Comparison of Post Office Schemes

India Post is the government operated postal system of India. It was founded in 1774. India Post comes under the Ministry of Communications and Information Technology.

Post Office is the most reliable place to make investment in India. Post office network is largest in India and is even present in those remote areas where banking facilities is still not available. Post office is a safe long and short term investment option for people especially from rural areas.

India Post has around 1,55,000 branches. These saving schemes provide financial stability to the citizens. Safety and security are the principal idea of investment for most of the Indian investors. Savings schemes offered by post offices are highly safe, government-backed schemes with attractive returns. Main target group of these schemes are small investors from rural and semi urban areas.

Schemes under Post Office:-

Post Office Recurring Deposit (RD)
Post Office Time Deposit (TD)
Post Office Monthly Income Scheme (MIS)

First let’s get a brief understanding about the various schemes offered by the post office:-

Like a regular bank recurring deposit, Post Office Recurring Deposit also needs you to make payments at regular intervals of two, three and five years. This recurring deposit scheme offered by post office offers an interest rate of 6.9% per annum (quarterly compounded). If in any Post Office RD account, there is monthly default amount, the depositor has to first pay the defaulted monthly deposit with default fee and then pay the current month deposit. One withdrawal up to 50% of the balance allowed after one year.

Interest rate under Post Office Time Deposit is payable annually but calculated quarterly. Post office time deposit comes with different tenure options for investment. Current rate of interest applicable is below:

1year Time Deposit = 6.60%
2year Time Deposit = 6.70%
3year Time Deposit = 6.90%
5year Time Deposit = 7.40%

Minimum amount can be invested is Rs.200. And there is no cap on upper limit. There is no restriction on the number of accounts one can hold.

Post Office Monthly Income Scheme (MIS) is a popular investment scheme wherein an individual invests a particular amount and gets an assured monthly income in the form of interest. This recurring deposit scheme offered by post office offers an interest rate of 7.3% per annum. Under the Post Office MIS scheme, the interest payable on a monthly basis commencing from the date of deposit is deposited in your post office savings account. There are no income tax benefits available for investing in the Post Office MIS account. This scheme is suitable for those who want a steady flow of income, such as retired persons.

Now, let us have a look at a comparison between the various aspects of the above banking investment options. It will provide a better understanding on these:-

Summary:-

All the schemes have alternative investment options. These options have almost same characteristics and features.

In all the schemes, there is no age limit mentioned. Minors aged 10 and above can open account in their own names under this scheme.

Only post office time deposit scheme has variety in tenure to choose from (1, 2, 3 & 5 years). Other two schemes have 5 years of tenure.

Premature exit and closure of accounts under these scheme allowed only on paying penalties.\

All the schemes have minimum investment conditions. Only post office monthly income scheme has maximum investment conditions. Other two schemes don’t have any upper limit for investment.

None of the schemes are fully liquid schemes. Withdrawals from these schemes attract penalties.

The deposit amounts as well as interest earned are taxable. No tax benefits available in any of the schemes. Only 5 year Time Deposit has tax benefit and is eligible for tax deductions.

All the schemes get affected by inflation. No scheme has inflation protection. The returns given by these schemes will be affected by inflation rates.

All the schemes are absolutely risk free and provide guaranteed returns. These schemes are reviewed every year and the interest rates are linked to the government securities (G-sec) of same maturity period. Revised rates will be announced at the beginning of every financial year based on previous year’s benchmark rate.

Post Office schemes are government backed schemes. Thus, the capital invested in these schemes is fully protected.

Below you can see the interest rates offered by post office schemes:-

Interest Rates on Post Office Schemes August 2018

All post office saving schemes are very popular. You can compare all post office schemes by checking the interest rates of post office schemes, tax benefits and withdrawal and maturity period as specified by central government.

After checking all the information about the scheme, you should choose them wisely as per your requirement and duration for which you want assured and best returns.