Popular post office saving schemes – best investment options with lowest risk

Popular post office saving schemesPost office saving schemes is the oldest way to invest money to get a guarantee return with lowest risk. These days there are plenty of options to invest your money. Many financial experts will suggest you to invest money in stock, mutual funds, bonds etc. In such an era post office saving schemes has still manage to stay alive with their awesome features, like fixed return, good interest rate compared to others and the most important factor is trust it earned from long time. In this article we will go through all the post office saving schemes that one can consider as a good investment product as per their need.

All about post office saving schemes

People who don’t want complicated life with stock market or complex return calculation simply go for any of these investment options with posit office. But with time post office saving schemes has also changed their face and now able to fight with all existing alternative investment product in market. Let’s check out them one by one.

  1. Recurring Deposit Account (RD)
  • Interest Rate: 8.40% compounding quarterly
  • Maturity: 5 Years
  • Minimum Amount: Rs 10/- per month or any amount in multiples of Rs 5/-.
  • Maximum Amount: No limit
  • Premature Withdrawal: Possible after completion of 3 years. One can withdraw 50% after 1 year completion also.

Recurring Deposit Account or RD is one of the most popular Posts office saving scheme has launched ever. I have seen mostly lower class people consider RD as the only way to invest money. Many small businessmen invest in RD account on daily basis. RD is the best investment product to invest regularly, if you are planning to start your first investment. Monthly save small amount for 5 years. This will help you to make a habit of savings. RD account opened on or after 1.4.2012 with monthly deposit of Rs 10/- shall be Rs 746.51. Can be continued for another 5 years on year to year basis.

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Besides post-office, banks are also offering RD accounts with attractive interest rates. One can open a recurring deposit account online easily without visiting your bank branch. You can even select a lesser tenure for the same. On maturity amount will be deposited in your account automatically. So recurring deposit is the best investment product and one can easily learn the habit of regular investment.

  1. Post Office Time Deposit Account

Interest Rate: payable annually but calculated quarterly.

Period          Rate

1 yr. A/c      8.20%

2 yr. A/c      8.30%

3 yr. A/c      8.40%

5 yr. A/c      8.50%    w.e.f. 01.04.2012

  • Minimum Amount: Rs 200/- and in multiples thereof.
  • Maximum Amount: No maximum limit
  • Premature Withdrawal: Only after 6 month completion
  • Income Tax Benefit:  Under section 80C

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This is almost similar to bank’s fixed deposit schemes. You can invest your money for 1, 2, 3 and 5 years like bank FDs. If you consider for 5 year deposit then currently many banks offer more interest rate than Post Office Time Deposit Account.

  1. Post Office Monthly Income Account Scheme
  • Interest Rate: 8.50% per annum   w.e.f. 01.04.2012
  • Minimum Amount: In multiples of Rs 1500/-
  • Maximum Amount: Rs 4.5 lakhs in single account and Rs 9 lakhs in joint account.
  • Premature Withdrawal: Withdrawal possible but interest applicable. If you withdraw before 3 year than 2% and after 3 year 1% amount will be deducted from principle amount
  • Income Tax Benefit:  No Tax Rebate

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Monthly Income Scheme or MIS is another very popular post office saving schemes. Mainly people who are old or retired took this as the best retirement product. One can deposit the lump sum amount and then earn monthly interest like regular pension. E.g. if you have a joint account and deposit 9 lakh, you will get monthly 6300 as interest. This is not bad and psychologically it will mean regular income generation. May be there are best alternative of MIS but we can’t expect everyone to think in that way.

  1. Public Provident Fund Account
  • Interest Rate: 8.80% per annum w.e.f. 01.04.2012
  • Minimum Amount: Rs 500/-
  • Maximum Account: Rs 1,50,000/- in a financial year
  • Income Tax Benefit:  Under section 80C

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I wrote an article to explain all information about PPF account in India. You can check out that to get complete details.

  1. National Savings Certificate (VIII Issue & IX Issue)
  • Interest Rate: 8.60% (VIII Issue) and 8.90% (IX Issue)
  • Maturity 5 years (VIII Issue) and 10 years (IX Issue)
  • Minimum Amount: Rs 100/-
  • Maximum Amount: No maximum limit
  • Premature Withdrawal: Only possible in special case (On death of account holder, on forfeiture pledge by Gazette Govt. Officer or When ordered by court of law.)
  • Income Tax Benefit:  Under section 80C

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National Savings Certificate is a good long term savings option. One can earn good interest rate on these certificates. You can invest for 5 year or 10 year. Again investing in these products can help you to learn good habit of investment. If you have a definite target of 5 or 10 year then NSCs are recommended.

