Indian Post office saving scheme are popular yet under rated. Post office saving scheme can give very good return to each and all. It carries low risk and provide high safety. The post office savings schemes can be categorised as core and non-core. Following 6 core post office scheme are highly recommended for investment.
Core Post office saving scheme
Post Office saving account
Like in any bank branch, saving account can be opened with post office. Anybody can open post office saving account in his/her name or as a guardian. A minor above 10 years can also open account in his own name. However, multiple accounts for a single person is not permitted.
The account can be opened with minimum ₹500 and there is no upper limit. Currently interest paid on deposits in post office saving account is 4% per annum.
The account can be operated both singly or jointly. However, change in choice not possible once the account become operational. The minimum balance of ₹500 has to be maintained all the time. Nomination is mandatory. Like any bank account, post office saving account also provide cheque book, ATM card, net/mobile banking facilities.
Post Office recurring deposit account
This post office saving scheme provide account holder facility to deposit a sum of money every month over 5 year period. The minimum per month deposit is ₹100 and above it in multiple of ₹10. Currently interest is paid at 5.8% with quarterly compounding.
The account can be opened by single adult or jointly upto 3 adults, a guardian on behalf of minor and a minor above 10 years in his own name.
There is no restriction on number of accounts. The deposit has to be made by 15th of every month, if the account is opened by 15th of a month. If the account is opened after 15th of a month, the deposit must be made between 16th and end of the month.
If there is default in paying monthly deposit, the same can be revived by paying the subsequent installment. In which case, the tenure will get extended. Advance payment of monthly installments is also permitted.
The depositor can avail loan facility if 12 installments are paid and the account is maintained for 1 year. Premature closure is permitted after maintaining the account for 3 years. After the completion of 5 years tenure, the account may be extended for another 5 year or kept as it is without any contribution.
Time Deposit Account
It is a post office saving scheme whereby the account holder can have fixed deposit with minimum ₹1000 or in multiple of 100. There is no maximum limit. The interest is calculated quarterly, but paid annually. The interest rate varies from 6.6% to 7% depending upon the tenure of the deposit.
The account can be opened by single adult or jointly upto 3 adults, a guardian on behalf of minor and a minor above 10 years in his own name. There is no restriction on number of accounts. The tenure of the account could be 1 year, 2 year, 3 year or 5 year. On maturity the account can be extended for another tenure as in the original. The interest accrued is paid in the saving account.
The account needs to be maintained for minimum 6 months. Pre mature withdrawal leads to reduction in interest rate by 2%. TD account may be pledged as security for availing loans from bank and financial institutions.
Post Office Monthly Income account
It is one of the most popular post office saving scheme. An account can be opened with minimum of ₹1,000 and in multiple of it. Maximum investment limit is ₹4.5 lakh in single account and ₹9 lakh in joint account. Presently applicable interest is 7.1% which is paid monthly to the account holder.
The account can be opened by single adult or jointly upto 3 adults, a guardian on behalf of minor and a minor above 10 years in his own name.
The account has to be maintained for minimum 1 year. If account is closed between 1 to 3 year, a deduction of 2% interest will be made, if closed between 3 to 5 year, deduction @1% will be made. The account may be closed on expiry of 5 years from date of opening.
National Saving Certificate
This is a government promoted saving scheme. Under this scheme any resident Indian can open account through post office. Minimum deposit is ₹1000 and in multiple of ₹100. No maximum limits. The tenure of deposit is 5 years. Any number of accounts can be opened under this scheme. Currently interest is paid @7% compounded annually but payable at maturity.
National Saving Certificate can be pledged as security for availing loan facilities. Premature closure not permitted before the 5 years.
Kisan Vikas Patra
It is a post office saving scheme of Indian Post Office launched in 1988. Any Indian resident can open account under this scheme. Minimum investment is ₹1000 and in multiple of ₹100. No maximum limit. Currently interest is paid @7.2%. The invested amount doubles in 120 months. The deposit will mature as per prescribed period given by Ministry of Finance at the time of deposit. Any number of accounts can be opened under the scheme. KVP can be pledged for securing loan. Premature closure is permitted subject to certain conditions.
As we see above, post office saving scheme provide very decent return compared to bank and other products available in the market. These schemes are backed by government guarantee. Therefore, it is highly recommended to include post office saving scheme in one’s financial planning.
Non core post office saving scheme
These are not exclusive post office saving scheme. These are also available through bank branch network. There are 3 non core post office saving scheme as below:
Senior Citizen savings scheme
This scheme is backed by Government of India for the benefit of senior citizens. The scheme permits citizen a) above 60 years, b) retired Civilian Employee above 55 years and below 60 years and c) retired defense employee above 50 years and below 60 years to open account under this scheme.
The account can be opened in individual capacity or jointly with spouse only. Minimum deposit is ₹1000 and in multiple thereof subject to maximum of ₹30 lakh.
Current interest rate is 8% per annum, payable on 31st March/30th June/ 30th September and 31st December.
Interest earned is paid quarterly by auto debit and credit to saving account. If interest is not collected, no interest will be paid on the interest income amount. Interest income more than ₹50,000 is taxable.
The account can be closed at any time. If it is closed within 1 year of opening, no interest will be paid. If closed after 1 year but before 2 year an amount equal to 1.5% will be deducted from principal amount. If closed after 2 years but before 5 year an amount equal to 1% of principal amount will be deducted. The account may be closed after 5 years on maturity or extended for another 3 years.
Public Provident Fund
This scheme is run by National Saving Institute under Ministry of Finance, Government of India. An investor can open account with post office or bank branches. Minimum investment is ₹500 and maximum is ₹1.5 lakh. Deposits can be made in lumpsum or in instalments.
Account can be opened by single resident Indian, a guardian on behalf of minor/person of unsound mind. Only one account is allowed across India.
Currently interest is paid @7.1% per annum compounded yearly and paid at the end of each financial year. If in any financial year minimum deposit of ₹500 is not made, the said PPF account shall discontinue. However, it can be revived by depositing default amount with penalties. The tenure of PPF account is 15 years.
Loan can be taken against PPF deposit after expiry of one year and before expiry of five year from the end of the FY in which the initial subscription was made. Only one loan is permitted in a financial year.
A subscriber can make 1 withdrawal during a financial year after 5 years excluding year of account opening. The amount can be withdrawn upto 50% of balance at the credit.
On maturity the accumulated amount can be withdrawn or extended for another 5 years block or continue as it is.
Sukanya Samriddhi Accounts
It is a small saving scheme backed by Government of India. This scheme is meant for supporting girl child. Anybody having girl child upto age 10 year can open this account either with post office or bank branch. Minimum investment is ₹250 and maximum investment is ₹1.5 lakh. No limit on number of deposits either in a month or in a financial year.
Currently interest rate is paid @7.6% per annum and compounded yearly. Only one account can be opened in the name of the girl.
Deposits are made till the child become 15 years old. The account become mature when child attain age 21 year or marry after 18 years.
Withdrawal is permitted once the child attains age 18 year or pass class 10th. Withdrawal is permitted once in a year upto 50% of balance available.
Premature closure is permitted after 5 year on compensatory ground.
If minimum deposit of ₹250 in a year is not paid the account will be in default. This can be revived by the minimum amount along with penalty.