Post office schemes could be best for you. Here’s why..

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Many a times we postpone investing plans because we are not able to save much. But this should not come in the way of your investing. Post Office Saving Schemes gives you an opportunity to start your investment with just Rs 1,000.

The three post office saving schemes which can kickstart your investment with Rs 1,000 are- Monthly Income Scheme (MIS), National Saving Certificate (NSC) and Kisan Vikas Patra (KVP).When compared to a bank FD, they are better of in terms of returns as well.

The bank FD rate is somewhere around 2.90 – 6%, while the post office MIS has an annual interest of 6.6%, the National Saving Certificate (NSC) is getting 6.8% interest per annum and the Kisan Vikas Patra (KVP) is at 6.9% interest. MIS and NSC have a lock-in of five years but the maturity of the Kisan Vikas Patra is 124 months (10 years and 4 months). The important thing about these schemes is that even if the interest is reviewed every three months and can decrease or increase, the interest level at which you start investing will remain the same till maturity.

Harshvardhan Roongta, CFP at Roongta Securities, suggests that MIS is one such scheme which has a provision of interest payback on a monthly basis. If an investor does not need this money every month, then she can open a RD (recurring deposit) for 5 years and re-invest this monthly interest or start a SIP to maximise the returns.

Features of each Scheme

Post Office Monthly Income Scheme (MIS)

• Tenure – 5 years

• Interest Rate- 6. 6% per annum payable monthly
• Minimum investment is Rs. 1,000/-

• Maximum investment limit is Rs 4.5 lakh in single account and Rs 9 lakh in joint account

• A minor can also have a MIS account through a guardian. Minor will have an independent limit for himself/herself

• Interest is taxable

• Interest can be credited into your regular bank account maintained with any bank & you don’t need to open a savings bank account with the same post office with whom you have opened your MIS account.

• Lock in/Premature Withdrawal

• Premature withdrawal not allowed within 1 year of deposit.
• Between 1 to 3 years : 2% penalty on principal amount.
• Between 3 to 5 years : 1% penalty on principal amount

National Savings Certificate (NSC)

• Tenure – 5 years

• Interest rate – 6.8% per annum. Interest is not paid out regularly. It is a cumulative scheme. If you invest Rs 1,000 now, you will earn Rs. 1,389.49 only after five years.

• Minimum investment Rs. 1,000/-. There is no maximum limit.

• Minor can also invest.

• Tax Benefit: Qualifies for deduction u/s 80C (up to Rs. 1.5 Lakh). Interest earned is taxable in the hands of the investor.

• Premature closure is not allowed before five years except in case of death or by order of court.

• Visit your nearest post office, fill in the application form and submit alongwith photograph Pan copy and address proof of all applicants. Birth certificate incase of minor (KYC documents)

Kisan Vikas Patra (KVP)

• Tenure – 10 years & 4 months (124 months)

• Interest rate – 6.9% p.a. Interest is not paid out regularly. It is a cumulative scheme. Rs. 1,000 you invest now and after 124 months you will get double i.e Rs. 2,000/-

• Minimum investment Rs. 1,000/-. There is no maximum limit.

• Interest earned is taxable in the hands of the investor.

• Pre-Mature closure is allowed after 2 years and 6 months of deposit or in case of death of one or more joint holders OR forfeiture by the pledgee OR by order of court.

To invest in a post office scheme, you have to go to your nearest post office and fill the form. You will also find all the forms on their website. You have to carry a photograph and a copy of PAN card along with an address proof.

Watch the full interview with Harshvardhan Roongta here: