Top-6 post office tax-saving schemes

Post office saving schemes are backed by the government making them one of the safest avenues for investment. Several post office schemes are the first choice of numerous citizens looking for fixed and assured income. Some of them also come with tax benefits under section 80C of the Income Tax Act. The interest rates of these schemes are set by the government at the start of every quarter of the financial year. Let’s take a look at the top-six post office investment options that help reduce tax liability.

1) Post Office Recurring Deposits

Recurring Deposits by Post-Offices provide an investment option wherein the investors can make monthly deposits for a period of five years. The interest rate associated with post office recurring deposit is 5.8% per annum which is compounded annually. Moreover, the subscribers of PORD can enjoy tax deductions up to Rs 1,50,000 under section 80C. There is no TDS on interest earned on this account but the income remains taxable at the hands of the investors as per their tax slab.

2) Post Office Savings Account

Just like banks, post-offices also allow common people to open a savings account. This account can be opened with a deposit of Rs 500. A 4% interest rate is paid on the balance of the savings account by the post office.

Under section 80TTA of the Income Tax Act, the income earned from savings accounts (including Post Office Savings Account) up to Rs 10,000 is tax deductible from gross income. No deductions under 80TTA are allowed for senior citizens.

3) National Savings Certificate

The investment made in the National Savings Certificate is eligible for deduction under section 80C. Now the interest rate is 6.8%. It is compounded annually and payable at maturity. The minimum amount for opening of an account is Rs 1,000 with no maximum limit. The scheme has a tenure of five years.

4) Sukanya Samriddhi Yojana

This government-backed small savings scheme was launched in January 2015 to encourage parents to build a fund for the future expenses of their girl child. This account can be opened in post offices by the guardian in the name of a girl child below the age of 10 years. Along with documents of the guardian, the birth certificate of the girl child in whose name the account is to be opened is also necessary to open a SSY account.

A minimum deposit of Rs 250 should be made yearly and at the time of the opening of the account. A maximum of Rs 1.5 lakh can be invested in this scheme every year.

The tenure of SSY is 21 years or until the daughter is married after 18 years of age. Between 15th and 21st year, no deposit need to be made. However, you will get interest on the earlier accumulated investment.

5) Public Provident Fund

One of your safest bets can be investing in PPF. It is a government-backed retirement benefits scheme that is entitled to deduction under section 80C of the Income Tax Act. It can be opened by both salaried and non-salaried individuals for long-term investments. In terms of liquidity, PPF has a lock-in period of 15 years. But the money can be withdrawn partially after seven years. The tenure of your PPF account can also be extended further up to five years.

The current interest rate on this scheme is 7.1%. The interest rate on the PPF is subject to change and is revised quarterly by the government.

6) Senior Citizen Saving Scheme

This is a government-backed retirement benefit program for senior citizens. Now SCSS is offering 7.4% annual interest rate payable quarterly. It is available across all banks and postal offices across India. One can get an income tax deduction of up to Rs 1.5 lakh under section 80C of the Income Tax Act.