Post Office Tax Saving Scheme

Learn about different types of Post Office Tax Saving Schemes.
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PO Tax Saving Scheme
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4 mins
17 October 2024

Investing in a tax-saving scheme is an effective way to not only lower your taxable income but also save money over the long term. This is where post office tax saving scheme come into play. The post office offers a wide range of savings schemes that not only offer competitive interest rates but also come with tax benefits. In this article, we have provided a comparative study of some of the most popular tax-saving post office schemes such as PPF, Sukanya Samriddhi Account, NSC, SCSS, and Post Office Time Deposit.

To diversify your portfolio and potentially earn higher returns, consider combining tax-saving schemes with fixed deposits (FDs). FDs offer guaranteed returns, complementing the long-term focus of post office.

Pro tip

Bajaj Finance launches a new variant, "FD Max", for investments upto Rs. 25,000 . Bajaj Finance is providing one of the highest interest rates of up to 8.85% p.a.for senior citizens and 8.60% p.a. for non-senior citizens , in this variant.

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Types of Post Office Saving Schemes for tax benefits

1. Public Provident Fund (PPF):

  • Interest Rate: PPF offers a competitive interest rate of 7.1% (as of 01/01/2024).
  • Tenure: The PPF account has a fixed tenure of 15 years, making it a long-term savings option.
  • Minimum and Maximum Investment: Investors can contribute a minimum of Rs. 500 annually and up to a maximum limit of Rs. 1.5 lakh annually.
  • Tax Benefits: PPF contributions are eligible for deductions under Section 80C of the Income Tax Act, making it a tax-efficient investment.
  • Maturity and Withdrawals: The PPF account matures after 15 years, and investors can make partial withdrawals after completing 6 years.

2. Sukanya Samriddhi Account:

  • Interest Rate: Sukanya Samriddhi offers an attractive interest rate of 8.2% p.a. (as of 01/01/2024).
  • Tenure: The account continues until the girl child turns 21 or gets married after the age of 18.
  • Minimum and Maximum Investment: A minimum annual deposit of Rs. 250 is required and with a maximum limit of Rs. 1.5 lakh in a financial year.
  • Tax Benefits: Investments in Sukanya Samriddhi are eligible for deductions under Section 80C, aiding in tax planning.
  • Maturity and Withdrawals: The account matures when the girl child reaches the age of 21 or gets married after turning 18.50% of the balance amount can be withdrawn when a girl attain the age of 18 or passed 10th standard.

3. National Savings Certificate (NSC):

  • Interest Rate: NSC provides a fixed interest rate of 7.7% (as of 01/01/2024) which is compounded annually.
  • Tenure: The NSC has a maturity period of 5 years, offering a relatively shorter investment horizon.
  • Minimum and Maximum Investment: Investors must deposit minimum of Rs. 1,000 annually and there is no maximum limit for investment.
  • Tax Benefits: Investments in NSC up to Rs. 1.5 lakh are eligible for deductions under Section 80C.
  • Maturity and Withdrawals: The NSC matures after 5 years, and the invested amount can be withdrawn upon maturity.

4. Senior Citizen Savings Scheme (SCSS):

  • Interest Rate: SCSS offers a interest rate of 8.2% p.a. (as of 01/01/2024).
  • Eligibility: Available for individuals aged 60 years or above, retired civilian employees aged above 55 years and retired defence employees aged above 50 years.
  • Tenure: SCSS has a fixed tenure of 5 years.
  • Minimum and Maximum Investment: The minimum investment is Rs. 1,000 in a financial year, with a maximum investment limit of Rs. 30 lakh.
  • Tax Benefits: Investments in SCSS up to Rs. 1.5 lakh are eligible for deductions under Section 80C. But interest earned are taxable of total interest amount exceeds Rs. 50,000 a year.
  • Maturity and Withdrawals: The SCSS matures after 5 years, and investors can choose to extend the tenure for an additional 3 years. You can close your account at any time after the date of opening but you have pay some penalty.

5. Post Office Time Deposit (TD):

  • Interest Rate: The interest rates for Post Office TD are fixed and vary based on the chosen tenure, ranging from 6.9% to 7.5% (as of 01/01/2024). There is total 4 such tenure, every tenure has different rate of interest.

