Moneycontrol
Aug 13, 2017 11:00 AM IST | Source: Moneycontrol.com

Post Office Savings: An alternate investment avenue for the risk-averse investor

Besides the regular savings and recurring deposits, investors can choose from the multiple risk–free options that post offices offer, right from term deposits for the salaried class to senior citizens looking to receive moderate returns on their life savings.

Post Office Savings: An alternate investment avenue for the risk-averse investor

Nikhil Kamath

Setting aside money in post office deposits are generally considered by many to be an extremely traditional way of saving cash. However, over the last few years, post offices in India are more or less operating like any other commercial bank offering a wide range of savings, deposits and long-term investment plans to retail investors.

Besides the regular savings and recurring deposits, investors can choose from the multiple risk–free options that post offices offer, right from term deposits for the salaried class to senior citizens looking to receive moderate returns on their life savings.

Highlighted below are some of the retail post office offerings

post office

 

Let’s take a look at some of the post office offerings, features, and benefits to investors.

Term deposits:
Period: 1- 5 years
Category of investors Individual, Joint
Limits- Min. limit- Rs 200; Max limit- Not defined
Interest payable: Calculated quarterly and paid annually

Income tax benefit: 5- year TD’s are eligible for tax benefits under Section 80C of the IT Act.

Monthly Income Scheme (POMIS)-
Period Not available
Category of investors Individual, Joint
Limits Min. limit- In multiples of Rs 1500
Max limit- 4.5 lakhs (individuals); 9 lakhs (joint)
Interest payable Monthly

Income tax benefit Not applicable

Public Provident fund (PPF)-
Period 15 years
Category of investors Individual
Limits Min. limit- Rs 500; Max limit- Rs 150,000 per financial year
Interest Payable Compounded annually and paid on maturity

Income tax benefit Deposits are eligible for tax benefits under Section 80C of the IT Act.

National Savings Certificates (NSC)-
Period 5 years
Category of investors Individual
Limits Min. limit- In multiples of Rs 100; Max limit- Not defined
Interest Payable Compounded annually and paid on maturity

Income tax benefit Deposits are eligible for tax benefits under Section 80C of the IT Act.

Senior Citizens Savings Scheme (SCSS)-
Period 5 years
Category of investors Individual, Joint
Individual = > 60 years
Individual = > 55 years and < 60 years, retired under superannuation or VRS
Limits Min. limit- In multiples of Rs 1000; Max limit- 15 lakhs
Interest Payable Quarterly

Income tax benefit Deposits are eligible for tax benefits under Section 80C of the IT Act.

Kisan Vikas Patra (KVP)-
Period Can be encashed after 2.5 years
Category of investors Individual, Adults on behalf of minors
Limits Min. limit- Rs 1000; Max limit- Not defined
Interest Payable Compounded annually and paid on maturity

Income tax benefit Deposits are eligible for tax benefits under Section 80C of the IT Act.

Sukanya Samriddhi-
Period Until the child completes 21 years
Category of investors Individual, Adults on behalf of minors
Limits Min. limit- Rs 1000; Max limit- Rs 150,000/ financial year
Interest Payable Compounded annually

Income tax benefit Not applicable

Post Office Schemes are a good alternative to banks for risk averse investors, as they offer a wide range of products for different classes of investors. With interest rates in India declining steadily, the return on investment from these schemes will barely beat inflation.

Short- medium term investments in post office savings are acceptable as interest received from these savings instruments can be measured in terms of income growth.

However, investors considering long-term capital growth in addition to income growth will need to look at other forms of investments in addition to the ones offered by post offices.

(Disclaimer: The author is Co-founder & Head of Trading, Zerodha. The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.)

 
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