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Post Office Saving Schemes, To Save Income Tax

If you want to save on income tax outgo during FY18, you may consider investing in nine small savings schemes offered by post offices.

The last day of financial year March 31 is only a few days away. So iIf you want to save on income tax outgo during FY18 (April 1 ,2017-March 31, 2018), you may consider investing in nine small savings schemes offered by post offices.

The department of Posts or India Post offers nine small savings investment schemes: Post Office Savings Account, 5-Year Post Office Recurring Deposit Account (RD), Post Office Time Deposit Account (TD), 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.

Post Office Savings Account

This account can be opened by cash only. The minimum balance to be maintained in a non-cheque facility account is Rs. 50. The interest earned on post office savings accounts is tax-free up to Rs. 10,000 per year from financial year 2012-13. The interest payable is 4 per annum on individual / joint accounts, according to indiapost.gov.in, the official website of India Post.

5-Year Post Office Recurring Deposit Account (RD)

This account can be opened by cash/cheque and in case of Cheque the date of deposit shall be date of presentation of cheque. This RD account can be transferred from one post office to another and any number of accounts can be opened in any post office, said India Post. There is rebate on advance deposit of at least six installments. Interest rate with effect from 1.01.2018, is 6.9 per cent per annum (quarterly compounded).

Post Office Time Deposit Account (TD)

This account may be opened by an individual by cash/cheque. A nomination facility is available at the time of opening and also after opening of account. It can be transferred from one post office to another. Interest is payable annually but is calculated quarterly.

From 1.01.2018, interest rates are as follows:-

​Period Rate
1yr.A/c 6.60%
2yr.A/c ​6.7%
3yr.A/c 6.90%
​​5yr.A/c 7.40%

The investment under 5 years TD qualifies for the benefit of Section 80C of the Income Tax (IT) Act, 1961 from 1.4.2007.

Post Office Monthly Income Scheme Account (MIS)

Post Office Monthly Income Scheme or MIS is a popular investment scheme wherein an individual invests a particular amount and gets an assured monthly income in the form of interest. From 1.01.2018, interest rates are paid monthly at a rate of 7.3 per cent per annum. The maximum investment limit is Rs. 4.5 lakh in single account and Rs. 9 lakh in joint accounts.

Senior Citizen Savings Scheme (SCSS)

An individual of the age of 60 years or more may open this account. From 1.07.2017, interest rates are as follows:- 8.3 per cent per annum, payable from the date of deposit of 31st March/30th Sept/31st December in the first instance and thereafter, interest shall be payable on 31st March, 30th June, 30th Sept and 31st Decemberm said India Post. This account can be opened by cash for the amount below Rs. 1 lakh and for Rs. 1 lakh and above by cheque only.

15-year Public Provident Fund Account (PPF)

An individual can open a PPF account with India Post with Rs. 100 but has to deposit minimum of Rs. 500 in a financial year and maximum Rs. 1,50,000. From 1.01.2018, interest rate being offered is 7.6 per cent per annum (compounded yearly). Deposits in PPF accounts qualify for deduction from income under Section 80C of the IT Act.

National Savings Certificates (NSC)

A single holder type certificate can be purchased by, an adult for himself or on behalf of a minor or by a minor. From 1.01.2018, interest rate offered is 7.6 per cent compounded annually but payable at maturity. NSC deposits qualify for tax rebate under Section 80C of IT Act.

Kisan Vikas Patra (KVP)

A KVP certificate can be purchased by an adult for himself or on behalf of a minor or by two adults. From 1.01.2018, interest rates offered is 7.3 per cent compounded annually. A minimum of Rs. 1000 and in multiples of Rs. 1000 must be invested. There is no maximum limit on investment.

Sukanya Samriddhi Accounts

A legal Guardian/Natural Guardian can open account in the name of girl child. The rate of interest offered is 8.1 per cent per annum with effect from 1.01.2018,calculated on a yearly basis and compounded yearly.

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