POST OFFICE SCHEMES

BY:ABHISHEK KAPOOR4111003003

o Indian Post offers several Savings Schemes which are safe and relatively more interest rates than bank deposits

Benefits of investing in post office schemes:o These schemes are offered by the Government of

Indiao Safe, secure and risk-free investment optionso No Tax Deduction at Source (TDS)o Nomination facility is availableo Nomination can be changed at any timeo The instruments are transferable to any Post Office

anywhere in Indiao Attractive rates of interest

TYPES OF POST OFFICE SCHEMES:

o Recurring Deposit Account (RDA)

o Post Office Monthly Income Scheme (MIS)

o Time Deposit

o Senior Citizen Scheme

o Kisan Vikas Patra

Recurring Deposit Account (RDA):

o It is one of the best investment option for the low income groups. Basically it is a  banking service offered by Department of post, Government of India at all post office counters in the country

o Amount of Investments:• Minimum investment- Rs. 10 p.m. or any amount

in multiples of Rs. 5• Maximum investment- No maximum limit

o The deposit shall be paid as monthly installments and each subsequent monthly installment shall be made before the end of the calendar month and shall be equal to the first deposit

o The post-office recurring deposits offers a fixed rate of interest, currently at 7.5 per cent per annum compounded quarterly

o Interest is liable to taxo Balance exempt from wealth-taxo No TDS from interesto Account can be continued for another 5 years on

year to year basis with interesto Rebate is admissible on advance payment of

deposits (6 and 12 monthso Nomination facility is availableo After maturity of the account, it can be continued for

a further period of 5 years with or without further deposits. During this extended period, the account can be closed at any time

Post Office Monthly Income Scheme (MIS)

o MIS provides a source of regular income on a long term basis. This scheme is more beneficial for retired persons. Basically  it is meant for investors who want to invest a sum amount initially and earn interest on a monthly basis for their livelihood

o Amount of Investments:

Single account

Joint account

Minimum investment

Rs 1000 Rs 1000

Maximum investment

Rs 3 lakhs Rs 6 lakhs

FEATURES:

o The duration of MIS is six yearso Premature closure of the account is permitted any

time after the expiry of a period of one year of opening the account

o Investors can withdraw money before three years, but at a discount of 2%. Closing of account after three years have 1% deduction.

Returns:o The post-office MIS gives a return of 8% plus a

bonus of 10 per cent on maturityo No bonus shall be paid on deposits made in

accounts opened on or after 13 Feb, 2006

Tax Considerations:o Interest is liable to tax o Balance exempt from wealth-taxo No TDS from interest

Other considerations:o Only one deposit is permittedo Provides a secured monthly pensiono Nomination facility is availableo Only individuals can open the account

(either single or joint)

Time Deposit

o Time Deposit is a  banking service similar to a Bank Fixed Deposit  offered by Department of post, Government of India at all post office counters in the country

o This scheme is meant for those investors who want to deposit a lump sum of money for a fixed period

o Investor gets a lump sum (principal + interest) at the maturity of the deposit. Time Deposit scheme offers a lower, but safer, growth in investment

o Amount of Investment: The minimum investment in a post-office time deposit is Rs 200  and there is no prescribed upper limit on your investment. Account can be opened in multiples of Rs. 50 in single or joint names

o Returns: This investment option pays annual interest rates between 6.25 and 7.5 per cent, compounded

quarterlyTime Period (year) Rate Of Return(%)

1 6.25

2 6.5

3 7.25

4 7.5

Tax Considerations:o Interest is liable to tax

o Balance exempt from wealth-tax

o No TDS from interest

Other considerations:o Accounts can be opened in name of minor/person of

unsound mind

o One can take a loan against a time deposit with the balance in your account pledged as security for the loan

o Nomination facility is available

Senior Citizen Scheme

o It started with effect from August 2, 2004

o Citizens of 60 years of age and above are eligible to invest

o The minimum investment is Rs. 1000 and in multiples of Rs.1000 subject to a maximum of Rs.15 lakh

o The deposit will carry an interest of 9% per annum

o Premature withdrawal after a period of one year will be allowed, subject to some deductions

o Interest is liable to tax

Kisan Vikas Patra

o This scheme is available at all post offices and brokers/agents of UTI, LIC and government schemes

o No limit ( available in denominations of Rs. 100, Rs. 500, Rs. 1000, Rs. 5000, Rs. 10000 and Rs 50000)

o Maturity period of certificate is 8 years and 7 months

o Premature encashment is possible after 2 and half years

o Returns: Money doubles in 8 years and 7 months

Tax Considerations :o Interest is not eligible for any tax

concessiono No TDS from interest

Other considerations:o Can be purchased from any post officeo Interest is paid only on maturity and cannot

be claimed prior to maturityo Can be purchased jointly by two adultso It has been declared as "public security"

under the provisions of the Mumbai Public Trust Act, 1950

o Can be purchased in name of minor