Interest rate comparison

Do a comparison between the country's largest lender SBI for interest rates and compare them with any small saving scheme, the latter is much better. For example, SBI offers you an interest rate of just 5.75 per cent to 6.75 per cent across its various tenures of fixed deposits.

On the other hand the PPF offers you an interest rate of 7.8 per cent, a 5-year post office time deposit offers you an interest rate of 7.4 per cent; NSC offers you an interest rate of 7.6, Sukanya Samriddhi offers you an interest rate of 8.1 per cent and KVP 7.3 per cent.

Tax efficient schemes

Some of the schemes of the post office are more tax efficient as compared to bank FDs. For example, the interest earned on the Public Provident Fund is completely exempt from tax. On the other hand all of the interest earned from bank FDs is taxable.

However, bank FDs offer tax saving deposits for tax saving under SEC 80C. Select post office schemes like PPF, National Saving Certificates and also the Sukanya Samriddhi offers you similar tax benefit. So, the better choice would be the post office schemes as they offer you tax benefits, along with higher interest rates. 

Better for senior citizens as well

There is hardly anything for senior citizens in the bank deposits. On the other hand the Senior Citizens Saving Scheme offers 8.3 per cent per annum, payable from the date of deposit of 31st March/30th Sept/31st December in the first instance & thereafter.

For senior citizens looking at monthly income, the Monthly Income Scheme is much better at the post office as it offers an interest rate of 7.3 per cent per annum. On the other hand, in the bank the Monthly interest rate is much lower, which does not make it lucrative at all.

Service and other aspects

Of course, if you compare service, banks are much much better, with access to the latest technology.

The Post Office affair could be more time consuming, tedious and with more paper work. Having said that there is no gains without pains. If you are investing large sums, you could lose money on the near 1 per cent interest differential between banks and post office.