List of Post Office Schemes for Tax Exemption in India

You can make your tax-free investment in the post office through different schemes, including Public Provident Fund (PPF), National Savings Certificate (NSC), Sukanya Samriddhi Yojana (SSY), etc. All these come with more or less unique features and benefits that you need to know before starting your investment.

One common advantage of them is the tax benefit. Under Section 80C of the Income Tax, you can reduce your tax obligations for up to ₹1.5 Lakh in a financial year by investing in any of these schemes.

Following are everything you need to know about these post office schemes on which you can save tax:

1. Public Provident Fund (PPF)

You can create your public provident fund or PPF account to obtain a secured interest. It is a long-term investment option which you can also consider as post-retirement savings. Due to the aspect of a secured return, it can be an ideal option for a risk-averse person. They can open an account and start investing without worry.

Here are some other features that you should know about PPF:

• PPF has a minimum tenure of 15 years. After this, you can renew its tenure in 5-year blocks.
• The minimum amount you will have to deposit in the PPF account is ₹500.
• In a financial year, you can deposit up to ₹1.5 Lakhs only.
• After the completion of 1 year of your savings, you can take loans against your PPF balance.
• You can also withdraw your money after 5 years under special conditions like financial requirements for medical treatment, child education and residential changes.
• The current annual interest that you will earn on your post office PPF balance is 7.1%.

2. National Savings Certificate (NSC)

The National Savings Certificate or NSC can also act as your investment instrument for generating a fixed income. The Government of India has launched this scheme to encourage individuals to reduce their tax obligations and earn a fixed interest simultaneously. You can easily opt-in for the certificate from your nearby post office branch.

The following are some of the notable features and benefits of this National Savings Certificate:

• The NSC scheme comes with a tenure of 5 years.
• The minimum amount of your deposit should be ₹1,000. Further, the investable amount needs to be multiples of 100. There is no upper cap on the deposit amount.
• You can purchase this certificate singularly or jointly with a maximum of 2 secondary account holders.
• You can also transfer your certificate in the name of a different individual within your chosen tenure.

3. Sukanya Samriddhi Yojana (SSY) Account

The Indian Government launched the Sukanya Sammriddhi Yojana under the campaign titled ‘Beti Bachao, Beti Padhao’ for the future of girls. Its objective is to help parents to build a fund to support education for their girl child. They can also leverage the amount to bear the expenses of her marriage.

SSY also comes with the following features:

• The female child should be below 10 years old to be a beneficiary of this scheme.
• The maturity period of the fund is 21 years. So, if the girl is of 5 years age at the time of opening this account, she will be able to withdraw the amount at the age of 26 years.
• You have to deposit a minimum amount of ₹250.
• The maximum amount you can deposit in this account in a financial year is ₹1.5 Lakh.
• The current annual interest rate for SSY is 7.6%. It is determined by the Finance Ministry on a yearly basis.

4. Post Office Time Deposit (TD)

Post office time deposit is more or less similar to the fixed deposits of a bank.  You can keep your money in this account for a flexible tenure, which can be between 1 to 3 years or 5 years.

The following are other features of post office time deposit that you must be aware of before opening your account:

• You will have to deposit a minimum of ₹1,000.
• It comes with no upper limit of deposit.
• You can liquidate your time deposit after 6 months.
• The interest rate of post office time deposits depends on the investment period. For tenure between 1 and 3 years, your fund will grow at an interest rate of 5.5%.  The interest rate of this deposit is 6.7% when the investment period is 5 years. These interest rates are subject to change quarterly.

5. Senior Citizen Savings Scheme (SCSS)

Senior citizens over the age of 60 years can put their money in this government-backed savings scheme. Like all other post office tax benefit schemes, it also allows them to earn a steady and fixed interest on their deposits and reduce their tax obligations. Before investing, let us know the attractive features the SCSS comes with:

• The investment period is 5 years. You also have the option to extend it for more than 3 years.
• You can open the account jointly with your spouse.
• The minimum amount you will have to deposit is ₹1,000.
• The maximum threshold of investment is ₹15 Lakhs.
• You can also withdraw your deposit before your chosen tenure by paying a certain penalty charge.

Fixed and Predictable Returns

The interest rate remains stable throughout the tenure. It does not fluctuate according to the market condition. As a result, you can predict the growth of your fund and make your future financial plan accordingly.

Highly Secured Investment Option

The government itself backs your investments in the post office, making them more secure than regular bank deposits.

Streamlined Process of Investment

It is quite easy to open an account to start saving under these schemes. You just need to visit your nearby post office. Alternatively, you can also open your account and start your risk-free investment online.

Attractive Rate of Interest

 Besides the facility of tax deduction, you can also grow your money at interest higher than that in bank deposits.

Low Amount of Deposits

The government aims to benefit individuals from lower or middle-income people through these schemes. The minimum threshold amount for these tax free post office schemes is much lower. So, you will not face many financial challenges while making your investments.

You need to follow the simple steps to open your account in a post office tax-free savings scheme:

Step 1: Visit the official website of India Post

Step 2: Find out the concerned application form and print it out

Step 3: Fill in the application form properly and attach all the required documents

Step 4: Reach the nearby post office branch and submit the filled-in application form

Here are the documents you will need to submit while applying for the post office savings schemes:

• Filled in KYC form
• PAN card
• Aadhaar card (In absence of the Aadhaar card, you can also provide other government-issued identity cards, including voter ID card, passport, driving licence, job card, etc.)
• Proof of birth date

Diversifying of Investment Portfolio

If you are an investor looking forward to diversifying your portfolio by allocating money to risk-averse assets, post office savings schemes will help you meet your objective. You can earn an interest that is even higher than bank fixed deposits. Furthermore, the interest rate is independent of market performance.

Limiting the Risk of Market Fluctuation

 Investment in stocks and mutual funds can be risky as the rate of returns of these instruments follows market sentiment, which is volatile in nature. Even if you do not invest in the stock market, you can go for building your corpus in post office tax savings schemes. It will enable you to grow your fund at a fixed interest rate.

Saving Money for Future Expenses

 You can use the amount to meet big-ticket expenses in future. Further, these schemes will also help you build your post-retirement fund if you plan your investments accordingly.

Saving Tax

You can also invest in these schemes if you want to save tax. Under Section 80C of the Income Tax Act of India, your investment in these government-backed instruments will allow you to reduce your taxable income by up to ₹1.5 Lakhs annually.