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ULIP INSURANCE

Post Office Scheme Offers Better Interest Than Fixed Deposits

Jagrity Sharma Jagrity Sharma 18 July 2019

You can get better interest rates from the different types of post office saving schemes than those offered by fixed deposits from some banks. Read on to know how!

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Post Office Saving Schemes have been a reliable mode of investment offering good returns for the investments made. Some of these schemes are in fact better in terms of value for money returns than the fixed deposit investments in many of the commercial banks. If you analyse the interest rates offered by various banks and compare it with the rates of some of the post office schemes, you will find that they offer you a better return.

The table below gives a brief of the interest rates of some banking institutions.

Name of the BankTenure of InvestmentInterest Rate per annum
Axis BankUp to 10 years3.5% - 7%
Bank of BarodaUp to 10 years4.5% - 6.7%
Bank of IndiaUp to 10 years5.25% - 6.35%
Canara BankUp to 10 years5.75% - 6.2%
Central Bank of IndiaUp to 10 years4.8% - 6.55%
HDFC BankUp to 10 years3.5% - 6.5%
ICICI BankUp to 10 years4% - 7%
IDBI BankUp to 10 years6.25% - 7%
State Bank of IndiaUp to 10 years5.75% - 6.85%
Yes BankUp to 10 years5% - 7.25%

If we consider the National Savings Certificate or NSC as it is popularly known, we find that that it earns interest at 7.9% per annum compounded annually. This is a better return on your investment than any fixed deposit investment in any of the leading banking institutions.

Why are Post Office Saving Schemes Better than Other Fixed Deposits?

The post office saving accounts have a number of benefits over the fixed deposits done in banks in both the public and the private sector.

  • Safe and Secure Investment: The Post Office Savings Schemes are all run under India Post which is a Government of India undertaking. Hence, there is a prevailing sense of security and guaranteed returns on these investments.
  • Rate of Interest is higher: As we have already mentioned, the rate of interest in post office saving schemes is higher than that of the bank fixed deposits. This is a great incentive for investors for better returns.
  • Liquidity: Post office saving schemes have the flexibility of premature withdrawals and loan against the money invested. This provides ready liquidity to the investor in the event of any unforeseen emergencies.
  • Low Risk Investments: The investments in post office saving schemes are not dependent on market trends and thus, are not affected by the fluctuations in the capital market. This again guarantees fixed and secure returns on the investments made.
  • Tax Benefits: Investors can avail tax benefits on the amount invested by them in post office saving schemes of 5 or more years under Section 80C of the Income Tax Act, 1961.

Types of Post Office Saving Schemes

Post Office Savings Account

The Post Office Savings Account can be opened with a minimum amount of as less as Rs.20 and earns an interest of 4% per annum on individual as well as joint accounts. This account can be opened only through a cash deposit. The interest earned on the invested money enjoys a tax redemption up to the amount of Rs. 40,000 per year as the announcements made in the budget 2019.

National Savings Recurring Deposit Account

The National Savings Recurring Deposit Account has a 5 Year maturity period earning an interest of 7.2% per annum compounded quarterly. This account can be opened with cash or cheque with the minimum amount being Rs.10 and no capping on the maximum amount. A deposit of Rs.10 can earn Rs.725.05 at the end of 5 years which can further be extended.

National Savings Time Deposit Account

This account is more commonly known as the Post Office Time Deposit Account and can be opened with the minimum amount of Rs.200 with no maximum limit. It has a maturity period of 1, 2, 3, or 5 Years, as decided by the investor at the time of opening the account. It also has the facility of automatic renewal of the account on maturity for the same time period. The interest rate earned is between 6.9% to 7.7% which is calculated quarterly, but is payable annually.

National Savings Monthly Income Account

The National Savings Monthly Income Scheme Account or the Post Office MIS can be availed as a single or a joint account through cash or cheque, the minimum amount being in multiples of Rs.1500. The maximum limit for investment is set at Rs. 4.5 lakhs and earns an interest of 7.6% per annum for a minimum period of 5 years.

Senior Citizens Savings Scheme

The Senior Citizen Savings Scheme or the SCSS is particularly for investors above the age of 60 or between the age of 55 and 60, if VRS is taken and the account is opened within a month of the retirement. A one-time investment amount in the multiples of Rs.1000 capped at a maximum of Rs. 15 lakhs is needed to open a SCSS Account, with a maturity period of 5 years. The interest earned is 8.6% per annum payable quarterly.

Public Provident Fund Account

The Public Provident Fund Account is another post office scheme with a maturity period of 15 years. The minimum amount required to open this account is Rs.500 and one can also open an account with a smaller amount of Rs. 100, but the amount should reach a minimum of Rs.500 in the particular financial year. The maximum amount is capped at Rs. 1,50,000. The returns on this investment is at the rate of 7.9% per annum and also enjoys tax redemption under Section 80C of the Income Tax Act.

National Savings Certificate Account

The NSC Account is a term deposit of 5 years which can be opened with a minimum amount of as less as Rs.100 and subsequent deposits should be in multiples of 100. The interest earned is at the rate of 7.9% with no capping on the maximum amount that can be deposited.

Kisan Vikas Patra Account

This post office account can be opened with a minimum of Rs. 1000 with additions in multiples of Rs. 1000 and no maximum limit. Interest earned on the investment is 7.6% compounded annually with the flexibility of encashing the certificate after a period of two and a half years from the date of issue.

Sukanya Samriddhi Account

This account is specifically designed keeping the interest of the girl child as the objective. A guardian can open one account in the name of one girl child and a maximum of two accounts for 2 girls. However, this can be availed only before the child is 10 years of age. Minimum amount required to open this account is Rs. 1000 with the maximum limit of Rs. 1,50,000. Interest earned on this investment is at the rate of 8.4% compounded annually.

The interest rates mentioned under the various investment schemes are applicable from 01.07.2019. This is subject to change as per Government revisions conducted quarterly which are based on the functioning of Government securities. So, post office schemes have a higher interest rate and if you are looking for fixed income schemes, you can choose any of the above-mentioned schemes and get good returns.

Recommended Read: Know About India Post Savings Account And Its Charges

Jagrity Sharma
Written by Jagrity Sharma
A bibliophile who hates alliterations, but loves cream, comics and content immensely! On another note, a content marketer who leverages the power of words to explain...almost anything!