up to 50% of the balance as on 31.03.2013 or 31.03.2016 whichever is lower.
The PPF account will mature after 15 financial years excluding the financial year in which the PPF account was opened.
On maturity, you can take maturity payment or you can retain maturity value without any further deposit in which case the PPF interest rate will be applicable and you can make the payment any time or can take 1 withdrawal in each financial year. Alternatively, you can extend your PPF account for a further block of 5 years and so on (within one year of maturity). However, the discontinued account cannot be extended.
In an extended account with deposits, you can make one withdrawal in each financial year subject to a maximum limit of 60% of balance credit at the time of maturity in the block of 5 years.
PPF account can be closed prematurely after 5 years from the end of the year in which the account was opened subject to the following conditions:
-> In case of life-threatening disease of the account holder, spouse, or dependent children.
-> In case of higher education of account holders or dependent children.
-> In case of change of resident status of account holder ( i.e. became NRI).
At the time of premature closure, there will be a 1% interest deduction from the date of account opening/date of extension.In case of death of the account holder, the account shall be closed and the nominee or legal heir(s) shall not be allowed to continue deposits in the account. In this case, the interest shall be paid till the end of the preceding month in which the account is closed.
Sukanya Samriddhi Account Yojana (SSY)
An SSY Account can be opened by a guardian in the name of a girl child below the age of 10 years.
You can open only one account either in a Post Office or in any bank in the name of a girl child.
You can open an SSY account for a maximum of two girls in a family. However, in the case of twins/triplets girls birth more than two accounts can be opened.
An SSY account is operated by the guardian till the girl child attains the age of majority (i.e. 18 years).
You can open the account with a minimum initial deposit Rs. 250 and deposit a minimum of Rs. 250 and maximum up to Rs. 1.50 lakh (in multiple of Rs.50) in a financial year. The deposit may be in a lump sum or in multiple installments as per your comfort.
You can deposit a maximum up to the completion of 15 years from the date of opening.
In case you have not deposited a minimum deposit of Rs. 250 in an account in a financial year, the account shall be treated as a defaulted account. Such an account can be revived before the completion of 15 years from the date of opening of the account by paying minimum Rs. 250 + Rs. 50 default for each defaulted year.
Deposit in SSY qualifies for deduction under section 80C of the Income Tax Act.
The SSY account earns interest on a quarterly basis as per the rate notified by the Ministry of Finance.
The interest in an SSY account shall be calculated for the calendar month on the lowest balance in the account between the close of the 5th day and the end of the month.
Interest shall be credited to the account at the end of each Financial year.
Interest earned on an SSY account is tax-free under Income Tax Act.
Withdrawal from the SSY account may be taken from the account after the girl child attains the age of 18 or passed the 10th standard. The withdrawal may be up to 50% of the balance available at the end of the preceding financial year.
The withdrawal from the SSY account may be made in one lump sum or in installments. Such withdrawal will not exceed one per year, for a maximum of five years. This is subject to the ceiling specified and subject to the actual requirement of fee/other charges for the girl child.
An SSY account can be prematurely closed after 5 years of account opening on the death of an account holder or on the extreme compassionate ground or any life-threatening disease of a/c holder or on the death of the guardian by whom the account operated.
The SSY account will be closed on maturity after 21 years from the date of account opening Or at the time of marriage of the girl child after attaining the age of 18years. (1 month before or 3 months after date of marriage).
National Savings Certificate NSC (VIII Issue)
NSC deposit can be done by a single adult or jointly up to 3 adults. A guardian can open the account on behalf of a minor or on behalf of a person of unsound mind. If the minor is above 10 years, the account can be opened in his own name.
The minimum deposit of NSC is Rs. 1000 and in multiple of Rs. 100. There is no maximum limit.
You can open any number of accounts under the scheme.
NSC deposits qualify for deduction under section 80C of the Income Tax Act.
The maturity of an NSC deposit shall be on completion of five years from the date of the deposit.
An NSC deposit may be pledged for taking a bank loan or can be transferred as security.
An NSC deposit can not be prematurely closed before completing 5 years except on the death of a single account, or any or all the account holders in a joint account, or on forfeiture by a pledgee being a Gazetted officer or on order by the court.
An NSC deposit can be transferred from one person to another person on the following conditions only:
(i) On the death of an account holder to nominee/legal heirs.
(ii) On the death of the account holder to the joint holder(s).
(ii) On order by the court.
(iii) On pledging of account to the specified authority.
Kisan Vikas Patra (KVP) Account
KVP deposit can be done by a single adult or jointly up to 3 adults. A guardian can open the account on behalf of a minor or on behalf of a person of unsound mind. If the minor is above 10 years, the account can be opened in his own name.
The minimum deposit of KVP is Rs. 1000 and in multiple of Rs. 100. There is no maximum limit.
You can open any number of accounts under the scheme.
The maturity of a KVP deposit shall be as per the Ministry of Finance directives from time to time.
A KVP may be pledged for taking a bank loan or can be transferred as security.
A KVP can be prematurely closed after two and half years from the date of deposit, on the death of a single account, or any or all the account holders in a joint account, or on forfeiture by a pledgee being a Gazetted officer or on order by the court.
A KVP can be transferred from one person to another person on the following conditions only:
(i) On the death of an account holder to nominee/legal heirs.
(ii) On the death of the account holder to the joint holder(s).
(ii) On order by the court.
(iii) On pledging of account to the specified authority.
