Best Small Saving Post Office Schemes To Invest In

Many new investors are under the impression that all small savings scheme fall under 80C of Income Tax Act, which is not true.

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Small savings schemes are very popular financial instruments in India as they are backed by the government. Many new investors are under the impression that all small savings scheme fall under 80C of Income Tax Act, which is not true.

Interest rates on these instruments are revised every quarter. Here are prevailing interest rates and tax applicable on these instruments:

Kisan Vikas Patra

Under Kisan Vikas Patra (KVP) scheme, the investment amount doubles in 110 months, interest is compounded annually.

The minimum amount which can be invested in KVP is Rs 1000 and there is no maximum limit.

Investments in KVP should be made in denominations of Rs 1,000, Rs 5,000, Rs 10,000 and Rs 50,000.

Returns: Interest rate on Kisan Vikas Patra is 7.80%. Individuals falling in the higher tax bracket, will see reduced returns of 5.39 per cent post tax returns.

Taxation: Investment made under KVP is taxable along with interest part. Interest earned will be taxed under " Income from Other Source".

Which means that investment made is not eligible for deduction under 80C of Income Tax. However, TDS is not deducted on interest earned.

National Savings Scheme

National Savings Certificate (NSC) is one of the most popular small saving instrument that gives you tax benefits too.

Returns: The interest rate on NSC for 5 years is 8.10 per cent which is compounded half-yearly. Individuals falling in the higher tax bracket, will see reduced returns of 5.60 per cent post tax returns


Taxation: Individuals can apply for NSC for a 5 year duration. Tax benefit is applicable on NSC under 80C up to a limit of Rs 1.5 lakh.

Tax Deduction on source (TDS) is not applicable on NSC. Interest earned on the same are taxable in the hands of investor.

Public Provident Fund

Public Provident Fund is one of the best investment for risk-averse individuals along with maximum tax benefits.

Returns: The interest rate on PPF for 15 years is 8.10 per cent. Individuals falling in the higher tax bracket, will see returns of 8.10 per cent post tax returns.

Taxation: Investments made are eligible for deductions under Sec 80C for investments up to Rs 1.5 lakh. Interest earned and maturity amount are also tax free in hands of investor.

Post Office Monthly Income Scheme

Post office monthly income scheme is for individuals who are less risk averse and looking for safe investment option with decent returns.

Returns: The interest rates applicable as of now is 7.80% per annum which is payable monthly. Individuals falling in the higher tax bracket, will see reduced returns of 5.39 per cent post tax.

Taxation: There is no tax deduction at source. And this scheme will not fall under the purview of Section 80C and the interest earned is taxable.

Sukanya Samriddhi Account

This is one of the best scheme launched by government specially designed to meet girl education and her needs.

Returns: The interest rate on Sukanya Samriddhi for 21 years is 8.60 per cent. Individuals falling in the higher tax bracket, will see 8.60 per cent post tax returns.


Taxation: Investments made are eligible for deductions under Sec 80C for investments up to Rs 1.5 lakh. Interest earned and maturity amount are also tax free in hands of investor.

Post Office Time Deposit

Post Office Time Deposit can be opened with the duration of one year, two years, three years and five years.

Returns: The prevailing rate of interests are 7.1%, 7.2%, 7.4%, 7.9%, compounded quarterly for 1, 2, 3 & 5 year accounts respectively.

Returns on the same will be 4.91%, 4.98%, 5.11%, 5.46% respectively.

Taxation: The investment in the case of  five years TD qualifies for benefit under section 80C of the Income Tax Act, 1961. Note that maturity amount will be taxable in hands of investor.

Senior Citizen Savings Scheme

The Senior Citizens Saving Scheme (SCSS) is very popular among Senior Citizens in the country.

Returns: The scheme attracts an interest rate of 8.60 per cent. Individuals falling in higher tax bracket, will see reduced returns of 5.94 per cent post tax returns.

Taxation: TDS will be applicable, if the interest income crosses the threshold limit. Investment made are eligible for deductions under Sec 80C for investments up to Rs 1.5 lakh.

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Read more about: small savings scheme, ppf, income tax
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