In the recent times there are lot of changes in the interest rates of debt instruments. It includes the interest rates changes on public provident fund(ppf), post office savings, employee provident(epf), etc.This is the main investment options for the people who are ready to take less risk. 2011 has been very bad year for the stock market because of the uncertainty on global economy, this creates huge demand for the safe investment options among the investors. This article summarizes some of the popular investment options with the latest interest rates and its tax benefits. This would be good refresh for the investors to know the latest interest rates on these schemes. If you have any doubts, please post it in the comments section. Subscribe to our future articles here.

Employee Provident Fund (EPF)

I have written about this many times in our blog. It is one of the traditional savings scheme in our country for enforcing the salaried employees to save for their retirement planning. Following are the few points to consider about the EPF:

• At present interest rates on EPF is 9.5% p.a.
• There is no tax liability of you withdraw money after the 5 years in the EPF account.
• When you are changing job, you can transfer your EPF account to new employer by submitting the form 13 or withdraw the money by submitting the form 19.
• Amount contributed towards EPF account would eligible for the tax exemption under section 80C.
• You can receive the SMS on your EPF balance by registering here.

Public Provident Fund (PPF)

If you are not salaried person and don’t have the option to save in EPF, open PPF account and save for your long term goals.

• It is 15 years lock-in period.
• At present PPF offers 8.6% interest on the investment, the income is not taxable.
• Minimum amount is Rs. 500 and Maximum Rs.100000 can be deposited in an single year.
• The investments are eligible for the tax exemption under section 80C.
• It is good idea to save in the PPF for your long term goals like retirement and children education or marriage.

New Pension Scheme (NPS)

The following are the important points to consider.

• NPS is available for people aged between 18 years and 55 years.
• The minimum amount per contribution is Rs 500, to be paid at least four times in a year. The minimum amount to be contributed in a year is Rs 6,000.
• If the subscriber exits the scheme before the age of 60, s/he may keep one fifth of the accumulated saving and invest the rest in annuities offered by insurance companies.
• Since the NPS is meant for post-retirement financial security, it does not permit flexible withdrawals as are possible

Senior Citizen Savings Scheme (SCSS)

The following are the important points to consider:

• Duration of the scheme is 5 years and can be extended to three years.
• Interest rate is 9% and compounded quarterly.
• The interest income on this scheme is fully taxable.
• The maximum investment on this scheme is Rs.15 lakhs.
• The application forms are available with post offices and nationalized banks.
• You can read our previous article about SCSS scheme.

National Savings Certificate (NSC)

It is one of the oldest traditional savings scheme. The following are the important points to consider:

• NSC is available in 5 years and 10 years duration.
• This investment is available in the post offices.
• The interest rate is 8.40 for 5 years and 8.70 for the 10 years investment.
• The interest income on NSC is entirely taxable.

Comparison Table

The following table lists the above savings schemes and its features.

Summary

Many of the product in this article has been already discussed in our earlier articles. This is a refreshing article to update with the latest interest rates on the each scheme. If I have missed any of the popular scheme in the list, please post it in the comments section. If you have any doubts, please post it in the comments section.

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Earlier Shyamala Gopinath Committee has proposed the set of changes on small savings interest rates to the govt. The reason for the proposal is to compete with other investment areas like bank deposits and fixed income categories. In the last week, govt. has announced  changes on the small savings schemes for the customers,  the interest rates and other changes to the small savings schemes like PPF, Post Office Savings, Monthly Income Scheme (MIS), etc. This would benefit the customers who prefer the small savings scheme like Post Office. Subscribe to our future articles here.

Public Provident Fund (PPF)

• The existing limit for the yearly investment of Rs. 70000 has been increased to Rs. 100000. Now onwards, an individual can invest up to Rs. 100000 for a financial year.
• The interest rates for PPF account is 8.0% p.a. and it has been revised to 8.6% p.a. which is very good for the customers. It will attract more investors to open the PPF account.
• Interest on loans from the PPF will be increased to 2% p.a. from the existing 1% p.a.

Tax Planning and PPF

Post Office Savings Accounts (POSA)

• Existing post office savings accounts fetch only 3.5% p.a. as the interest rates. In the revised rate is 4.0% p.a.
• This has been revised with effect of banks accounts has revised the interest rates to 4.0% earlier. (update: bank’s savings account interest rates deregulated).

Post Office Savings

Post office Time Deposit (POTD)

• Liquidity of post office time deposit – 1,2,3 & 5 years to be improved by allowing premature withdrawal at 1% less than the time deposits of comparable maturity.
• For premature withdrawals between 6 and 12 months of investment, the POSA rate of interest will be paid.

