Post office interest rates

Post office interest rates and fees

Indian Post offers diverse investment options to cater to the varying needs of different investors. All Post office savings schemes guarantee returns as they are backed up by the government of India. Moreover, most of the post office investment schemes are tax-exempt under Section 80C, i.e. tax exemption up to Rs. 1,50,000 is allowed. Read on to know in detail about the various small saving schemes offered by the Post Office including Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), National Savings Certificate (NSC), Kisan Vikas Patra, Post Office Monthly Income Scheme, Senior Citizen Savings Scheme (SCSS) and more.

Small Savings SchemeInterest RateTenureTax Deduction on Investment?

Interest Taxable

Post Office Savings Account4.0%NANoYes
Post Office Recurring Deposit5.8%5 YearsNoYes
Post Office Monthly Income Scheme6.7%5 YearsNoYes
Post Office Time Deposit (1 year)5.5%1 YearNoYes
Post Office Time Deposit (2 year)5.7%2 YearsNoYes
Post Office Time Deposit (3 year)5.8%3 YearsNoYes
Post Office Time Deposit (5 year)6.7%5 YearsYesYes
Kisan Vikas Patra (KVP)7%30 Months Lock-in periodNoYes
Public Provident Fund (PPF)7.1%15 YearsYesNo
Sukanya Samriddhi Yojana7.6%21 YearsYesNo
National Savings Certificate6.8%5 YearsYesNo
Senior Citizens Savings Scheme7.6%5 YearsYesYes

Please Note:

*Interest rates are reviewed every quarter by the Government for these schemes and are updated as on October 2022.

 *Investing in Post Office Time Deposit, Post Office Recurring Deposit, Post Office Monthly Income Scheme, National Savings Certificate (NSC) and Kisan Vikas Patra (KVP) in a given quarter will lock-in the rate in that quarter for the entire tenure of the savings scheme. However, for Public Provident Fund (PPF) and Sukanya Samriddhi Yojana, the revised rate will be applicable in the concerned quarter and so on. In other words, the applicable rate keeps changing.

Post Office Savings Account

  • A Post Office savings account is like a savings account with a bank, except that it is held with a post office.
  • Only one account can be opened with one post office and can be transferred from one post office to another.
  • You can also open an account in the name of a minor. The Post Office savings account interest rate is 4% and is fully taxable. However, no TDS is deducted on the same.
  • Under the non-cheque facility, the minimum balance which is required to be maintained is Rs.50/-
  • However a deduction of Rs 10,000 per annum is available on your total savings account interest including post office savings interest under Section 80TTA of the Income Tax Act, 1961.

Post Office Monthly Income Scheme (POMIS)

  • Unique scheme which offers guaranteed fixed monthly income on the lump sum investment made by the investor
  • Any resident individual can open the MIS account in a single or joint holding pattern. A minor can also invest in this scheme. If the minor is of more than 10 years, then he can even operate the account
  • The minimum limit for investment is Rs. 1000 and the maximum investment limit is Rs. 4.5 lakhs in a single holding account and Rs. 9 lakhs for joint accounts under the Monthly Income Scheme of Post Office
  • Currently, the MIS interest rate in the post office is 6.7% per annum payable monthly with a maturity period of 5 years. For example, Mr. Suresh invests Rs. 2,00,000 in Post Office Monthly Income Scheme. He will receive Rs. 1068 every month as interest for 5 years. He will receive back the deposit on completion of the tenure. The amount so received monthly can also be further invested in post office recurring deposits.
  • Investors can hold multiple accounts with a maximum investment of Rs. 4.5 lakh by combining balances in all the accounts. Joint accounts will have equal shares from all holders. If we continue with the above example, Mr. Suresh would be able to open a joint account with his wife for a maximum amount of Rs. 2.5 lakh
  • Post Office monthly income scheme also offers liquidity by allowing investors to withdraw the deposit after 1 year. However, there will be a penalty of 2% on deposit if withdrawn between 1 year-3 years and 1% penalty on withdrawals after 3 years
  • Accounts are transferable from one post office to another across the country

There is no major tax benefit in this scheme. Interest received on a monthly basis is a part of the taxable income. There is no TDS on the interest payout and deposits are exempt from wealth tax. Post Office Monthly Income Scheme is a preferable choice for risk-averse investors looking for regular monthly income.

