What are meaning and benefits of post office investment schemes?

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If you’re wondering where to invest your money for five years, you may be overwhelmed by the investment avenues proliferating the market today. Today’s investment opportunities are endless for mutual funds, bonds, stock options, and post office investment schemes. What you choose to invest in should depend upon your goals and the time frame you are willing to devote to your investment.

In this regard, post office investment schemes hit the right chord. Not only do they have a tenure of 5 years, but they provide a fixed monthly income. Continue reading to understand what post office monthly investment schemes are and the benefits they provide. 

Defining a Post Office Investment Scheme

A post office investment scheme is designed to help you accrue good investment returns. This scheme has a holding period of 5 years and provides an annual interest rate ranging from 4 to 8 per cent. With it, you can avail of a fixed monthly income. You can help with this scheme at any of the post offices located across the country.

Now, if you hail from an urban part of the country, the chances of your having heard of a post office investment scheme may be slim. This is because fixed deposits and alternative debt options are more popular sources of accruing monthly incomes. In fact, most urban dwellers may choose to park their money in these investment avenues.

That said, while Indian post office investment schemes aren’t as popular, they provide investors with a wide range of benefits. In fact, as the Indian post offices fall under the governance of the Ministry of Finance, they hold greater credibility in comparison to other investments. To further cement their credibility, you should keep in mind the fact that the post office continues to serve as one of the country’s most prominent and largest banking service providers.

Exploring the Advantages of Post Office Investment Schemes

Here are some of the more prominent benefits of investing in postal investment schemes.

Investing’s as Easy as your ABCs - It is easy to invest in such schemes, and this is further compounded by the fact that they require limited documentation. The fact that the government upholds them enhances their credibility. By following a few simple steps at your local post office, you can invest in these safe investments that provide fixed returns. 

Access Them Across the Country – Rural as well as urban investors can take advantage of post office schemes as post offices are located across the country. These schemes have been strategically designed to be simple so that their benefits can be reaped by rural and uneducated people also. This makes them the preferred savings route for a large section of the country’s population.

Avail Benefits Across the Long Term – These investments encourage you to look to the future as they long term oriented. They can serve as good retirement or pension plans and can be extended for a period of up to 15 years, provided you have a public provident fund (or PPF). Holding such an investment can diversify your portfolio and gain access to risk-free and fixed returns.

Risk-free + Viable Interest Rates - The interest rates applicable to post office savings schemes fall between 4 to 8 per cent. Not only are they risk-free, but these rates are highly competitive against those offered by banks. Since the government of India regulates these investments, minimal risks are involved.

Investors Rejoice with Customised Offerings – Investors can take advantage of the wide range of investments offered by the Indian Post Office that are targeted to meet different investor requirements. These products have different tax implications, investment horizons, and anticipated returns. 

Features of the Post Office Monthly Investment Scheme

The following features stand out when looking at the post office monthly investment scheme. 

  • Maturity – These schemes have a maturity period that amounts to five years. If you withdraw your funds before this time, you will incur certain deductions.
  • In case you withdraw your deposits within a year, you won’t receive any benefits.
  • In case withdrawals are made between one to three years, you receive your entire deposit once a two per cent deduction has been applied as a penalty.
  • Withdrawals made after three years provide the investor with their entire deposits after a one per cent deduction has been imposed as a penalty. 
  • Risks Involved – This investment is risk-free.
  • Assigning Nominees – Investors have the choice to nominate another individual to receive their benefits in case of an untimely demise. 
  • Possibilities Available – Investors can choose to have their funds deposited into a recurring deposit.
  • Age no bar – Rather than being limited to adults alone, even minors can invest in post office monthly investment schemes.
  • Transfers Possible – Investors can transfer the post office investment accounts from one post office to another without incurring any transfer fees. 
  • Balance Applicable – In the case of accounts held by individuals, a lower cap on the investment amounts to INR 1,500, whereas the higher cap amounts to INR 4.5 lakhs. While the lower cap on joint account holdings is the same as that of single accounts, the upper cap amounts to INR 9 lakhs.
  • Reinvestments – The amount can be reinvested when the investment matures and reaches the end of its term in such a scheme.
  • TDS Doesn’t Apply – Tax deductions at source don’t apply under this scheme. That said, the interest generated via this scheme is taxable.
  • Opening a Post Office Investment Scheme Account – You can open such an account via a cheque or cash. Once the cheque is realised in the Government’s account, the customer’s account will be opened on that very day.

