Small saving schemes of the post office are prominent among Indians for their low risk and simple availability. Apart from assured returns some post office small savings schemes also provide tax benefits under section 80C of the Income Tax Act 1961 to the depositors. Reliability and risk-free returns on investment are offered by post office tax saving schemes which allows an investor to secure their financial security without any risk of market uncertainties.
Eligibility required to invest in post office tax savings schemes
- Any Indian citizen over 18 years of age can invest either individually or on behalf of a minor under the post office tax saving scheme.
- A maximum of two to three adults can open a joint account.
Post Office Savings Account
In order to gain a guaranteed interest rate, a savings account can be opened via cash deposit in any bank branch and post office. Some of the key benefits of this savings account are as follows:
- For cheque and non-cheque facility account, the minimum balance to be maintained is different. In the case of a non-cheque, it is Rs.50, while it is Rs.500 for the cheque facility account.
- With a nomination facility an individual can only open one account in one post office across the country.
- In order to keep the account active, the account manager must make a transaction, either a deposit or a withdrawal, in three fiscal years.
- Under section 80TTA of the Income Tax Act, interest of up to Rs. 10,000 received in a fiscal year is exempted from taxable income from all Savings Bank Accounts.
Post Office Time Deposit Account
It is among the most considered tax exemption post office schemes. With different maturity periods of 1, 2, 3, and 5 years, this scheme is just like a bank fixed deposit. Some other benefits of this scheme are:
- The maximum period here is 5 years, and in one or more post offices, any number of such deposits can be made.
- The minimum deposit amount is capped at Rs. 1000 with no upper limit. The tax benefit is, however, restricted to Rs. 1.5 Lakh.
- If deposit is made for 5 years, under section 80C, interest received on this scheme is taxable only.
- Investors are not allowed to withdraw from their TD accounts within six months. Post Office Savings Scheme interest rates are applicable for premature withdrawals between 6 and 12 months.
Senior Citizen Savings Scheme (SCSS)
- Individuals above the age of 60 years are eligible for SCSS. Individuals over 55 years of age and under 60 years of age who have retired or have taken VRS are also eligible for this scheme. Some of the other benefits of this scheme are:
- This scheme comes with a maturity period of 5 years.
- SCSS account can be opened individually or jointly with a spouse.
- One can open multiple accounts, but the overall amount should not surpass the deposit limit of Rs. 15 Lakh.
- Before maturity, investors can close their account only by paying penalties. No interest will be paid if the account is closed within 1 year. If interest has already been received, it is withheld. 1.5 percent of the deposit will be withheld as a penalty after one year, and a depositor will be penalised with 1 percent of the deposit after 2 years.
- This tax saving scheme can be extended to a period of 3 years after maturity.
- Under section 80C of the Income Tax Act, this scheme counts for a tax deduction. That being said, if the interest amount exceeds Rs. 40,000, TDS is applicable.
Public Provident Fund (PPF)
One can only open a PPF account on behalf of his or her name, and there is no option for a joint account. There are nomination facilities, and account holders can even transfer their account from one post office to another. Some other benefits are:
- It comes with a maturity period of 15 years, and further can be extended to a block of 5 years.
- Investors have to make a minimum investment of Rs. 500 per year and in a single financial year, the maximum deposit is limited at Rs. 1.5 Lakh.
- Under section 80C of the Income Tax Act, deposits made under this scheme are tax-exempted. The interest gained is even tax-free completely.
- Investors must keep in mind that with this account, interest pay-out facilities are not available.
Sukanya Samriddhi Account
Regulated under Sukanya Samriddhi Yojana, this scheme also provides tax benefits under section 80C. This account can be opened for his/her girl child by a legal guardian, and only one account is allowed for one child in a family with a limit of two accounts. Some other key benefits of this scheme are:
- This account can be opened by a guardian in the name of a girl under 10 years of age.
- This scheme has a maturity period of 21 years which implies that once the girl child reaches 21 years of age the maturity amount will be payable to her.
- Here, the minimum amount of annual deposit is Rs. 250 and Rs. 1.5 Lakh is the upper limit.
- According to section 80C, contributions made under this post office tax savings scheme count for tax benefits.
- After completion of 18 years of the girl child, premature closure of the account is permitted.
Post Office Tax Saving Schemes Interest Rates
|Schemes||Tenure||ROI||Min and max deposit|
|Post Office Savings Account||-||4.00%||Rs 500, no upper limit|
|Post Office Time Deposit Account||1, 2, 3 and 5 years||1,2,3: 5.5%, 5 years: 6.7%||Rs 1000, no upper limit|
|Senior Citizen Savings Scheme||5 years||7.40%||Rs 1000 up to Rs 15 lakh|
|Public Provident Fund||15 years||7.10%||Rs 500 to Rs 1.5 lakh|
|Sukanya Samriddhi Account||21 years||7.60%||Rs 250 to Rs 1.5 lakh|
Key benefits of post office tax savings schemes
- In the above discussed tax-saving schemes, one can conveniently apply and receive a guaranteed return.
- Post Office Tax savings schemes are ideal for investors in both rural and metropolitan areas who are unable to partake in stressful documentation.
- As a Post Office RD, it will aid investors pursuing fixed returns and term deposits will allow them to build corpus by investing a fixed amount for a certain period.
- For the relevant accounts, individuals can pick and nominate their nominees.
- The only two post office savings schemes fall under the EEE (investment amount, interest received and maturity amount exempted from tax) classification are the Public Provident Fund and the Sukanya Samriddhi Yojana.