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Popular Post Office Small Savings Schemes

[Post Updated on Feb 18, 2016]

Salient features of the various Small Savings Schemes offered at the Post Offices in India are detailed below. They are typically useful and beneficial for the vast population of India that resides in small towns and villages; which is rarely serviced by the banks, mutual funds and insurance companies.

They are available only to the resident individuals and minors. NRIs, HUFs, trusts and co-operatives are not permitted to invest in these schemes.

Post Office Savings Account
- Maximum permissible account balance Rs.1 lakh (for single account) / Rs.2 lakhs (for joint account)
- Interest rate 4% p.a. (payable annually)
- Up to Rs.10,000 of interest income per year is tax-free

Post Office Time Deposit
- No maximum limit

- 1-yr, 2-yr, 3-yr and 5-yr deposits allowed
- Interest rates are 8.40% for 1, 2 and 3-year deposits and 8.50% for the 5-year deposits
- Interest compounded quarterly, but payable annually
- Fully taxable. But no TDS
- No premature withdrawal up to 6 months. Withdrawals within 6 months to 1 year are paid only the 4% savings account rate; and early encashments after one year are paid 1% less interest than the rate on the deposit of comparable maturity

Post Office Recurring Deposit Scheme
- No maximum limit
- The term of the deposit is 5 years. Can be extended for another 5 years
- Interest rate is 8.40% p.a. (compounded quarterly)
- Fully taxable and payable on accrual basis every year. But no TDS.
- Premature closure permitted after 3 years, but only the 4% savings a/c rate will be paid.
- Loans, up to 50% of the account balance, allowed after 1 year at
5-yr time deposit rate + 2%

Post Office Monthly Income Scheme (POMIS)
- Max investment Rs.4.50 lakhs (for single account) / Rs.9.00 lakhs (for joint account) / Rs.3.00 lakhs (for minor account)
- The term of the scheme is 5 years
- Interest rate is 8.40% p.a. (payable monthly)
- Interest is fully taxable. But no TDS.
- Premature withdrawal not allowed up to 1 year. For encashments between 1 and 3 years, 2% of the amount is deducted as penalty and after 3 years the penalty is 1% of the amount

National Savings Certificate (NSC)
- No limit on investment.
- Two plans One Plan - 5 years and 10 years.
- Interest rate is 8.50% p.a. (5-yr plan) and 8.80% p.a. (10-yr plan).
- Compounded half-yearly annually
- Interest is fully taxable. But no TDS.
- No premature withdrawal, but transferable to other persons
- Investment in NSC and interest accrued eligible for deduction u/s 80C

Public Provident Fund (PPF)
- Only one account per person permitted.
- Max permissible investment is Rs.1.50 lakhs p.a. (for all accounts i.e. self and family members put together)
- Minimum investment of Rs.500 every year is necessary to keep the a/c active
- 15-year scheme. Can be extended in a block of 5 years
- Interest rate is 8.70% p.a. (compounded annually)
- Calculated on the minimum balance between 5th and the last day of the month.
- Interest income from PPF is totally tax-free
- Eligible for deduction u/s 80C
- Premature closure not permitted
- Borrowing permitted between 3rd and 6th year up to a specified limit. Thereafter, part withdrawal permitted up to a specified limit

Senior Citizens Savings Scheme
- For individuals of age 60 years and above [55 and above if retired under VRS]
- Can be held singly or jointly with spouse
- Maximum investment Rs.15 lakhs
- 5-year scheme. Can be extended for further 3 years thereafter.
- Interest rate is 9.20% (payable every quarter)
- Fully taxable and TDS deducted if interest is more than Rs.10,000 p.a.

- Eligible for deduction u/s Sec 80C
- No premature withdrawal.
- Premature closure attracts a penalty of 1.5% of the deposit (if closed after 1 year but before 2 years) and 1% of the deposit (after 2 years)

Kisan Vikas Patra

Sukanya Samridhhi Yojana

Important : Interest rates are announced every year quarter. Above-mentioned rates apply to the new accounts opened during 2014-15. The contracted rates remain unchanged until maturity, except PPF where the new rates every year are applied on the outstanding account balance.

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