About Post Office Schemes

The main financial services offered by the Department of Posts are the Post Office Savings Bank. It is the largest and oldest banking service institution in the country. The Department of Posts operates the Post Office Savings Scheme function on behalf of the Ministry of Finance, Government of India. Under this scheme, more than 20.50 crores savings account are operated. These accounts are operated through more than 1,54,000 post offices across the country

The Post offices provide a number of savings schemes like the Savings Account Schemes, Recurring Deposit Schemes, Time Deposit Schemes, Public Provident Fund Schemes, Monthly Income Schemes, National Savings Certificates, and Senior Citizens Savings Scheme. A brief of the various schemes is as follows:

Types of Schemes :

1) National Saving Certificates (NSC)

National Savings Certificate, popularly known as NSC is an assured investment scheme. It is a time-tested instrument providing double benefits; one is tax savings and the other is adequate returns with high safety. They facilitate long-term safe saving options for the investor. NSCs are a good investment option for salaried class people, businessmen as well as government employees. When you buy a NSC for a particular value, the interest compounded is returned along with the principal amount only after the maturity. It is a cumulative scheme wherein the interest is reinvested. The duration for an NSC is 6 years. Owing to it being time-bound, NSCs have low liquidity.

NSCs are available at all post offices across the country. They are issued by the Department of Post. Many middle class people in the country buy NSCs for saving tax as well as to earn decent return on their investment. Though NSC has much competition from other investment options like shares and mutual funds, yet it is highly popular owing to its respectable returns which are government guaranteed as well as can be used for saving Income tax.

2) Post Office Time Deposit Scheme

Post Office Time Deposit Scheme is a scheme offered by the department of Post, Government of India. This is a type of fixed deposit and is offered at all post offices. As this scheme is handled directly by the Government of India through Post Office network, it can be considered a very safe and secure method of investment. The amount grows at a predetermined rate at no risk.

This scheme is best for those people who want to invest their lump-sum money for a fixed period of time. At the maturity of the deposit, the depositor gets the total amount, (principal + interest). The rate of interest on investment is high in this scheme ranging from 6.25% to 7.50%, depending on the term of the deposit. The interest is calculated on quarterly basis but is payable annually.

3) Post Office Recurring Deposit Account (RDA)

A Post-Office Recurring Deposit Account (RDA) is a banking service offered by Department of post, Government of India at all post office counters in the country. The scheme is meant for investors who want to deposit a fixed amount every month, in order to get a lump sum after five years. The scheme, a systematic way for long term savings, is one of the best investment option for the low income groups.

Features :

• The minimum investment in a post-office RDA is Rs 10 and then in multiples of Rs. 5/- for a period of 5 years. There is no prescribed upper limit on your investment.
• The deposit shall be paid as monthly installments and each subsequent monthly installment shall be made before the end of the calendar month and shall be equal to the first deposit. In case of default in payment, a default fee is chargeable for delayed deposit at 0.20 Paise per month of delay, for Rs. 10 Denomination. After more than four defaults, the account shall be treated as discontinued in case the account is not revived within two months from the fifth default.
• For Advance deposits for 6 months or 12 months, a rebate is allowed at the prescribed rate (For Rs 10 denomination:- Rs. 1/- for 6 advance deposits, Rs. 4/- for 12 advance deposits.
• One withdrawal is allowed after one year of opening a post-office RDA on meeting certain conditions. You can withdraw up to half the balance lying to your credit at an interest charged at 15%. The withdrawal or the loan may be repaid in one lump or in equal monthly installments.
• Premature closure is allowed on completion of three years from the date of opening and in such case, interest is payable as per the rate applicable for the Post Office Savings Bank Account.
• After maturity of the account, it can be continued for a further period of 5 years with or without further deposits. During this extended period, the account can be closed at any time.

4) Post Office Monthly Income Scheme

The post-office monthly income scheme (MIS) provides for monthly payment of interest income to investors. It is meant for investors who want to invest a sum amount initially and earn interest on a monthly basis for their livelihood. The MIS is not suitable for an increase in your investment. It is meant to provide a source of regular income on a long term basis. The scheme is, therefore, more beneficial for retired persons.

Features :

• Only one deposit is available in an account
• Only individuals can open the account; either single or joint.( two or three)
• Interest rounded off to nearest rupee i.e, 50 paise and above will be rounded off to next rupee
• The minimum investment in a Post-Office MIS is Rs. 1,000 for both single and joint accounts
• The maximum investment for a single account is Rs. 3 lakh and Rs. 6 lakh for a joint account
• The duration of MIS is six years

5) Post Office Senior Citizen Scheme

A new savings scheme called ‘Senior Citizens Savings Scheme’ has been notified with effect from August 2, 2004. The Scheme is for the benefit of senior citizens and maturity period of the deposit will be five years, extendable by another three years. Initially the scheme will be available through designated post offices throughout the country.

Features :

• The minimum investment is Rs. 1000 and in multiples of Rs. 1000 subject to a maximum of Rs. 15 lakh
• Citizens of 60 years of age and above are eligible to invest. Single or joint account (with spouse only) can be opened. Citizens who have retired under a voluntary or a special voluntary retirement scheme and have attained the age of 55 years are also eligible, subject to specified conditions
• The deposit will carry an interest of 9% per annum (taxable). The maturity period of the deposit will be five years, extendable by another three years
• Premature withdrawal after a period of one year will be allowed, subject to some deductions
• The investments in the scheme will be non-tradable and non-transferable. However, nomination facility will be available
• Non-Resident Indians and Hindu Undivided Families are not eligible to invest in the scheme