  1. Senior Citizen Savings Scheme
  • Interest Rate: 9.30% per annum,
  • Maturity: 5 year
  • Maximum Amount: 15 lakh
  • Premature Withdrawal: One can withdraw after 1 year with interest rate of 1.5% before 2 year. And 1% after 2 year
  • Income Tax Benefit:  Under section 80C

This scheme is completely for the old aged people. This is a 5 year deposit scheme. You can invest maximum of 15 lakh. Interest will be provided after every 3 months. Interest rate is also good, 9%. But it will be taxable. Even you can open multiple accounts in your name. There shall be only one deposit in the account in multiple of Rs 1000/- maximum not exceeding rupees fifteen lakh.

  1. Post Office Savings Account
  • Rate of interest: 4.0% per annum
  • Minimum amount: Rs 50/- in case of non-cheque account and Rs 500 for rest
  • Maximum Amount: For single account Rs 1,00,000/- and for joint account Rs 2,00,000/-
  • Premature Closure: Any time
  • Income Tax benefit: Interest earned is tax-free

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This is simply like a bank account. One can deposit cash and enjoy 4% interest. Like bank account you can also avail cheque-book. The best part of this account is interest earned on this account is tax-free.

  1. KVP – Kisan Vikas Patra
  • Rate of Interest: 8.7% annually
  • Minimum Amount: Rs 1,000 (certificates would be available in the denominations of Rs 1,000, 5,000, 10,000 and 50,000)
  • Maximum Amount: No limit
  • Premature Withdrawal: a lock-in period of 30 months or 2 years and 6 months.
  • Income Tax benefit: No benefit

Kisan Vikas Patra was a super-hot investment product from Post office. Later on it was discontinued on 2011. But recently it has been re-launched again. One can get his invested amount doubled after 8 years 4 month. I will write a complete article to discuss positives and negatives of KVP.

So these are most popular post office saving scheme one can start and invest money without taking any risk. Now I have taken care few queries and tried to answer below.

Can I operate post office saving schemes online?

No. This is one of the biggest disadvantages of these post office saving schemes. When we can open a RD easily with online banking then what is the point to go post-office? Postal department has to come up with the solution soon to stay in the competition.

Can I depend on NSC or PPF for a long-term investment point of view?

You should not rely on these products 100% as in long term interest earned them may not able to beat the inflation. You should invest in Stock market via Mutual fund or directly as you have more than 10 years.

Should I open my first PPF account with Post-office or Bank account?

I think opening a PPF account with SBI or any other bank is much better. As one can easily create a standing instruction to transfer money to your PPF account regularly. In case of post-office you have to visit nearest post office regularly. Do you have time do that every month?

Post Office Term Deposit or Bank FDs – Which one is better?

I think both have their own advantages. Like in Bank you will get flexibility in tenure and interest rates vary from 7.5 – 9.5% max. But for post office term deposit it is fixed. One more thing is that bank will deduct TDS on maturity, where this is not applicable for term deposit accounts.

Is the post office saving schemes are branch specific?

Yes. This is one bad thing in the age of internet. One can’t encash a NSC certificate in any part of India. You have to encash at the same branch it was issued. In that case one can transfer these schemes by filling a form to your desired branch.

Do you  have any question regarding these most popular post office saving scheme? Share your question or query here by writing a simple comment. Thanks for reading….

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  1. Interesting post – I was fascinated by the points ! Does someone know if my company could possibly find a fillable CBP 7507 form to use ?

  2. Hallo mr santanu i m working women 40 yrs of my age can u show me some investment plan in post office, so far i m working i dont want montly interest but something in which my monthly interest is also counted as a part of investments.
    Thanks waiting for yr reply.

  3. Hi Santanu,

    I am planning to invest in NSC for value 3000 per month, however I noted that there are no denominations for 3000/-

    Is it possible for me to open 3 accounts in the same name for Rs. 1000/- each. ?


  4. Hello sir.mene ek fix dpsit korna sahti hu.rs 30000 ka.5yr kiye le.maturity amount kitni milegi aur kaun si scheme me mujhe jada atchi hogi.plz jald se jald muje botayegi

  5. My PPF with post office have been matured . Now they are asking to show aadhar card. I am NRI, don’t have aadhar card.
    please advice

    1. Hi Avtar,

      I don’t have much info about your case. But I think you can apply for Aadhaar card in that case, as NRI’s can also apply the same as per my knowledge.

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