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A post office offers various deposit schemes to investors. These are also known as small savings schemes. The USP of these schemes is their sovereign guarantee, i.e., it is backed by the government. Some of these schemes also offer tax-saving benefits under section 80C of the Income-tax Act.
Post offices offer several saving schemes across different time periods with different interest rates. One such saving scheme offered by India Post is time deposit or fixed deposit. The Post Office Time Deposit (POTD) is similar to bank fixed deposits (FDs), also known as term deposits. The USP of POTD is that it is backed by the government. The interest rate offered on these schemes is reviewed quarterly by the government. Recurring Deposit Account (RD), Public Provident Fund (PPF), Kisan Vikas Patra, Monthly Income Scheme Account (MIS), Sukanya Samriddhi Yojana are some of the other well-known schemes offered by Post Office.
India Post, which has a network of over 1.5 lakh post offices across the country, provides a range of financial services, other than its mailing operations. The Department of Posts offers nine savings schemes with different interest rates. Interest rates on post office saving schemes move in line with the government’s interest rates on small savings schemes, which are revised on a quarterly basis.
Post office monthly income scheme account can be opened by individuals through cheque or cash. In case of cheque, the date of realisation of cheque in government’s account shall be the date of opening of account.
The interest on Post Office deposits was revised on 1 July 2019. For one-year time deposit, Post Office offers an interest rate of 6.9%. For time deposit for a tenure of 2 and three years, it offers an interest rate of 6.9%. For five year time deposit account, Post Office offers an interest rate of 7.7%.
The minimum amount required to set up the account is Rs. 1,500. The maximum investment limit is Rs. 4.5 lakh in a single account and Rs. 9 lakh in a joint account, noted India Post.
Investments that are made under the 5-year fixed deposit account qualifies for income tax benefits under Section 80C of the Income Tax Act. However, there is no tax benefit on the deposits with less than five-year tenure.
The maturity period of the MIS account is 5 years. The account can be prematurely encashed after one year but before three years at the discount of 2 per cent of the deposit and after three years, at the discount of 1 per cent of the deposit. Discount means deduction from the deposit.
At the end of the post office time deposit’s tenure, the deposited amount with interest earned on the income is taxable.
Nomination facility is available at the time of opening and also after opening of MIS account. The account can be transferred from one post office to another.
The Post Office deposits account can be opened in the name of a minor and a joint account can be opened by two adults.
Any number of POTD accounts can be opened in any post office.
Portability of the account between post offices is possible.
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