Post Office Investments: Schemes & Benefits

Post Office Investment Scheme: Definition

The Indian post office, established in Oct 1854 during British rule, is one of the country's oldest organisations. It began by delivering mail and expanded to offer various financial services such as banking, insurance, and investments. These post office investment schemes have the advantage of being government-backed, ensuring a sovereign guarantee. Additionally, certain post office savings schemes provide tax-saving benefits under Section 80C of the Income Tax Act.

Advantages of Post Office Investment Schemes

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

1. Credibility

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.

2. Access 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 also be reaped by rural and uneducated people.

3. Avail of benefits long term

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.

4. Risk-free

‍ The interest rates applicable to post office savings schemes fall between 4% to 8%. 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.

5. 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 Post Office Investment Schemes

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

• 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 percent 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.
• These investments are risk-free.
• Investors have the choice to nominate another individual to receive their benefits in case of an untimely demise.
• Investors can choose to have their funds deposited into a recurring deposit.
• Rather than being limited to adults alone, even minors can invest in post office monthly investment schemes.
• Investors can transfer the post office investment accounts from one post office to another without incurring any transfer fees.
• In the case of accounts held by individuals, a lower cap on the investment amounts to ₹1,500, whereas the higher cap amounts to ₹4.5 lakhs. While the lower cap on joint account holdings is the same as that of single accounts, the upper cap amounts to ₹9 lakhs.
• The amount can be reinvested when the investment matures and reaches the end of its term in such a scheme.
• Tax deductions at source don’t apply under these schemes. That said, the interest generated via this scheme is taxable.
• 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.

8 Favourite Post Office Investment Schemes

Visit the nearest post office to invest in any of these schemes.

Here is a list of the top 6 post office savings schemes for the boy child in India.

Conclusion

Although post office investment schemes may not be well known, they should be taken advantage of. With minimal risks and competitive interest rates, they cater to various investor requirements. Various post office investment schemes are available, including Kisan Vikas Patra, National Savings Certificate, National Savings Monthly Income Account, National Savings Recurring Deposit Account, Public Provident Fund Account, Senior Citizens Saving Scheme Account, Sukanya Samriddhi Account, etc. The schemes have different maturity periods, allow for nominee assignments, and offer flexibility in terms of deposits and transfers. Overall, post office investment schemes present a range of benefits and options for investors to consider.

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Frequently Asked Questions

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

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.

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

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.

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

The interest rates applicable to post office savings schemes fall between 4% to 8%.

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

The Sukanya Samriddhi Account has the highest interest rate, which amounts to 8%. The Kisan Vikas Patra account has an interest rate of 7.5%, where there is no limit on the amount invested each year.