Small Savings Schemes or Post Office Savings Schemes are very popular in India as people like to invest money in instruments supported by the Government of India. These are schemes that aim to provide safe investments with guaranteed returns. These post office schemes have been launched to encourage the habit of saving among the investors. Post office savings schemes include a bucket which are products that offer risk free returns and good interest rates.
The nine schemes launched under Post Office Savings Schemes are:
- Post office savings account
- 5-Year Post Office Recurring Deposit Account
- Post office time deposit account
- Post Office Monthly Income Scheme Account
- 5 Year Senior Citizen Savings Scheme
- 15 Year Public Provident Fund Account
- National Savings Certificate
- Kisan Vikas Patra
- Sukanya Samriddhi Yojana Scheme
Post Office Interest Rates Table
The interest rates of small savings schemes are decided by the government every quarter.
| small savings schemes | Interest Rates (PA) (FY 2020-21) | minimum deposit | investment period |
|---|---|---|---|
| post office savings account | 4% | INR 500 | No |
| 5-Year Post Office Recurring Deposit Account | 5.8% | INR 100 Month | 1- 10 years |
| post office time deposit account | 6.7% (5 years) | INR 1000 | 1 year |
| Post Office Monthly Income Scheme Account | 6.6% | INR 1000 | 5 year |
| 5- Year Senior Citizen Savings Scheme | 7.4% | INR 1000 | 5 year |
| 15 Year Public Provident Fund Account | 7.1% | INR 500 | 15 years |
| National Savings Certificate | 6.8% | INR 1000 | 5 or 10 years |
| Kisan Vikas Patra | 6.9% | INR 1000 | 9 years 5 months |
| Sukanya Samriddhi Yojana Scheme | 7.6% | INR 250 | 21 years |
High Savings on Investment Small Savings Schemes
Here are some of the high return schemes offered by the Government of India under Small Savings Schemes.
Senior Citizen Savings Scheme (SCSS) – 7.4 percent
This is a special scheme dedicated to senior citizens of India. The scheme is fetching an interest rate of 7.4 per cent per annum from 2020. An individual who is above 60 years of age and senior citizen can open a savings scheme account. The maturity period of SCSS is 5 years and the maximum amount in the plan should not exceed INR 15 Lakh.
The interest rate of this scheme is maintained by the government after every June quarter. The interest rate on the Senior Citizens plan is paid quarterly. Investment amount will be deducted under section 80C , and the interest earned is taxable and subject to TDS as well.
Sukanya Samriddhi Yojana Scheme (SSYS) – 7.6 percent
The objective of the Sukanya Samriddhi Yojana scheme was to encourage parents to secure a future for their daughters. This scheme was launched in the year 2015 by the Prime Minister of India Narendra Modi under the ‘Beti Bachao, Beti Padhao’ campaign. This scheme is targeted for minor girl child. SSY account can be opened in the name of the girl child from her birth at any time before the age of 10 years.
The minimum investment amount is INR 250 and the maximum is INR 1.5 lakh per annum. The scheme is operated for 21 years from the date of inauguration. The current interest rate of SSYS is 7.6 per cent per annum.
Kisan Vikas Patra (KVP) – 6.9 percent
Launched in 2014, Kisan Vikas Patra lets people invest in a long-term savings scheme. The KVP certificate is offered in multiple denominations which gives flexibility to the customers. The minimum deposit starts from INR 1000, and there is no maximum limit. The current interest rate offered at present is 6.9 percent per annum. There is no maximum investment limit in this scheme.
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Public Provident Fund (PPF) – 7.1 percent
One of the popular savings schemes for Public Provident Fund is Retirement Deposit. Here, investors get benefits in terms of EEE – Exempt, Exempt, Exempt – income tax treatment. Contribution to Public Provident Fund up to INR 1.5 Lakh in a financial year is eligible for tax deduction under section 80C of the Income Tax Act. In addition, investors get a loan facility and can also make partial withdrawals. Currently, the interest rates offered for the PPF account are 7.1 per cent per annum. PPF accounts come with a maturity period of 15 years.
National Savings Certificate (NSC) – 6.8 percent
This scheme has been started by the Government of India to promote the habit of savings among Indians. The minimum investment amount for this scheme is INR 1000 and there is no maximum investment amount. The interest rate of NSC changes every year. The NSC interest rate for the financial year 2020-21 is 6.8%. One can claim tax deduction of INR 1.5 lakh under section 80C of the Income Tax Act. Only residents of India are eligible to invest in this scheme.
Post Office Monthly Income Scheme (MIS) – 6.6 percent
A person invests a specific amount in Post Office MIS and gets an assured monthly income in the form of interest. Under this scheme, interest payable on monthly basis (starting from the date of deposit) is deposited in your post office savings account. The current interest rate is 6.6 percent, payable monthly. There are no income tax benefits available for investing in this scheme. The maturity period of Post Office Monthly Income Scheme is 5 or 10 years.
The plan can be closed prematurely. However, on closure of the account between 1 year to 3 years, a deduction of 2 percent will be taken. And after three years, 1 percent will be deducted.
Top Benefits of Small Savings Schemes
1. Investment Details
The given range of savings schemes are best-suited for both urban and rural investors and are easy to enroll in. The simplicity of the given investment options along with the overall availability makes them a highly preferred savings and investment idea.
2. Documentation and Procedures
Proper procedures and limited documentation in post office small-savings schemes assure that the plans offered are safe as the Indian government backs them.
3. Lucrative Investments
Overall investments in post office savings schemes are ideal for the long term. Also, the total investment tenure for a PPF account is around 15 years. Hence, they are excellent for pension planning and retirement.
4. Tax Exemption
Most of the schemes are eligible for tax exemption under section 80C. Sukanya Samriddhi Yojana, SCSS, PPF, and some other schemes have interest exempted from tax.
