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Post office tax saving schemes for section 80C: From PPF to NSC to SSY, Full list

Sunil Dhawan
Post office tax saving schemes, PPF, NSC, SCSS, SSY, Section 80C,Sukanya Samriddhi Yojana,Public Provident Fund Account

Several post office schemes are the first choice of investors looking for fixed and assured income. Some of them also come with tax benefits under Section 80C of the I-T Act. All of them are sovereign backed investments wherein the principal invested and the interest earned are guaranteed by the government. The interest rate of the small savings post office investments are set by government at the start of every quarter of the financial year.

Here, we look at those 5 post office investments that helps reduce tax liability by investing a maximum of Rs 1.5 lakh per financial year in them.

1. Public Provident Fund Account (PPF )

One is allowed to open only one account in own name, another can be opened in minor child’s name.
Tenure: Requires regular contribution to be paid for 15 years.
Liquidity: One may exit after 5 years ( subject to conditions), avail a loan from 4th year, make partial withdrawals after 7th year.
Investment: Minimum of Rs 500 and maximum of Rs 1.5 lakh ( self plus minor account) in each financial year.
Interest rate: 8 percent per cent per annum, compounded annually and paid on maturity ( January 1 to March 31, 2019)
Interest payouts: Not allowed.
Taxation: Investment qualifies for tax benefit under Section 80C and the interest earned is tax exempt.
Lesser known fact: * Interest for the month is applicable only if the deposit is made before 5th day of the month.
*PPF account can be extended indefinitely in block of five years after maturity.
Whom it suits: PPF has been a popular investment over several decades and witnessed varying interest rate cycle. Suits all but keep your asset allocation in sight as going overboard ( especially salaried) in debt may not be the right approach.

2. National Savings Certificates (NSC)

NSC requires only a lump sum payment and there is no need to pay further contributions. On maturity, a fixed amount is received which is known right at the time of investment.
Tenure: 5 years.
Liquidity: Premature withdrawals will be subject to the applicable rules.
Investment:NSC is issued in denominations of Rs. 100, Rs. 500, Rs.1000, Rs.5000, Rs.10,000.
Interest rate: 8 percent per cent per annum, compounded annually and paid on maturity ( January 1 to March 31, 2019). Rs 100 grows to Rs 146.9 3 after 5 years.
Taxation: Interest taxable. Interest re-invested for initial four years qualify for Section 80C benefit
Whom it suits: At times, NSC rates are higher than bank deposits. Choose accordingly. Suits those who do not need regular income.

3. Sukanya Samriddhi Yojana (SSY)

SSY is an investment that earmarks funds exclusively for the needs of girl child. Can be opened in the name of girl child below 10 years.
Tenure: SSY is a 21 year scheme. Irrespective of the age, the SSY account will run for 21 years from the date of its opening. So if the girl child’s age is 8, the scheme will mature when she turns 29. Deposits need to be made only for the initial 15 years.
Liquidity: Premature closure allowed after 5 years only on medical ground.
When the girl turns 18, a maximum of 50 per cent of the account balance of the preceding year may be withdrawn for the purpose of higher education of the girl.
The rules permit final closure anytime after girl turns 18 years for the purpose of her marriage.
Investment: A minimum initial deposit of Rs 250 ( earlier it was Rs 1,000) is required. Thereafter, a minimum of Rs 250 ( earlier it was Rs 1,000) up to a maximum of Rs 1.5 lakh can be deposited in the account annually.
Interest rate: 8.5 percent per cent per annum, compounded annually and paid on maturity ( January 1 to March 31, 2019).
Taxation: Investment qualifies for tax benefit under Section 80C and the interest earned is tax exempt.
Lesser known fact: * Child can operate and contribute after crossing age of 10.
* A guardian can open only one account in the name of one girl child and maximum two accounts in the name of two different girl children.
Whom it suits: SSY has high fixed rate of returns and comes with tax free interest. Funds get earmarked for child needs. A must-have investment in one’s portfolio if conditions are met.

4. Post Office Time Deposit Account (TD)

The time deposit (TD) in a post office is somewhat similar to a bank fixed deposit. While the time deposits in a post office are for 1, 2 , 3 and 5 years, its only the 5-year TD that comes with section 80C tax benefit.
Tenure: 5 year
Liquidity: Premature withdrawals will be subject to the applicable rules.
Investments: There is no maximum limit but tax benefit is restricted to Rs 1.5 lakh
Interest rate: 7.8 percent per cent per annum, payable annually but calculated quarterly. ( January 1 to March 31, 2019).
Taxation: Interest earned is fully taxable and to be added to one’s ‘Income from other sources’.
Lesser known fact: * There’s only the annual interest option as it does not allow monthly or cumulative option.
* In post offices with core-banking,when any TD account is matured, the same TD account will be automatically renewed for the period for which the account was initially opened.
Whom it suits: At times, post office rates are higher than bank deposits. Choose accordingly.

5. Senior Citizen Savings Scheme (SCSS)

SCC is a popular investment option for those who are 60 years and above. An individual of the age of 55 years or more but less than 60 years who has retired on superannuation or under VRS can also open account subject to the condition that the account is opened within one month of receipt of retirement benefits and amount should not exceed the amount of retirement benefits.
Tenure: 5 Years
Investment: More than one account may be opened, but the combined limit is capped at Rs 15 lakh.
Interest rate: 8.7 percent per cent per annum, payable quarterly. ( January 1 to March 31, 2019).
Taxation: Interest earned is fully taxable and to be added to one’s ‘Income from other sources’.
Whom it suits: Senior citizens looking for high fixed rate of return and a regular income.
Lesser known fact: * Premature closure is allowed after one year on deduction of an amount equal to 1.5 per cent of the deposit and after 2 years 1 per cent of the deposit.
*After maturity, the account can be extended for further three years within one year of the maturity by giving application in prescribed format. In such cases, account can be closed at any time after expiry of one year of extension without any deduction.