Post offices offer a host of reliable small saving schemes that have risk-free returns. The low risk and tax benefits make these saving schemes more attractive for investors. An individual can claim tax benefits under Section 80C of the Income Tax Act 1961.
Any Indian citizen who has attained the age of 18 years can invest individually or on behalf of a minor under post office tax saving schemes. Some of the top tax-saving schemes include the post office savings account, PPF account, SSY, time deposits, among others.
The post office savings account can be opened in order to gain a guaranteed interest rate. The account can be opened with cash deposit in any post office branch.
The interest earned, up to Rs 10,000, in a fiscal year is exempted from taxable income from all savings accounts under section 80TTA. The minimum balance to be maintained for a cheque facility account is Rs 500 while it is only Rs 50 for a non-cheque account.
To keep the account active, the account holder must make a transaction in three fiscal years, be it a deposit or a withdrawal. Only one account with a nomination facility is allowed in one post office across the country.
Time deposit schemes
The maximum lock-in period is 5 years in case of post office time deposit schemes. The account tenure can be extended by giving a formal application to the post office. One has to adher to the minimum deposit amount is Rs 1000. There are tax benefits available but only for five-year time deposits. One can claim exemptions of up to Rs 1.5 lakh.
Senior Citizen Savings Scheme
Individuals who have attained the age of 60 and those who have taken voluntary retirement and are above 55 years but under 60 years are eligible for Senior Citizen Savings Scheme (SCSS). The SCSS account can be opened individually or jointly with a spouse and has a maturity period of 5 years and the amount should not surpass the deposit limit of Rs 15 lakh.
The account can be prematurely closed by paying penalty and if closed within a year then no interest will be paid. If the interest has already been credited, then 1.5 percent of the deposit will be withheld as penalty. The interest exceeding Rs 40,000 will attract tax deductions.
Public Provident Fund
Under the PPF account an investor can deposit up to Rs 1.5 lakh in a financial year. In case of PPF account in a post office there is lock-in period of 15 years. The money an investor will get o maturity is tax-free. Tax benefits under Section 80C can be easily availed.
Sukanya Samriddhi Yojana
Another tax saving scheme is the Sukanya Samriddhi Yojana that is meant exclusively for the girl child. Parents or guardians can open the account till the child is 10 years old. The interest rate is 7.6 percent, which is revised quarterly. In a financial year, the minimum deposit is Rs 250 and maximum is Rs 1.5 lakh.