Post office deposit to provident fund: All about small savings schemes

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The government’s small savings schemes are instruments that encourage citizens to plan their financial security irrespective of age. The schemes provide better returns than bank fixed deposits and come with a sovereign guarantee and tax benefits.

Here is a list of different types of small savings schemes

Post Office Savings Account

It is a savings account with a post office. Only one account can be opened with one post office and can be transferred from one post office to another. You can also open an account in the name of a minor. The interest rate is 4 per cent and is fully taxable.

Post Office Recurring Deposit Account

It allows you to deposit a consistent sum each month, with each instalment accruing interest. The account offers an annual compounding interest rate of 6.7 per cent. It has a fixed tenure of 5 years, extendable up to 10 years upon renewal. You can start with a minimum monthly deposit of Rs 100, and there’s no maximum limit. It doesn’t provide tax benefits and the interest earned is fully taxable.

Post Office Time Deposit

A minimum investment of Rs 1,000 is required to open a Post Office Time Deposit. Deposits of five-year tenure are a good tax saving investment option as you can avail of deduction up to Rs 1,50,000 annually under Section 80C of the Income Tax Act. There are four possible tenures for post office time deposit accounts you can choose from, i.e. 1 year, 2 years, 3 years, and 5 years. For April-June 2024, the interest rate for Post Office Time Deposits is set at 7.5 per cent for 5 year tenure.

Kisan Vikas Patra

The minimum deposit for this account is Rs 1,000. As per rules applicable to the first quarter of Financial Year 2024-25, the interest rate is 7.5 per cent p.a. The account tenure is 115 months, and the amount invested in this tenure will be doubled.

National Savings Certificate

The National Savings Certificate (NSC) pays interest at a rate of 7.7 per cent per annum upon maturity after five years. The interest that is earned is reinvested into the scheme every year automatically. The NSC also qualifies for tax saving under Section 80C of the income tax act.

Sukanya Samriddhi Accounts

Sukanya Samriddhi Accounts (SSA) is designed for girls below the age of 10, offering a structured avenue for savings and investment. Parents of girl children are responsible for initiating and managing the account until the girl reaches 18 years of age. The minimum deposit required is Rs 250 and a maximum of Rs 1,50,000 per financial year. An interest rate of 8.2 per cent p.a. is applicable. The interest is calculated every year and compounded annually. The interest earned is exempt from tax.

Public Provident Fund

The Public Provident Fund is a popular saving option for long-term financial goals like retirement. It pays 7.1 per cent a year and qualifies for tax benefit under Section 80C of the Income Tax Act. Upon maturity of the account after 15 years, it can be extended indefinitely in blocks of 5 years. The accumulated amount and interest earned are exempt from tax at the time of withdrawal.

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Pooja Gupta

CA Pooja Gupta (CA, ISA, having 15 years of experience. Educator and Digital Creator

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CA Pooja Gupta (CA, ISA, having 15 years of experience. Educator and Digital Creator

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