Monthly Income Scheme (MIS)

• Existing rate of 8.0% p.a. will be revised to the 8.2% p.a.
• The duration of the scheme is reduced to 5 years from 6 year.
• Payment of 5% bonus on maturity is discontinued.

National Savings Certificate (NCS)

• The maturity period of National Savings Certificate (NSC) reduced from 6 years to 5 years.
• A new NSC instrument, with a maturity period of 10 years, to be introduced.

 Kisan Vikas Patras (KVPs)

• Kisan Vikas Patra certificates is that the deposited amount doubles itself after the completion of stipulated period and the rate of interest offered by the post offices for these certificates remain same throughout the loan period.
• The tenure of Kisan Vikas Patra certificates is 8 years and 7 months.
• This scheme will be discontinued and no longer will be available with the post office savings.

• Tax Deduction on Post Office Savings Account
• Post office Monthly Income Scheme (POMIS)
• Fixed Deposit for Monthly Income

The following is the table contains summary of changes proposed:

Bad News for Commission Agents

• The payment of commission on the PPF schemes (1%) and senior citizens savings scheme (0.5%) will be discontinued.
• Agency commissions under all other schemes will be reduced from the existing 1% to 0.5%.
• The commission at the existing rate of 4% will continue for the Mahila Pradhan Kshetriya Bachat Yojana agents.
• Incentives, if any, paid by the state/UT governments will be reduced from the commission paid by the central government.

Summary

I hope this changes would bring more investors to the post office savings schemes. But, still there could be more changes because the investors who prefer the post office savings are from rural areas with less income. The revised rates are not effective now, it is expected that government would announce it from the Dec 1,2011. If you have any doubts, please post it in the comments section.

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In this article I will be explaining about the new notification sent by the Central Board of Direct Taxes (CBDT) regarding the tax deduction for the Post Office Savings account. Currently there is no tax deducted for the interest income from the post office savings account. This is introduced to remove the cap on the deposit. Please read this article to know more details on the post office savings account and what are the changes introduced from this fiscal year. If you have any doubts, please post it in the comments section.

Read: Post Office Savings

What is Current Scenario?

In the current scenario, one can open a post office savings account with the minimum deposit of Rs.50 to maximum limit of Rs.1 lakh. If it is join account the maximum limit is Rs.2 lakhs. The interest rates are calculated at 3.5% per annum and balance amount at 10th of every month. Any interest income on your deposits, are tax-free. Where as bank deposits earns 4% interest rates per annum on daily balance.

What are the Changes?

From this fiscal, it is planned to remove the maximum limit for deposits. That means account holders can deposit more than Rs.1 lakh. In this case, if the total interest income of single account exceeds Rs. 3500 and Rs. 7000 incase of joint account will be taxable. This changes are introduced to bring the post office savings account and bank savings account in the same manner. Currently, interest income on bank savings account is liable to pay the income tax.

Summary

Purpose of this this article is to bring awareness on this new notification from the Central Board of Direct Taxes (CBDT). Many would have opened the post office savings account, this information would be helpful for you. But, interest income will be less than bank savings account because they offer 4% per annum on daily balance. Please post your thoughts in the comments section.

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In this article I will be writing about the Post office Monthly Income Scheme(POMIS). Our readers posting questions about the POMIS and comparing it with the other fixed deposit options. I come up with this article to provide you some in depth details to differentiate POMIS with other investment options.  Here I am going to provide the key facts about the POMIS. After reading the article please post your comments and write down your doubts. Subscribe to our future articles here.

Key Factors on POMIS

Update: Revised Post Office Savings Interest Rates

The following is the list of facts about the POMIS investment.

• It has the lock in period of 6 years.
• 8% Interest Rates offered (Update: Revised to 8.2%)
• Maximum 450000 allowed for single account. It is 900000 for the joint account.
• Minimum amount is Rs.1500
• Account can be opened in any departmental post office and is transferable from one post office to another
• Interest amount is payable monthly.
• If the account is closed on or before expiry of three years opening of such account, an  amount equal to two percent of the deposit shall be deducted and remainder paid to the depositor
• If the account is closed after expiry of three years opening of such account, an amount equal to one percent of the deposit shall be deducted and remainder paid to the depositor
• 5% Maturity Bonus (Update: Discontinued)

• Tax Deduction on Post Office Savings Account
• Fixed Deposit for Monthly Income

You can buy a post office MIS at any post-office in India. When you open an MIS, you will get a certificate issued by the post office. In addition, the investor is provided with a passbook to record his transactions against his MIS.

