Everything need to know about Post Office Tax Saving Scheme

Post office small saving scheme is one of the older yet popular schemes among Indians for its security and its reach. Post office tax saving scheme give the security of your money being kept in the safe hands of the government and to top it up it has the highest spread of branches across India followed by State Bank of India (SBI). Though these schemes do not have competitively high interest rates; on the back of these two features the government has introduced several post office small saving schemes into the gamut of tax saving scheme eligible for deduction u/s 80 C of the Income Tax Act 1961.

Stated below are the list of several post office schemes which have tax saving features:

PO Small Saving Schemes	ROI	Tenure	Range of Investment (Rs.)	Tax Benefit
PO Small Saving Schemes	ROI	Tenure	Range of Investment (Rs.)	Investment	Interest	Maturity
PO – Time deposit	7.8%	5 Years	200 – No Limit	Y	N	N
NSC	8.0%	5 Years	100 – No Limit	Y	Y	N
PPF	8.0%	15 Years	500 – 150,000 pa (max 12 installments during a fiscal)	Y	Y	Y
SCSS	8.5%	5 Years	1,000 – 15,00,000	Y	N	N
Sukanya Samriddhi Yojana	8.5%	When the account holder turns 21	1,000 – 150,000 pa	Y	Y	Y

5 Year Time Deposit in an Account Under Post Office Deposits Rules, 1981

Similar to 5 year Fixed Deposits with banks which are eligible for deduction u/s 80 C; 5 year time deposit with post office is also eligible for deduction. Following are the basic features of the product:

Account can be opened in a Single name or Joint.
Investment can be initiated with a meager sum of Rs. 200 and in multiples of Rs. 200 thereafter.
In CBS post office if prior information is not given for redemption of maturity proceeds, the time deposit is automatically renewed for 5 years.

National Saving Scheme (NSC), Issue VIII

This is one of the most traditional form of tax saving investment. Following are the salient features of the product:

The scheme is specially designed for individuals who are businessmen / salaried, HUF and Trust are not allowed to invest in it
Certificates of NSC are available in the denomination of Rs. 100, Rs. 500, Rs. 1,000, Rs. 5,000 and Rs. 10,000
These certificates can be kept as collateral to get a loan from banks / financial institution
It can be held in Single form by an adult himself or adult on behalf of a minor
Tax is not deducted at source on the maturity proceeds
Interest accrued on NSC is deemed to be re-invested u/s 80 C of the Income Tax Act, 1961
Maturity value of the certificate is stamped on the certificate. For all certificates issued post 1 Apr 16 a certificate of Rs. 100 will mature to be Rs. 147.61 after 5 years.

Public Provident Fund (PPF) Scheme, 1968

Along with NSC, PPF has over the several years been known to the Indian investors as one of the safest and lucrative form of investment not only from the tax saving point of view but also from the long term investment. Stated below are the few major characteristics of the product:

The feature that makes this product a winner is that the product is one of the only products that is EEE i.e. Exempt, Exempt, Exempt.
- Deposits made towards this account can be claimed as tax deduction
- Interest earned on deposit into this account is also not taxable
- Amount received on maturity of the account is tax free
One can open a PPF account with the post office or any certified nationalized bank along with ICICI Bank and Axis Bank in the private sector. Please note that this account can be opened only at specific branches of the banks and post offices.
Resident Individual who might be self employed or salaried or any other person can open a PPF a/c.
Foreigners, Non Resident Indians (NRIs) and Hindu Undivided Family (HUF) are not eligible to open a PPF account
A person can open a PPF account in the name of a minor however, it would be considered as an account opened in his name.
Account can be opened only in single name.
Nomination facility available
At any point of time in your life, an individual is allowed to have only 1 PPF account in his name. If a person is found holding more than one account then immediately the second account is closed and the holder is returned only the principal amount.
The account matures after the completion of 15 years from the end of the fiscal year in which the account was opened.
On maturity of 15 years, the account can be renewed for 5 years at a time (with or without additional deposits)
Premature closure of account is allowed only in certain cases after completion of 5 years.
From the 3rd to the 6^th year an account holder can avail loan against the amount held in the account. This loan amount is limited to 25% of the balance in the account.
Premature partial withdrawal is allowed from the 7^th year of account opening. This withdrawal is limited to 50% of previous years balance.
PPF cannot be attached under the court order or laid claim by any creditor.

Senior Citizen Saving Scheme (SCSS) Account

As the name suggest this scheme is only meant for senior citizens. This is one of the products which could be suggested to retired individual to earn regular income from its retirement corpus. Enlisted below are some of the salient features of the scheme.

Eligibility:
- An individual above the age of 60 can open an account
- An individual above the age of 55, however less than 60 can also open a SCSS account provided that the individual has retired on superannuation or voluntary retirement scheme (VRS) and the account is opened within one month of the receipt of retirement benefits and the invested amount should not exceed the retirement corpus.
This account can be opened in any post office or state Bank of India and its subsidiaries.
The maximum amount that can be deposited by an individual is limited to Rs. 7.5 L in case of a single holding account and Rs. 15.0 L in case of a joint account.
An account can be held jointly only in the name of the spouse. The first holder is the main investor in the account.
An individual can operate multiple accounts in his name whether individually or jointly subject to the maximum limit by adding balance in all accounts.
At the time of opening and even after that Nomination facility is available.
Interest on this scheme is payable quarterly on the 1^st working day of the beginning of every quarter i.e. April, June, September and January.
The investor has the option to receive interest through auto credit, post-dated cheques (PDCs) or money order. If it is a CBS post office then the interest is directly credited to the savings account of the investor.
Premature closure of the account is allowed after a year by paying a penalty of 1.5% of the deposit amount and after 2 years by paying 1.0% as penalty.
Tax is deducted at source if interest amount is greater than Rs. 10,000 p.a.

Sukanya Samriddhi Yojana (SSY) Account

This is the latest entrant in the EEE category.As the name suggest this can be taken in the name of girl child. Stated below are some of the basic points that should be kept in mind before opting for the scheme:

Eligibility:
- A natural or legal guardian can open a SSY account in the name of a girl child
- This account can be opened up to the age of 10 years of the girl child
A maximum of one account can be opened in the name of one girl child with a maximum limit of two girl children.
If the girl child is married then normal premature withdrawal is allowed after the age of 18.
Partial withdrawal with a maximum limit of 50% of the balance amount standing to the credit of the Sukanya Samriddhi Yojana account at the close of the preceding year is permitted only after the account holder turns 18.
Deposit can be made in lump-sum or multiple times during a year however it should be in multiple of Rs. 100.
The account would be discontinued if the minimum amount of Rs. 1,000 is not deposited in a fiscal. This account can only be revived by paying a penalty of Rs. 50 per year of default.

Public Provident Fund and Sukanya Samriddhi Yojana are the only two schemes which fall into the EEE category. While the PPF rates stand at 8.0% presently, Sukanya Samriddhi Yojana provides its investors an even further attractive rate of 8.5%, making it a hot cake for retail individual investors.

Source:- paisabazaar