Post Office Recurring Deposit

  • Post office RD is basically a monthly investment for a fixed period of 5 years with an interest rate of 5.8% per annum (compounded quarterly).
  • On completion of the fixed tenure of five years, RD account with Rs. 10,000 invested every month will fetch you Rs. 3,256.48
  • Post Office Account RD helps small investors by allowing them to invest as little as Rs.100 per month and above minimum any amount in multiples of Rs.10. There is no upper limit for the investment.
  • Joint accounts can also be opened by two adult individuals. The account can also be opened in the name of a minor. Multiple accounts can also be opened.
  • RD can be transferred from one post office to another.
  • There is a default fee of 1 rupee for every 100 rupees in case you miss on any monthly investment.
  • The account offers flexibility by allowing a partial withdrawal up to 50% of the balance after a year.

There is no TDS on interest from post office RD. However, income is taxable in the hands of investors as per their individual tax slab. It’s one of the best investment choices for every investor who is looking for a risk-free investment avenue to save some amount every month systematically.

Post Office Time Deposit

  • Post office time deposit comes with different tenure options for investment. Current rate of interest applicable is below:
TenureRate (w.e.f. 1.10.2022)
1 year Time Deposit5.5%
2 year Time Deposit5.7%
3 year Time Deposit5.8%
5 year Time Deposit6.7%
  • The minimum amount that can be invested is Rs. 1000. There is no upper limit. There is no restriction on the number of accounts one can hold.
  • Accounts can be opened in single holding or joint holding pattern. An investment in the name of minor is also allowed.
  • Accounts can be transferred from one post office branch to another across India.
  • Once the time deposit is matured, it will automatically renew for the same tenure again with the prevailing rate of interest on the day of maturity.
  • There is a tax benefit for the investment made in the 5-year post office time deposit. The investment qualifies for the deduction under Section 80C of The Income Tax Act, 1961.

Kisan Vikas Patra (KVP)

  • Kisan Vikas Patra offers an interest rate of 7% compounded annually. It can be purchased from any post office.
  • The invested amount doubles every 123  months (10 years and 3 months).
  • The investment comes with a minimum limit of Rs.1,000, no maximum limit and can be made in multiples of 100.
  • Certificates are easily transferable and can be endorsed to a third person.
  • The certificate is comparatively liquid in nature as it offers an encashment facility after 2.5 years of investment.

There is no tax deduction on the principal amount invested and interest on the KVP is also taxable. Kisan Vikas Patra scheme is thus not tax-efficient. It works for new and small investors from remote areas who do not have access to other financial products.

Senior Citizen’s Savings Scheme

  • The minimum age of entry is 60 years for Senior Citizen Savings Scheme (SCSS). Someone who has taken voluntary retirement after 55 years of age can also open this account within a month of receiving the retirement benefits. The amount invested in such cases should not exceed the value of corpus received on retirement.
  • Maximum limit of investment allowed per individual (combined balances in all accounts) is Rs. 15 lakhs. The investment amount can be in multiples of Rs.1000.
  • An individual can hold multiple accounts in his name or in joint holding with his spouse.
  • Current rate of interest offered is  7.6 % per annum payable on the first working day of each quarter. The deposit has a maturity period of 5 years. For an instance, if you invest Rs. 12 lakh in this scheme today, you will be receiving quarterly interest of Rs. 94,800.
  • Senior Citizen Savings Scheme also allows premature withdrawals of deposits anytime after the date of opening the account but penalties. A penalty of 1.5% of the deposit amount is levied before completion of 2 years of opening the account. The penalty of 1 % is levied after 2 years of deposit.
  • Account can be extended for three more years after the scheme matures.
  • Investments are eligible for tax deduction under Section 80C of The Income Tax Act. However, the tax will be deducted at source if the amount of interest exceeds Rs.10,000 in a year.

Public Provident Fund (PPF)

PPF is a long-term investment for a period of 15 years currently offered at an interest rate of 7.1% per annum (compounded yearly).  The maximum amount under this scheme is Rs.  1,50,000 in a financial year. Moreover, the deposit is qualified for deduction from income under Section 80C of the Income Tax Act.

