Skip to main content

Post Office Savings Schemes for Tax Saving

Best SIP Funds to Invest Online 


Post Office Savings Account, 5-Year Post Office Recurring Deposit Account (RD),  Post Office Time Deposit Account,  Post Office Monthly Income Scheme Account (MIS), Senior Citizen Savings Scheme (SCSS), 15-Year Public Provident Fund Account (PPF), National Savings Certificates (NSC), Kisan Vikas Patra (KVP) and Sukanya Samriddhi Accounts  for the girl child are some of the savings schemes offered by the Department of Posts at post offices. Many of these schemes also offer the advantage of income tax benefits to investors.

Here are some of the schemes offered at post offices which come with income tax benefits:

Public Provident Fund (PPF)

Apart from many banks, post offices also offer the popular tax-saving scheme PPF, which qualifies for EEE (exempt-exempt-exempt) benefits under tax laws. That means the contribution, interest and maturity proceeds all are tax-free. PPF deposits are eligible for tax deductions under Section 80C of Income Tax Act – a maximum of Rs. 1.5 lakh can be claimed in one financial year.

The maturity period of PPF accounts is 15 years and it can be extended in blocks of five years. Loan facility and partial withdrawal facilities are also allowed.  Premature closure is allowed only after the account has completed five financial years but under specific conditions. The government has proposed to allow premature closure of Public Provident Fund (PPF) accounts. Currently, PPF accounts offer an interest rate of 7.6 per cent (January-March quarter).  The interest rate on small savings schemes such as  PPF, Senior Citizen Savings Scheme and Sukanya Samriddhi Accounts, which are benchmarked to bond yields, are revised on a quarterly basis.

Sukanya Samriddhi Scheme

Sukanya Samriddhi Account is a small savings scheme exclusively for the girl child. A parent or legal guardian can open an account in the name of the girl child until she attains the age of ten years. Apart from post offices, the Sukanya Samriddhi account can be opened in some designated banks.

Deposits made into the Sukanya Samriddhi Account as well as the proceeds and maturity amount are fully exempted from income tax. The annual deposit of up to Rs. 1.5 lakh qualifies for tax benefit under Section 80C. The maximum amount that can be deposited in a year is Rs. 1.5 lakh. Sukanya Samriddhi Account currently fetches an interest rate of 8.1 per annum (January-March quarter).

5-Year Post Office Time Deposit

Post offices offer deposits with tenure of one year, two years, three years and five years, according to India Post. The investment under the five-year term deposit qualifies for the benefit of Section 80C of the Income Tax Act, 1961 from April 1, 2007, according to India Post. Under current income tax laws, investment in income tax-saving FDs can help you claim deductions for investments up to Rs. 1.5 lakh a year under Section 80C of the Income Tax Act. Currently, the five-year Post Office Term Deposit offers an interest rate of 7.4 per cent.

Senior Citizen Savings Scheme (SCSS)

Senior Citizen Savings Scheme is an investment option for individuals above the age of 60 years. An individual aged 55 years or more up to 60 years who has retired on superannuation or under VRS can also invest in Senior Citizen Savings Scheme. Currently, it offers an interest rate of 8.3 per cent. The maturity period if five years and an individual cannot invest more than Rs. 15 lakh under this scheme. Investment under this scheme qualifies for the benefit of Section 80C of the Income Tax Act but interest earned is taxable. TDS is deducted at source on interest if the interest amount is more than Rs. 10,000.

 National Savings Certificates (NSC)

The Five-Year National Savings Certificate currently offers an interest rate of 7.6 per cent. The interest is compounded annually but is payable at maturity. This means every Rs. 100 invested in NSC grows to Rs. 144.23 after five years. There is no maximum limit for investment in NSC and it has a maturity period of five years. Investment of up to Rs. 1.5 lakh in NSC can qualify for income tax deduction under Section 80C of the Income Tax Act. In addition, interest accrued yearly on NSC is deemed to be reinvested on behalf of the investor and qualifies for deduction under Section 80C within this total limit. But since the interest accrued on NSC in the last year of the certificate's term is not reinvested, it cannot be claimed as a deduction from taxable income under Section 80C. Therefore, the interest earned in the last year is added to the income of the investor in the year of accrual.

However, since the interest accrued on NSC in the last year of the certificate's term is not reinvested, it cannot be claimed as a deduction from taxable income under Section 80C. Therefore, the interest earned in the last year is added to the income of the investor in the year of accrual.

Post Office Savings Account

This savings account facility offered by Post Office give an interest of 4 per cent per annum. Under Section 80TTA, interest income earned from savings accounts (including Post Office Savings Account) up to Rs. 10,000 is tax deductible from the gross income.

It is to be noted that senior citizens will get a higher interest income exemption limit on deposits in banks and post offices, including recurring deposits, from April 1, according to changes proposed in Budget 2018.  Currently, a deduction up to Rs. 10,000 is allowed under Section 80TTA of the Income Tax Act to an individual in respect of interest income from a savings account. Under the tax laws, a new section, Section 80TTB, is proposed to be inserted to allow a deduction up to Rs. 50,000 in respect of interest income from deposits held by senior citizens. However, no deduction under Section 80TTA is allowed for senior citizens.

Interest income earned from savings bank account (whether from savings account in a bank or a post office) is included in your income. However, under Section 80TTA, a corresponding deduction of such interest income up to Rs. 10,000 is allowed and hence it does not form part of the income to this extent.



SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Popular posts from this blog

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

National Savings Certificate

National Savings Certificate Here's everything you need to know about the 5-year savings scheme offered by the Government This is a 5-year small savings scheme of the government. From 1 July 2016, a National Savings Certificate (NSC) can be held in the electronic mode too. Physical pre-printed NSC certificates have been discontinued and replaced with Public Provident Fund-like passbooks. What's on offer The minimum amount you can invest in them is Rs100 and there is no upper limit. Under this scheme, all deposits up to Rs1.5 lakh qualify for deduction under section 80C of the Income-tax Act, 1961. The interest earned is taxable. You can invest in multiples of Rs 100. These certificates can be owned individually, jointly and also on behalf of minors. The interest rates for all small savings schemes are released on a quarterly basis. The effective rate for NSC from 1 October to 31 December is 8%. The interest is calculated on an annual compounding basis and is given along w...

Different types of Mutual Funds

You may not be comfortable investing in the stock market. It might not seem like your cup of tea. But you can start by investing in Mutual Funds. Many first-time investors invest in Mutual Funds. This is because they do not know how to invest in individual securities. Basic information on Mutual Funds People invest their money in stocks, bonds, and other securities through Mutual Funds. Each Fund has different schemes with specific objectives. Professional Fund Managers look after these schemes. Your Fund Manager could help you invest in a scheme that suits your financial goal. Functioning of Mutual Funds You could make money through Mutual Funds in different ways. A single Mutual Fund could hold many different stocks, bonds, and debentures. This minimizes the risk by spreading out your investment. You could earn dividends from stocks and interest from bonds. You could also earn capital by selling securities when their price increases. Usually, you could choose to sell your share any t...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now