Here are Post Office Schemes That Have High Returns, Tax Benefits; Better than Bank Fixed Deposit!

Post office schemes are offering investors a higher rate of interest than bank fixed deposits. If you only want to save money in investments that provide fixed returns for a period of 1 year to 10 years, then looking for small savings can be a better option.

In most of the leading banks, the interest rate on fixed deposits of 1 year to 10 years ranges from 5 per cent to 6 per cent. The fixed deposits of the year range from 5 per cent to 6 per cent.
In most major banks, the interest rate on fixed deposits of 1 year to 10 years is 5 per cent to 6 per cent. However, for senior citizens, all banks offer an additional rate of 0.5 per cent on the amount invested. The interest rate ranges from 5.5 percent to 7.6 percent, depending on the scheme while in the post office. The 5-year NSC provides 6.8 per cent while the Post Office Monthly Income Scheme provides 6.6 per cent on the investments made.

Apart from a slightly higher interest rate, most small savings schemes also come with tax benefits. In case of bank FDs, only special tax saving 5-year bank FDs offer tax benefits.

Here are five post office investments that help reduce tax liability as they come with tax benefits under Section 80C of the Income Tax Act, 1961.

Public Provident Fund Account (PPF)

Public Provident Fund Account (PPF) is a 15-year plan that requires regular contributions for 15 years. One can exit PPF after 5 years or get loan from 4th year and even make partial withdrawal after 7th year.

One is allowed to open only one account in his own name while the other PPF account can be opened in the name of a minor child. A minimum of Rs 500 and a maximum of Rs 1.5 lakh (self plus minor account) can be deposited in PPF in each financial year. The investment made in PPF is eligible for tax benefits under section 80C and the interest earned is tax free. Currently, the interest rate of PPF is 7.1 per cent per annum, compounded annually and paid on maturity

National Savings Certificate (NSC)

If you want to invest for 5 years with fixed returns and tax benefits, then NSC is suitable for you. Presently, the interest rate of NSC is 6.8 per cent, while the 5-year bank FD with tax benefits is around 5.5 per cent. NSC requires only lump sum payment and there is no need to contribute further. On maturity, a fixed amount is paid to the investor.

Sukanya Samriddhi Yojana (SSY)

Sukanya Samriddhi Yojana (SSY) is an investment which specifically earmarks funds for the needs of the girl child. The 21-year SSY scheme can be opened only in the name of a girl child below the age of 10 years. Premature closure of the plan is allowed after 5 years only on medical grounds. Also, when the girl child turns 18, a maximum of 50 percent of the previous year’s account balance can be withdrawn for the purpose of the girl’s higher education. In addition, the rules allow the final termination of a girl’s marriage at any time after she turns 18 for the purpose of her marriage. Currently, the SSY interest rate is 7.6 per cent per annum, compounded annually and paid on maturity. The investment is eligible for tax benefits under section 80C and the interest earned is tax free

Post Office Fixed Deposit Account (TD)

Post Office Fixed Deposit (TD) is somewhat similar to Bank Fixed Deposit. While the post office fixed deposit is for 1, 2, 3 and 5 years, it is only 5 years TD that comes with section 80C tax benefit. There is no maximum limit but the tax benefit is limited to Rs 1.5 lakh. However, the interest earned is fully taxable and has to be added to ‘Income from other sources’. At present the interest rate on 5-year post office fixed deposit is 6.7 per cent per annum.

Senior Citizen Savings Scheme (SCSS)

Senior Citizen Savings Scheme (SCSS), a 5-year investment plan, is a popular investment option for people aged 60 years and above. One can open more than one SCSS account but the combined limit is Rs 15 lakh. Currently, the interest rate on SCSS is 7.4 per cent per annum, payable quarterly. The interest earned is fully taxable and has to be added to ‘Income from other sources’.

Many post office schemes are the first choice of investors looking for fixed and assured income and most of them come with tax benefits under Section 80C of the I-T Act. These are all sovereign backed investments in which the principal invested and the interest earned is guaranteed by the government. The interest rate for small savings post office investment is determined by the government at the beginning of each quarter of the financial year.

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