  • There is no minimum or maximum age for PPF account opening.
  • Investments are allowed with the minimum amount of Rs. 500 and maximum of Rs. 1.5 lakhs in a financial year. Investments can be made in lump sum or in installments.
  • PPF Account can only be opened in a single holding form.
  • You can invest in the name of minor also without exceeding your maximum limit of investment by combining balances of all your accounts.
  • Maturity period can also be extended to 5 more years on completing the period of 15 years. You can keep extending maturity in blocks of five years, indefinitely.
  • PPF is a pure long term investment plan with premature closure facility allowed only after 5 years from account opening and only for serious ailments or higher education. Partial PPF withdrawal is also permissible after the expiry of 5 years from the end of the year in which the account is opened.
  • Investor can avail loan facility from the 2nd financial year to the 5th year of account opening.
  • Investment in PPF account qualifies for tax deduction under Section 80C of The Income Tax Act. It also offers a tax efficient return as its interest is fully tax-free. However, you have to report PPF interest in your income tax return.

It is a good scheme for investors who want to get the tax exemption along with safety of principal and tax-free returns.

National Savings Certificate (NSC)

  • The NSC has a maturity period of 5 years. The NSC interest rate is 6.8% per annum compounded half-yearly but payable at maturity. That means, your investment of Rs. 100,000 will yield you Rs. 1,38,949 after 5 years.
  • There is no maximum limit on investment with a minimum amount of investment of Rs.1000. Investments can be done in denominations of Rs.100, Rs. 500, Rs. 1,000, Rs. 5,000 and Rs.10,000.
  • The NSC Certificate can be purchased in a single holding, joint holding (up to 3 adults), by a guardian on behalf of a minor/person of unsound mind or by a minor above 10 years in his own name
  • Investment in NSC is tax deductible under Section 80C of The Income Tax Act. Interest on NSC is deemed to also be reinvested under Section 80 C and hence tax deductible, except interest in the final year of the NSC.
  • NSC certificates can be pledged as security for availing bank loans.
  • Certificates are transferable. Transfer from one person to another person is allowed only once during the investment tenure.

NSC is a risk-free and tax-efficient saving scheme for long-term and traditional investors with no risk appetite.

Sukanya Samriddhi Scheme

  • Sukanya Samriddhi Yojana (SSY) is a  scheme introduced for the benefit of the girl child. It currently offers an attractive interest rate of 7.6% per annum compounded annually.
  • The minimum amount of investment is Rs.1000 and maximum of Rs.1,50,000 in a financial year. You have to invest at least the minimum amount every year for 15 years from the date of account opening. Thereafter the account will continue to earn interest till maturity.
  • Investment in the Sukanya Samridhhi Account is tax deductible under Section 80 C up to Rs 1.5 lakh per annum. The interest on the Sukanya Samriddhi Account is also tax free and the maturity amount is tax free.
  • Investment will mature after the completion of 21 years from the date of opening the account or upon marriage of the girl child after attaining the age of 18. The account will also have to be closed if the girl child becomes an NRI or loses her Indian citizenship.
  • Sukanya Samriddhi account can be opened only in the name of girl child by her parents or legal guardians. Girl’s age should be 10 years or less on the date of opening the account.
  • Multiple accounts cannot be opened in the name of one girl child. A parent/guardian can open maximum of two accounts in the name of two different girl children.
  • There will be a penalty of Rs.50 if minimum amount is not deposited in a financial year.
  • Premature closure can only be done by a girl child on attaining the age of majority that is 18 years for the purpose of marriage or higher education.
  • Girl can also avail partial withdrawal facility (not more than 50% of the balance) after attaining the age of 18 years.
  • Parents/guardian can avail a tax benefit for the invested amount under Section 80C of The Income Tax Act. Maturity proceeds are paid to the girl child and are completely tax free in her hands.

SSY scheme has gained lot of popularity especially in rural India. It’s a good means to provide financial security to the next generation of women in the country.

