Post Office Schemes are the best tool for multiplying your investments

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When we are taking about secured investment option for long term, post office investment schemes are the best option which will give good returns. The post office scheme are comes under secured investment options as it runs by government of India. Few of the schemes are as under which can help to create big corpus for financial freedom. The schemes are as below

  1. 5-Year Post Office Recurring Deposit Account (RD)
  2. Post Office Time Deposit Account (TD)
  3. Post Office Monthly Income Scheme Account (MIS)
  4. National Saving Certificate ( NSC ) VIII issue – 5 years
  5. Public Provident Fund Account (PPF ) -15, 20, 25 year
  6. Kisan Vikas Patra (KVP ) – 9.33 years

(1) 5-Year Post Office Recurring Deposit Account (RD)

This scheme is good for recurring deposit where we can contribute monthly. The duration of this schemes is 5 years. Also it is giving feasibility to withdraw 50% amount after one year in case of emergency. Few of the features are as under

Duration                           – 5 year

Minimum contribution    – Rs 10/-

Maximum contribution    – No limit

Interest rate                     – 7.2 % per annum (quarterly compounded)

Interest after maturity     – Taxable

80 C benefit                     – No    

Salient Features

  • Account can be opened by cash / Cheque and in case of Cheque the date of deposit shall be date of presentation of Cheque
  • Nomination facility is available at the time of opening and also after opening of account
  • Account can be transferred from one post office to another post office
  • Any number of accounts can be opened in any post office
  • Account can be opened in the name of minor and a minor of 10 years and above age can open and operate the account
  • Joint account can be opened by two adults
  • Subsequent deposit can be made up to 15th day of next month if account is opened up to 15th of a calendar month and up to last working day of next month if account is opened between 16th day and last working day of a calendar month.
  • If subsequent deposit is not made up to the prescribed day, a default fee is charged for each default, default fee @ Rs 0.05/- for every 5 rupee shall be charged. After 4 regular defaults, the account becomes discontinued and can be revived in two months but if the same is not revived within this period, no further deposit can be made.
  • If in any RD account, there is monthly default amount, the depositor has to first pay the defaulted monthly deposit with default fee and then pay the current month deposit. This will be applicable for both CBS and non CBS Post offices.
  • There is rebate on advance deposit of at least 6 instalments.
  • Single account can be converted into Joint and Vice Versa
  • Minor after attaining majority has to apply for conversion of the account in his name
  • One withdrawal up to 50% of the balance allowed after one year. It may be repaid in one lump-sum along with interest at the prescribed rate at any time during the currency of the account.

Advantages

  • Recurring deposit make your habit to save money regularly.
  • It is giving reasonable returns on your investments which is 7.2% quarterly compounded which is very good return as compare to any bank deposit recurring scheme.
  • Online facility is available for post office recurring deposit.

Disadvantages

  • Rate of interest are less than the fixed deposit post office scheme like NSC which is offering 8% interest compounded yearly in same duration of 5 years.
  • It has lock in period of one year, during this period money cannot be withdraw  

(2) Post Office Time Deposit Account (TD)

This scheme is good for deposit for shorter duration where scheme is offering 1,2,3 years lock-in-period options. Also one option for longer duration is also available for 5 year lock in period where interest rates are at higher side.

Duration                           – 1,2,3,5 years

Minimum contribution    – Rs 200/-

Maximum contribution    – No limit ( should be multiple of Rs 200/- )

Interest rate                     – For 1, 2, 3 years – 6.90% per annum (quarterly compounded)

  For 5 Years – 7.70% per annum (quarterly compounded)

Interest after maturity     – Taxable

80C benefit                      – Only on 5 year time deposit

Salient Features

  • Account may be opened by individual
  • Account can be opened by cash /Cheque and in case of Cheque the date of realization of Cheque in Govt. account shall be date of opening of account
  • Nomination facility is available at the time of opening and also after opening of account.
  • Account can be transferred from one post office to another post office.
  • Any number of accounts can be opened in any post office.
  • Account can be opened in the name of minor and a minor of 10 years and above age can open and operate the account
  • Joint account can be opened by two adults.
  • Single account can be converted into Joint and Vice Versa
  • Minor after attaining majority has to apply for conversion of the account in his name
  • In CBS Post offices, when any TD account is matured, the same TD account will be automatically renewed for the period for which the account was initially opened. Example 2 Years TD account will be automatically renewed for 2 Years. Interest rate applicable on the day of maturity will be applied
  • The investment under 5 Years TD qualifies for the benefit of Section 80C of the Income Tax Act, 1961 from 1.4.2007.