Summarising the Post Office Investment Schemes Available Today

Here’s a list I’ve jotted down of post office investment schemes available in India.

  • Kisan Vikas Patra Account – This post office certificate scheme can help double a one-time investment over the course of 9 years and ten months. 
  • National Savings Certificate – This fixed-income investment scheme is a savings bond that encourages subscriptions from small and mid-income investors. 
  • National Savings Monthly Income Account – Here, investors contribute a certain amount and are provided with a fixed interest earning each month.
  • National Savings Recurring Deposit Account – With this scheme, small and/ or poor investors can create a corpus that they can use to fund their future expenses. This account can be created by a single adult or two adults together.
  • National Savings Time Deposit Account – Tax benefits outlined under Section 80C of the Income Tax Act apply to 5-year post office investment deposits. 
  • Public Provident Fund Account – This long-term investment scheme provides tax exemptions. It is linked with good interest rates that are determined each year.
  • Senior Citizens Saving Scheme Account – Indian residents over the age of 60 years can take advantage of this scheme. It matures five years from the date of its being opened. However, investors can extend it once for a period of 3 additional years.
  • Sukanya Samriddhi Account – This scheme has been designed to improve and enhance the finances of female children. It helps parents grow capital that can then be used for their daughters’ education in the future and for their marriage. It provides an attractive interest rate. 

Applying for Post Office Investment Schemes

If you wish to apply for a post office monthly investment scheme, simply follow the below steps.

Step 1. Visit the nearest post office.

Step 2. Get the form needed to open the appropriate account from the post office, or download it from the official website for the Indian Post Office.

Step 3. Fill out the form with the necessary details and submit it along with your KYC and other necessary documents. 

Step 4. Deposit the amount of your choice into your account to complete the process of enrolment. 

Documents Needed to Apply for a Post Office Investment Scheme

Use the following documents to apply for a post office investment scheme.

  • Aadhar card
  • Driving license
  • Employment ID
  • KYC form
  • PAN card
  • Proof of date of birth
  • The relevant form
  • Voter ID

Wrapping Up

Although post office investment schemes may not be well known, they should be taken advantage of. They provide investors with competitive interest rates and are characterised by the ease with which they can be invested. As far as investments go though, Fi provides investors with the tools they need to make wise investment decisions. Visit the website today to learn more. 

Frequently Asked Questions:

Q1. What is the best scheme offered by the Indian post office?

A1. No one scheme is the best among those offered by the post office as different schemes carry different benefits. The scheme you ultimately invest in should depend upon your goals, the time frame you are willing to allocate, the interest applicable and the caps on the amount you invest.

Q2. How many years will it take for a fixed deposit to double in a post office?

A2. Fixed deposits at post offices pay interest on an annual basis; however, compounding occurs each quarter. At an interest rate of 6.7 per cent, such an investment would take ten years and five months to double in value.

Q3. What is the rate of interest for five years in a post office scheme?

A3. The interest rates applicable to post office savings schemes fall between 4 to 8 per cent.

Q4. Which post office scheme has the highest interest rate?

A4. The Sukanya Samriddhi Account has the highest interest rate, which amounts to 7.6 per cent. The Kisan Vikas Patra account has an interest rate of 6.9 per cent, where there is no limit on the amount invested each year. That being said, it is important to understand that investors have an INR 1.5 lakh cap on the amount they can invest in this scheme each financial year. 

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