Savings in Post Office is popular with Indians because of their low risk and easy availability at the nearby Indian post.
Some of them also provide tax deductions under 80C of the Income Tax Law of 1961, which you can easily use whether in urban or rural areas.
Its tax plan can provide a reliable and risk-free return on investment, allowing people to invest and ensure their financial future with minimal risk.
The PO Plan thus includes a variety of products that provide reliability and risk-free return on investment.
These programs are operated through 154,000 PO across the country.
For example, the PPF program; PPF operates through the branches of 8,200 public sector banks.
We discuss them in detail in this article. Let's begin!
Benefits of Savings in Post Office
- According to section 80TTA, interest income from PO accounts is up to ₹10,000, and taxes can be deducted from the total income.
- According to the current income tax law, according to Article 80C of the Income Tax Law, investment in tax-saving FD can help you claim an investment deduction of Rs 150,000 per year.
Return for Senior Citizens are better than FD:
- Bank time fixed deposit (FD) is a financial product used by many senior citizens to fix income, and its return rate has been lower than 7%.
- For example, the State Bank of India (SBI) lowered the fixed deposit interest rate for each maturity by 40 basis points (bps) on May 27, and now, a 5-10 year fixed deposit will earn 5.4% per year.
- Although few banks (such as SBI, HDFC Bank, ICICI Bank) have launched fixed deposit plans for senior citizens with high-interest rates, even the rate of return is less than 7%.
- The Seniors Plan is an investment choice for individuals over 60. Individuals who are 55 years of age or older but not more than 60 years old and have retired under VRS can also invest in the "Senior Savings Plan."
- Currently, its interest rate is 8.3%. According to the plan, if the period is five years and the personal investment does not exceed Rs 1.5 million, the maturity period is.
- Moreover, the investment made under this plan meets the requirements of Article 80C of the Income Tax Law, but the interest earned is taxable.
- If the interest amount exceeds 10,000 rupees, TDS will thus be deducted from the interest.
Types of Schemes in Post Office
1. Post Office saving accounts
By depositing at least 20 rupees, you can easily open an account here, similar to an account opened at a bank.
In addition, you must have an account with at least 50 rupees.
Indian Post also allows you to transfer funds in your PO account online.
2. 5-year PO Recurring Deposit Account (RD)
A fixed deposit is very effective for you if you want to save a small amount of money on a regular basis.
The five-year plan provides an interest of 7.2%, which is the interest provided by most banks.
After one year, you can withdraw up to 50% of your balance, and you must repay the interest during the life of the account.
3. Post Office Time Deposit Account (TD)
This is a one-year (interest rate of 6.9%), two-year (6.9%), three-year (6.9%), and five-year (7.7%) time deposit.
You need to invest at least Rs. Multiples of 1,000 rupees.
It is 100 thereafter.
Interest is paid monthly but calculated quarterly.
According to Article 80C of the Income Tax Law, 5-year deposits can be deducted from taxable income.
4. Senior Citizen Saving Scheme (SCSS)
This applies to people over 60 or people over 55 who retire or accept VRS.
The interest rate is 8.6% and the term is five years.
Investments made under this plan are eligible for deductions under section 80C.
5. PO Monthly Income Scheme Account (MIS)
If you need monthly income, this is a plan you will be interested in.
You can invest in multiples of Rs. 1,000 to no more than Rs. 45 lakh rupees, or rupees.
The joint account is 900,000.
The interest rate is 7.6% per year, paid monthly.
The account is valid for five years.
It can be cashed out prematurely at the 2% discount on the deposit (deducted from the deposit) at the end of the year or 1% at the end of the three years.
6. 15 year Public Provident Fund Account (PPF)
PPF is one of the preferred options, and the lock-up period is 15 years.
However, investors can withdraw part of the funds after 5 years.
The minimum deposit is Rs. It takes 500 per year to keep the account active.
7. National Savings Certificates (NSC)
Due to the safety and tax benefits under Article 80C, NSC is a popular choice among small investors.
You can invest at least Rs. Multiples of 1,000 rupees.
It is 100 thereafter.
You will receive an interest rate of 7.9%, compounded annually, and paid at the end of 5 years.
8. Kisan Vikas Patra (KVP)
The interest rate of this plan is 7.6%, which is slightly lower than that of NSC and can be used 2.5 years after issuance.
The minimum investment is Rs. 1,000, and a multiple of the rupee. It is 100 thereafter.
9. Sukanya Samriddhi Accounts (SSA)
According to this, the parent or legal guardian of any girl under the age of 10 is eligible to open the account in the name of the child.
A family is allowed to have up to two accounts, in the case of 2 daughters and three accounts in the case of triplets.
Once the child turns 21, she is eligible to claim the due amount.
The expiration date of the account also varies depending on the age of the girl on the date of registration.
Therefore, under the limit of not exceeding 10 years old, the expiration period will be extended from 21 years old.
Just like, if the child is 5 years old on the day of enrollment, the expiration year will be 21 years old + 5 years old, or 26 years old.
Are they really worth it?
1. Only benefit conservative investors, who do not want to take risks, who are retired and want to save tax after the retirement period.
It allows investors to accumulate funds by depositing funds every month.
Currently, this program can provide a guaranteed annual return of up to 8.7%, and early withdrawal will allow you to deduct more than 2% of the cost.
However, in some plans, the maximum investment that investors can make in the plan is fixed.
2. Apart from this category all other investors should consider other options such as mutual funds schemes.
Investing in mutual funds is a paperless and straightforward process.
Investors can monitor the market and invest according to their own requirements.
In addition, switching between funds and portfolio re-balancing can help keep returns in line with expectations.
Post Office Account v/s Mutual Funds
PO account gives a guaranteed return of 8% per Annum payable month to month in addition to a maturity bonus of 5%.
Then again, Mutual Fund investments offer higher liquidity as well as better returns.
The difficulty that emerges for investors here is what to choose.
Is it better to go for a fixed pace of return or a fluctuating one?
If you are looking for significant returns, Mutual funds are worth considering.
One should invest in Mutual Funds with a base period of 2-3 years.
Therefore Mutual fund investments are worth considering for all kinds of investors because of the following reasons:
- You can invest in mutual funds as per your budget and convenience. For example, starting a SIP (Systematic Investment Plan)on a monthly or quarterly basis is suitable for investors with less money.
- You can invest up to Rs 1.5 lakh in ELSS mutual funds to save tax.
- It is easy to buy and sell a mutual fund scheme. You can buy or sell your units at any point.
- Mutual funds is a diversified investment. The fund manager invests in more than one asset class (equities, debts, money market instruments, etc.) to minimize the risks.
- It does not require the investors to do any market research. A fund manager takes care of everything and makes decisions on what to do with your investment.
If you are old and looking for a stable source of income, undoubtedly, the post office plan is a good choice for you.
However, if you are willing to take risks, then mutual funds will be your ideal choice.