Interest Rate and Taxability on Different Savings Schemes

The interest rate and taxability on different Post Office savings schemes are as follows:

List of Schemes Interest Rate and ReturnTaxability

Public Provident Fund 		7.1% p.a. compounded annuallyMaximum deposit of Rs. 1,50,000 in a financial year is exempted under section 80C

Post Office Savings Account		4.00% p.a. on individual/joint accountsInterest earned is Tax Free up to Rs. 10,000 p.a. from financial year 2012-13

Post Office Recurring Deposit Account		5.8% p.a. on individual/joint accounts_

Post Office Time Deposit Account		5.5% (1 year), 5.7 (2 year), 5.8 (3 year) and 6.7% ( 5 year)The investment under 5 Years TD is qualified for the benefit of Section 80C of the Income Tax Act, 1961 from 1st April 2007

Post Office Monthly Income Savings Account (MIS)		6.7% per annum payable monthlyThe maximum investment limit is Rs. 4.5 lakh in single account and Rs. 9 lakh in joint account
Senior Citizen Savings Scheme7.6 % per annum*The maximum limit not exceeding Rs. 15 lakh and the investment under this scheme is qualified for the benefit of Section 80C of the Income Tax Act, 1961 from 1st April 2007
Kisan Vikas Patra7% compounded annually                    –
National Savings Certificate6.8 % compounded annually but payable at maturityThe deposits are qualified for   for tax rebate under section 80C of Income Tax Act and the interest accruing annually but deemed to be reinvested under Section 80C of IT Act
Sukanya Samriddhi Accounts7.6% p.a. calculated on the annual basisMaximum deposit of Rs. 1,50,000 in a financial year

Note: *Please refer to the official website of Indian Post for more details of Senior Citizen Savings Scheme.

The above-mentioned interest rates are effective from 1st October 2022 and updated as on 1st October 2022.

Schedule of Fee

The schedule fee of Post office Investment Schemes are as follows:

Duplicate Passbook IssueRs. 50
Deposit Receipt or Issue of Statement of AccountRs. 20/case
Issue of Passbook in Lieu of Lost or Mutilated Certificate Rs. 10 per registration
Cancellation or Change of Nomination ChargesRs. 50
Account Transfer FeeRs. 100
Pledging of AccountRs. 100
Issue of Cheque Book (for Savings Bank a/c)
  • Nil: Up to 10 leafs in a calendar year
  • Rs. 2 per cheque leaf thereafter
Cheque Dishonour ChargesRs. 100

Note: Tax as applicable shall also be payable on the above service charges

Advantages of Investing in Post Office Savings Schemes

Here are a few key benefits of investing in Post Office Savings Schemes:

  • Simple Documentation & Procedure: Minimal documentation and hassle-free procedures make Post Office investment schemes easy to invest and enrol.  These savings schemes are suitable for both urban and rural investors they can be availed at Post Offices across the country. 
  • Competent Interest Rates and Risk-free: Post Office Savings Scheme interest rates are highly competitive with bank interest rates and currently range between 4% to 7.6%. Also, the risk involved in these investments is minimal since they are backed up by the government. Tax Exemption: Most of these Post Office Savings Schemes are eligible for tax rebates under Section 80C for the deposit amount. Some schemes like the SSS (Sukanya Samriddhi Yojana), PPF, etc. also has tax exemption on the interest earned amount.
  • Tax Exemption: Most of these Post Office Savings Schemes are eligible for tax rebates under Section 80C for the deposit amount. Some schemes like the SSS (Sukanya Samriddhi Yojana), PPF, etc. also has tax exemption on the interest earned amount.
  • Diverse Products to Cater Different Investment Needs:  These different Post Office Savings Schemes cater to the varying needs of different investors. The different investment schemes vary in their deposit limits, tax implications and return on investment and can be chosen as per the ínvestors’ unique requirements.

Created & Posted by Aashu
Article Assitant at TAXAJ

TAXAJ is a consortium of CA, CS, Advocates & Professionals from specific fields to provide you a One Stop Solution for all your Business, Financial, Taxation & Legal Matters under One Roof. Some of them are: Launch Your Start-Up Company/Business, Trademark & Brand Registration, Digital Marketing, E-Stamp Paper Online, Closure of Business, Legal Services, Payroll Services, etc. For any further queries related to this or anything else visit TAXAJ

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