Savings account, recurring deposit, post office time deposit and post office monthly income scheme (MIS) accounts offer an interest rate of 4-7.4%.
Did you know you can open several types of accounts at post offices today? India Post, which has a network of more than 1.55 lakh post offices across the country, offers a variety of banking and remittance services. Individuals can choose from nine types of savings schemes in post offices today. Of these, post office savings, post office recurring deposit (RD), post office time deposit (TD) and post office monthly income scheme (MIS) accounts offer interest rates – or rate of return – ranging from 4 per cent to 7.4 per cent. The return depends on the selection of scheme and the maturity period, also known as tenure.
Here’s a comparison of four post office savings schemes – recurring deposit, time deposit, monthly income scheme and savings account – in terms of investment return and other important factors:
Post office savings account
The post office offers an annual return of 4 per cent on deposit in the savings account. A post office savings account, which comes with the ATM facility, can be opened against a cash payment of a minimum Rs. 20, according to India Post’s website – indiapost.gov.in. The interest earned through the savings account is tax-free up to Rs. 10,000 in a financial year, according to India Post. The savings account comes with optional features such as cheque book and nomination facilities.
| Post office savings scheme | Interest rate | Maturity period |
|---|---|---|
| Savings account | 4% | – |
| Monthly income scheme | 7.3% | 5 years |
| Time deposit | 6.6% for 1 year; 6.7% for 2 years; 6.9% for 3 years; 7.4 per cent for 5 years | 1-5 years |
| Recurring deposit | 6.9% | 5 years |
| (Source: indiapost.gov.in) | ||
Post office monthly income scheme (MIS)
The post office monthly income scheme offers an annual return of 7.3 per cent. One can enter the post office monthly income scheme with a minimum amount of Rs. 1,500. The scheme allows investment in multiples of Rs. 1,500 subject to a maximum investment limit of Rs. 4.5 lakh in case of single account and Rs. 9 lakh in joint account. The MIS comes with a maturity period of five years. Among other features, the monthly income scheme offers the option of premature encashment after 1-3 years at a discount of 2 per cent of the deposit. After three years, a discount of 1 per cent is applicable. This means should the investor want to withdraw his or her money from the scheme before the stipulated maturity period of five years, it can be done with 1-2 per cent deduction from the deposit, depending on the timing of premature withdrawal as stated.
Post office recurring deposit account
The post office RD account, known as the five-year post office recurring deposit account, offers an annual return of 6.9 per cent. The recurring deposit can be set up with a minimum amount of Rs. 10 per month. In a recurring deposit, the investor deposits a fixed amount of money in regular intervals. Contribution in the multiples of Rs. 5 can be chosen to invest in the five-year RD account. The interest rate of 6.9 per cent is compounded on a quarterly basis, which means an RD of Rs. 10 – in which the account holder pays Rs. 10 every month – provides a return of Rs. 717.43 in the maturity period of five years, according to India Post. The account comes with the option of withdrawal of up to 50 per cent of the balance after one year, among other features.
Post office time deposit (TD) account
The post office time deposit account offers return in the range of 6.6 per cent to 7.4 per cent, depending on the maturity period of 1-5 years. The interest is calculated on a quarterly basis and paid on an annual basis, according to India Post. The TD account can be opened with a minimum amount of Rs. 200. Any amount in the multiple of Rs. 200 can be invested in the scheme. The post office TD account has no stipulated maximum investment limit. Out of the four tenures available, the five-year option qualifies for the benefit of Section 80C of the Income Tax Act. Section 80C of the Income Tax Act allows deduction of Rs. 1.5 lakh from total income in a financial year. That means one can claim reduction up to Rs. 1.5 lakh total taxable income in a year.
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