• Only scheme in Post office where monthly interest is payable.
• Interest not with-drawn does not carry any interest.
• Non-Resident Indian / HUF cannot open the POMIS Account.
• Account can be opened by an individual, two/three adults jointly and a minor through a guardian.

Summary

I hope this article is useful for who want to learn about the Post Office Monthly Income Scheme(POMIS). This would be more suitable for the people who are retired and want to earn the monthly income. Please read this article to know about updates information on the post office savings. I am looking for the feedback from you. Thank you for reading this article.

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Since the post office is owned by the Government of India whatever money we invest in it is totally 100% safe and secure. Whats more they give us competitive rate of interest on our investment as well.

Post Office Savings

Post Office Saving Facts

Post Office Saving is the best form of savings schemes which provide substantially higher rates of interest and pose relatively lesser risks of suffering losses. Therefore, they are widely accepted among the different sections of the Indian society and among the different age groups.

The Indian postal sector has started numerous Post Office Saving schemes like:

• Post Office Time Deposits
• Deposit Scheme for Retiring Government Employees
• Post Office Monthly Income Scheme
• Post Office Recurring Deposits
• Deposit Scheme for Retiring Employees of Public Sector Companies
• National Savings Scheme
• National Savings Certificates
• Postal Life Insurance
• Public Provident Funds
• Kisan Vikas Patra

Let us look in detail about some of the best investment options using the Post Office.

Post office time deposits

The post office time deposits scheme fall under the category of fixed deposits and are available at all the post offices throughout India. The investors are not entitled to receive any amount towards interests on a monthly basis but receive a lump sum amount as interest when the scheme matures. The interest rate in case of these schemes is directly proportional to the tenure of the scheme. The minimum amount required to start the post office time deposits scheme is only Rs. 200 but there is no set limit for the maximum amount. The scheme allows nomination facility and the tenure of the scheme ranges from 1-5 years. The rate of interest varies according to the tenure of deposit. For example, the interest rate for the post office time deposits scheme of 1 year is 6.25% per annum, 6.50% for 2 years per annum, 7.25% for 3 years per annum, and 7.50% for 5 years per annum.

Though banks today offer a much higher rate of interest on term deposits, post office being owned by the government of India safety is 100%

Post office monthly income scheme

The monthly income scheme also falls under the category of fixed deposits and the tenure of this scheme is 6 years. The post office has made it a rule to accept only a single deposit in an account and the monthly income schemes are available in all the post offices in India. The minimum amount required to be submitted to start this scheme is Rs. 1,000, a maximum amount of Rs. 3 lakh in case the account is held by a single individual and Rs. 6 lakh in case it is a joint account. The rate of interest has been fixed at 8% per annum and the investors are entitled to receive monthly interest payments. The investors are also entitled to a bonus amount of 10% on the total loan amount which is paid when the scheme matures. The investors have the facility to get income tax relief in accordance with Section 80C of Income Tax.

Kisan Vikas Patra

Kisan Vikas Patra certificates are secured by the backing of the central government of India which makes it the most effective post office saving. The best thing about Kisan Vikas Patra certificates is that the deposited amount doubles itself after the completion of stipulated period and the rate of interest offered by the post offices for these certificates remain same throughout the loan period. The tenure of Kisan Vikas Patra certificates is 8 years and 7 months. The face value of Kisan Vikas Patra certificates range from Rs. 100 to Rs. 50,000.

Post office recurring deposit

The tenure of the post office recurring deposit accounts is 5 years which comprise of 60 equal monthly deposits of at least Rs.10 towards each installment. Default of at the most 4 payments are considered and forgiven by charging a minimal default fee. As the post office recurring deposit scheme matures, the investor of Rs. 10 denomination account is paid a sum of Rs. 728.90.

Public provident funds

The public provident funds can be started with a sum of Rs. 500 and can extend to Rs. 70,000 and the account can be shifted from a post office to another post office or from a post office to a bank or from one bank to another. The interest change varies every year and is entitled to income tax rebates under Section 88 of Income Tax Act.

Summary

I hope this article would be more useful for those who want to invest in the post office. Post office is need not be used only for sending the parcel to India. It is good investment option for senior citizens and house wife who want to save the money by depositing each month. There is no risk on investing on the post office. If you have any doubts, please post it in the comments section.

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