Tenure

Rate

1 year

6.9 %

2 years

7.0 %

3 years

7.1 %

5 years

7.5 %

 

  • Minimum and Maximum Investment: There is no maximum limit for investment, and the minimum investment requires is Rs. 1,000.
  • Tax Benefits: Interest earned is taxable, but the investment under 5 years TD qualifies for deductions under Section 80C.

Explore Life Insurance policies

If you're aiming to grow your investment portfolio while enjoying tax savings, life insurance savings and investment plans are a smart choice. These policies not only provide life coverage but also offer flexible premium payment options, guaranteed maturity benefits, and the potential for market-linked returns. With Bajaj Finance Insurance Mall, you can easily compare various life insurance plans online and select the one that meets your financial and tax-saving needs.

Comparative study of Post Office Schemes for tax exemption

Schemes

Interest Rate

Tenure

Min Investment

Max Investment

Tax Benefits

Public Provident Fund (PPF)

7.1 %

15 years

Rs. 500

Rs. 1,50,000

Principal- Yes

Interest- Yes

Maturity- Yes

Sukanya Samriddhi Account

8.2 %

Until the age of 21 or marriage after the age of 18

Rs. 250

Rs. 1,50,000

Principal- Yes

Interest- yes

Maturity- Yes

National Savings Certificate (NSC)

7.7 %

5 years

Rs. 1,000

No limit

Principal- Yes

Interest- Yes

Maturity- No

Senior Citizen Savings Scheme (SCSS)

8.2 %

5 years

Rs. 1,000

Rs. 30,00,000

Principal- Yes

Interest- No

Maturity- No

Post Office Time Deposit (TD)

7.5 %

 5 years

Rs. 1,000

No limit

Principal- Yes

Interest- No

Maturity- No


What are advantages of Post Office Tax Saving Scheme?

  1. Stable returns: These schemes offer stable and predictable returns, providing a secure avenue for investment.
  2. Tax benefits: Many of these schemes come with tax benefits, allowing investors to save on income tax through deductions and exemptions.
  3. Diversification: Investors can diversify their portfolio by investing in these schemes. This helps them in balancing their risk and returns.
  4. Government backing: Being government-backed schemes, they instil a sense of reliability and trust among investors.
  5. Flexible investment options: With various schemes catering to different needs, investors have the flexibility to choose based on their financial goals and preferences.
  6. Long-term savings: Some schemes, like PPF, encourage long-term savings, fostering disciplined financial planning.

But if you want to earn better interest rates compare to these post office tax saving scheme, then you can consider Fixed Deposit (FD).

Bajaj finance offers one of the highest FD rates of up to 8.85% p.a. for senior citizens (above the age 60) and up to 8.60% p.a. for individuals below the age of 60. Flexible payout option like monthly, quarterly, half yearly, annually are also offered by Bajaj Finance

How to apply for tax saving schemes in the Post office?

  1. Visit your nearest Post Office or download the form online.
  2. Fill out the application form.
  3. Attach required documents like identity proof and PAN card.
  4. Deposit the specified investment amount through cash, cheque, or demand draft.

Who should apply for the Post Office Tax Saving Schemes?

  1. If you prioritise guaranteed returns on your investment at maturity, these schemes offer a predictable outcome.
  2. If you prefer investments that are not affected by market fluctuations, these schemes provide security from market ups and downs.
  3. These schemes help you reduce your tax burden on your income.

Conclusion

Post office tax saving schemes offer a range of investment options with stable returns, tax benefits, and government backing. These schemes provide investors with flexibility in choosing based on their financial goals and preferences and encourage disciplined long-term savings. Applying for these schemes is simple and can be done either by visiting the nearest post office or online. It is important to note that investors should carefully weigh their options and assess their financial goals before investing in any of these schemes.

Calculate your expected investment returns with the help of our investment calculators

Investment Calculator
SIP Calculator

Fix Deposit Calculator

Systematic Deposit calculator

Gratuity Calculator

Employee Provident Fund Calculator

Lumpsum Calculator

Step Up SIP Calculator

Sukanya Samriddhi Yojana Calculator

PPF Calculator

Recurring Deposit Calculator

Frequently asked questions

Are online facilities available in post offices for these schemes?

Yes, Post Office has upgraded its services, allowing you to conveniently manage your accounts online.

Are there any market-related risks associated with these schemes?

No, these schemes are not exposed to market risks. They offer guaranteed returns based on government-determined rates.

Can I invest in these tax saving plans at any post offices throughout the country?

Yes, you can invest in these schemes at any post office across India, regardless of your location.

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Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.