Advantages

  • The time deposit is good tool for short term investment like 1-2 years.
  • The interest are compounded quarterly.
  • It is recommended for long term investment if investment will be done for 5 year period where interest rate higher is 7.7%. per annum which is quarterly compounded
  • Five year time deposit is giving much better returns compete to bank fixed deposit which is having lock in period of 5 years.

Disadvantages

  • It has fixed lock –in period so money cannot be withdraw in case of emergency.
  • 1,2,3 years offering almost the little less interest rates which nationalised banks are offering but in time deposit due to lock-in period money cannot be withdraw, in case of bank FD the money can be withdraw any time.
  • Online facility is not available for post office time deposit. Every time physically should go to post office for deposit the monthly amount by cheque or cash.

(3) Post Office Monthly Income Scheme Account (MIS)

MIS is scheme is good for investment where we can expect monthly income in our saving bank account every month. This scheme allow to invest limited amount and maximum Rs 5,700/- can be earn per month with given interest rate if maximum investment of Rs 9 Lakhs will be done with joint holders.

Duration                           – 5 years

Minimum contribution    – Rs 1500/-

Maximum contribution    – Rs 4.50 Lakhs ( single account holder ) multiple of Rs 1500/-

Rs 9.00 Lakhs ( joint account holders ) multiple of Rs 1500/-

Interest rate                     – 7.6% per annum payable monthly 

Interest after maturity     – Taxable

80C benefit                      – No

Salient Features

  • Account may be opened by individual.
  • Account can be opened by cash/Cheque and in case of Cheque the date of realization of Cheque in Govt. account shall be date of opening of account.
  • Nomination facility is available at the time of opening and also after opening of account.
  • Account can be transferred from one post office to another.
  • Any number of accounts can be opened in any post office subject to maximum investment limit by adding balance in all accounts.
  • Account can be opened in the name of minor and a minor of 10 years and above age can open and operate the account.
  • Joint account can be opened by two or three adults.
  • All joint account holders have equal share in each joint account.
  • Single account can be converted into Joint and Vice Versa.
  • Minor after attaining majority has to apply for conversion of the account in his name.
  • Maturity period is 5 years.
  • Interest can be drawn through auto credit into your savings account standing at same post office, through PDCs or ECS./In case of MIS accounts standing at CBS Post offices, monthly interest can be credited into savings account standing at any CBS Post offices.
  • Can be prematurely en-cashed after one year but before 3 years at the discount of 2% of the deposit and after 3 years at the discount of 1% of the deposit. (Discount means deduction from the deposit.
  • A bonus of 5% on principal amount is admissible on maturity in respect of MIS accounts opened on or after 8.12.07 and up to 30.11.2011. No bonus is payable on the deposits made on or after 1.12.2011.

Advantages

  • This is the only post office scheme where every month the interest amount will be credited to your linked bank account.
  • It will give fixed regular income per month.
  • Lock-in-period is one year so money can be withdraw with penalty of 1-2% in case of emergency.

Disadvantages

  • The interest rate 7.6% per annum look good but as interest amount is getting withdraw every month hence compounding on interest benefit will not applicable in this case which will give lower return on investment.
  • Only good for every month returns. Not good for long term long term investment.

(4) National Saving Certificate ( NSC ) VIII issue – 5 years

NSC is best option if investment lock in period is 5-6 years. This scheme is giving good return on investments in 5 year period. This scheme is best under secured investment option with 5 year lock-in-period which is giving best returns on investments. Even after maturity investment can be done for further 5 years. The interest rate offered by post office for this scheme is as equivalent to PPF as interest rates are same but the interest earned is taxable. This also allow to invest as much money.

Duration                           – 5 years

Minimum contribution    – Rs 100/-

Maximum contribution    – No Limit ( Multiple of Rs 100/- )

Interest rate                     – 7.9% per annum compounded annually 

Interest after maturity     – Taxable

80C benefit                      – Yes

Salient Features

  • A single holder type certificate can be purchased by an adult for himself or on behalf of a minor or by a minor.
  • The account can be open with two more joint holders.
  • Deposits qualify for tax rebate under Sec. 80C of IT Act.
  • The interest accruing annually but deemed to be reinvested under Section 80C of IT Act.
  • In case of NSC VIII , transfer of certificates from one person to another can be done only once from date of issue to date of maturity.
  • At the time of transfer of Certificates from one person to another, old certificates will not be discharged. Name of old holder shall be rounded and name of new holder shall be written on the old certificate and on the purchase application (in case of non CBS Post offices) under dated signatures of the authorized Postmaster along with his designation stamp and date stamp of Post office.

