Tax-saving options offered by the Post Offices in India


Are you a risk-averse customer looking for some safe tax-saving investment instruments? Indian Post Offices provide various options which may suit your purpose. Read the article which provides details of four tax-saving investment options offered by the Post Offices. These options are risk-free.

All of us know the importance of Post Offices. The Department of Post and its units and sub-units (Post Offices) help us to remain connected with our near and dear ones living at far-away places. Post Offices help us to send official and semi-official letters at low cost. These also help us to transfer money. However, comparatively fewer people know that the Post Offices in India also provide four tax-saving options for the risk-averse investors. Due to the convenience, safety and availability in the local Post Offices, these tax-saving options are popular. The article discusses these four tax-saving options available at Indian Post Offices.

Public Provident Fund (PPF)-most efficient tax saving option

For many individuals, PPF is the most favoured investment option. The investment is tax-exempt in all three stages, i.e., at the time of investment, interest accumulation stage and lastly at the time of withdrawal. A resident Indian can open only one Account. The minimum investment is Rs. 500/- par year and the maximum is Rs. 1.5 lakh, i.e., the limit of saving under Section 80C of the I-T Act. The present market-linked rate of interest is 8.7% (for 2016-17, the rate of interest will be 8.1%). The PPF Account matures in 15 years and can be renewed every five years thereafter. Withdrawal is allowed from the seventh financial year from the year of opening of account. The Post Offices provide the opportunity to the investors to transfer the PPF Account from one Post Office to another.

National Savings Certificate (NSC)-another popular instrument

NSCs of 5 year or 10 year maturity period are another preferred investment option for risk-averse investors. NSCs are offered only by Post Offices. The minimum denomination of NSC is Rs. 100/- and other available denominations are Rs. 500/-, Rs. 1000/-, Rs. 5000/- and Rs. 10000/-. There is no upper limit for this investment. If an investor invests Rs. 100/- in 5 year NSC, he will get Rs. 151.62/- after 5 years (Compound interest rate: 8.5% p.a.). If the investor invests Rs. 100/- in 10 year NSC, he will get Rs. 236.60/- after 10 years (Compound rate of interest: 8.8% p.a.). The investor can avail tax benefit under Section 80C and the annual interest earned is deemed to be re-invested and qualifies for deduction under Section 80C. NSCs can be transferred from one Post Office to another and there is provision of issuing duplicate certificate in case of loss.

Five year Post Office Time Deposit-postal fixed deposit

This is basically a fixed deposit and it works like fixed deposits of banks. The interest is payable annually but is calculated quarterly. 5 year deposit carries an interest rate of 8.5% p.a. and the investment qualifies for the tax benefit under Section 80C.

Post Office Saving Account-postal saving account

The saving account in Post Offices carries the interest rate of 4% p.a. Interest income upto Rs. 10000/- is exempt from Income Tax under Section 80TTA of the IT Act.

The risk-averse investors who are very conscious about the protection of capital investment can avail the aforestated four investment options available with Indian Post Offices for tax-saving, and also for the safety and security of the investment.


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