Advantages

  • NSC is one of the best investment tool which is giving good returns on investments.
  • Due to not very much long term investment, it is most popular.
  • It has 5 year lock in period and interest rate be the same at the time of purchasing NSC.
  • Return on investment is fixed from first day.
  • Loans are available against NSC.

Disadvantages

  • Due to lock-in-period the money cannot be withdraw in case of emergency.
  • The interest earn is taxable.

(5) Public Provident Fund Account ( PPF ) 15, 20, 25 year –

PPF is best option if investment to create corpus of financial freedom. The lock in period is 15 which can be further extended in 5 years till 25 years. This scheme is giving very good return on investments 15 year period. This scheme is best under secured investment option with 15 year lock-in-period which is giving best returns on investments. Even after maturity investment can be done for further 5 block years which will multiply your income very fast. The interest rate offered by post office for this scheme is highest in post office scheme under age 60. This scheme allow to invest Rs 1.5 lakhs every year till even 25 years.

Duration                           – 15 years

Minimum contribution    – Rs 500/-

Maximum contribution    – Rs 1,50,000/- per year in 1-12 lump-sum instalments

Interest rate                     – 7.9% per annum compounded annually 

Interest after maturity     – Non – Taxable

80C benefit                      – Yes

Salient Features

  • An individual can open account with INR 100/- but has to deposit minimum of INR 500/- in a financial year and maximum INR 1,50,000/-
  • Joint account cannot be opened.
  • Account can be opened by cash / Cheque and In case of Cheque, the date of realization of Cheque in Govt. account shall be date of opening of account.
  • Nomination facility is available at the time of opening and also after opening of account.
  • Account can be transferred from one post office to another post office.
  • The subscriber can open another account in the name of minors but subject to maximum investment limit by adding balance in all accounts.
  • Maturity period is 15 years but the same can be extended within one year of maturity for further 5 years and so on.
  • Maturity value can be retained without extension and without further deposits also.
  • Premature closure is not allowed before 15 years.
  • Deposits qualify for deduction from income under Sec. 80C of IT Act.
  • Interest is completely tax-free.
  • Withdrawal is permissible every year from 7th financial year from the year of opening account.
  • Loan facility available from 3rd financial year.

Advantages

  • PPF is one of the best investment tool which can help to create big corpus for financial freedom due to long term investment and compounding effect.
  • PPF is offering best returns under secured investment option.
  • The best part of this scheme is the interest earned is completely tax free.
  • The money can be transferred online to PPF.
  • Loan facility is available from 3rd financial year.
  • Giving tax benefit 80C every year on investment done for particular financial year.
  • Loans are available against NSC.

Disadvantages

  • Return on investment is not fixed as govt. of India is revising the interest rate as per their wish.
  • Due to lock-in-period the money cannot be withdraw in case of emergency.
  • Interest is compounded annually not quarterly.

(6) Kisan Vikas Patra (KVP ) – 9.33 years

KVP is good option for the investment period of around ten years. It will doubled your investments in 9 years and 4 months. Also lock in period is 2.5 years after which money can be in-cashed. The interest rate offered by post office for this scheme is reasonably good.

Duration                           – 9 years & 4 months

Minimum contribution    – Rs 1000/-

Maximum contribution    – No limit

Interest rate                     – 7.6% per annum compounded annually 

Interest after maturity     – Taxable

80C benefit                      – No

Salient Features

  • Certificate can be purchased by an adult for himself or on behalf of a minor or by two adults.
  • KVP can be purchased from any Departmental Post office.
  • Facility of nomination is available.
  • Certificate can be transferred from one person to another and from one post office to another.
  • Certificate can be en cash after 2 & 1/2 years from the date of issue.

Advantages

  • KVP is the best investment tool to double the investment.
  • Lock in period is 2.5 years hence in case of emergency the investment can be withdraw after 2.5.
  •  

Disadvantages

  • Interest rate is less as compare to NSC.
  • Interest is compounded annually.

In present market scenario the Post office schemes are good investment option as it is giving good returns on investment and also invested money is reasonable secures.

Read more about in which post office scheme we should invest

“Which post office plan is best and for what” ( Coming Soon ).


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Vivek Rai

Hi this is Vivek Rai. I am a blogger,

I am helping people to live their life peacefully, gracefully and guiding them to invest our valuable money & time in such a way so we need not to work for money and we can live our respectful life with quality lifestyle.

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