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Post Office Saving Schemes: Investments With Higher Returns Than Post Office Schemes

Read this blog to know more about the 9 different Post Office Saving Schemes. Know who can invest in Post Office Savings Schemes and understand the returns the schemes generate. Find out how Cube Wealth gives you access to alternatives to Post Office Savings Schemes.
May 10, 2021

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Post Office Savings Schemes include a broad umbrella of investment options that are designed to offer predictable returns between the range of 4 to 7.6%. 

A majority of Post Office Savings Schemes are considered relatively safer than other assets like NPS even though both these investments are backed by the government.  

However, the returns generated by several Post Office Savings Schemes have fallen drastically over the past few decades. Therefore a lot of investors want to find alternatives to these schemes. 

This blog will examine Post Office Savings Schemes and the historical trajectory of their returns. Finally, we'll compare the schemes with assets like liquid funds, debt funds, and alternative assets.  

List Of Post Office Saving Schemes

1. Post Office Savings Account (SB)​​​​

A Post Office Savings Account is similar to a regular savings account. It can be opened by an Indian citizen with valid KYC proof. The rule is simple - 1 PAN card = 1 account. The account options include: 

  • Single account
  • Joint account

The account opening privileges also extend to:

  • Minors above 10 years
  • Guardians (for children)
  • Guardians (for people with mental health issues)

You'll have to pay ₹500 to open the account and there's no upper limit on deposits while the minimum withdrawal limit is ₹50. The current interest rate is 4% per annum and has fallen by 1.5% since 1981. 

Investment options like liquid funds have been known to generate better returns around the range of 4 to 6% with high liquidity and safety as they invest in debt securities that mature in 60 to 91 days.

Discover Top Liquid Funds Now 

2. National Savings Recurring Deposit Account (RD)​​

The Recurring Deposit Account (RD) offered by the Post Office carries a lock-in period of 5 years or 60 monthly deposits. That's why it is called a 5-Year Post Office Recurring Deposit Account (RD).

Any individual with valid KYC documents can open:

  • Single account
  • Joint account

The account opening privileges also extend to:

  • Minors above 10 years
  • Guardians (for children)
  • Guardians (for people with mental health issues)

There's no limit on the number of RD accounts you can open. The minimum deposit at the time of account opening is ₹100. Subsequent deposits have no upper limit and can be made in multiples of ₹10.

The RD interest rate as of 04-2020 is 5.8​% per annum that compounds quarterly. The Post Office RD interest rate has decreased by more than 7.5% since 1991. 

The USP of RDs is safety and predictable compound interest. However, investment options like debt funds carry the same USPs while generating better returns that range from 6 to 8%. 

Explore Top Debt Funds In India

3. Post Office Time Deposit Account (TD)

The logic behind the Post Office Time Deposit Account (TD) is straightforward - the longer you stay invested the more interest you stand to earn. 

You can open one or more TD accounts based on investment options for 1 year, 2 year, 3 year, and 5 years. The TD facility is open to any individual with valid KYC proof. Account types include:

  • Single account
  • Joint account (up to 3 adults)

The account opening privileges also extend to:

  • Minors above 10 years
  • Guardians (for children)
  • Guardians (for people with mental health issues)

The minimum investment amount for a TD account is ₹1000 and further deposits can be made in multiples of ₹100. Interest is calculated quarterly and paid out annually. 

Here are the interest rates as of 04-2020:

 

Term

Interest Rate

Benefit Under Section 80C

1 year

5.5%

2 years

5.5%

3 years

5.5%

5 years

6.7%


For context, ELSS funds offer better tax benefits and returns of approximately 8 to 12% with a lower lock-in period of 3 years. Check out the best ELSS funds today

4. Post Office Monthly Income Scheme Account (MIS)

The Monthly Income Scheme (MIS) account offered by the Post Office allows you to earn a fixed monthly interest in exchange for your investment. 

Any individual with valid KYC proof can open the following types of MIS accounts for ₹1000:

  • Single account
  • Joint account (up to 3 adults)

The account opening privileges also extend to:

  • Minors above 10 years
  • Guardians (for children)
  • Guardians (for people with mental health issues)

You can invest a maximum of up to ₹4,50,000 in the MIS account in multiples of ₹100. This includes your share of investment in a joint MIS account that has an upper limit of ₹9,00,000. 

The interest rate on a Post Office Monthly Income Scheme Account is 6​.6​% as of 04-2020. Furthermore, the interest that you earn will be taxable under the Income Tax Act. 

Alternative investment options like Asset Leasing by GRIP are far more tax efficient and produce nearly 2x returns. GRIP has been generating 12% post-tax returns. Explore GRIP On Cube Now 

5. Senior Citizen Savings Scheme (SCSS)

The Post Office Senior Citizen Savings Scheme (SCSS) is open to investors above the age of 60. But there are exceptions. Here's a proper breakdown of who is eligible to invest in SCSS:

1. 60+: any individual.

2. 55 to 60 years: retired civilian employees (within a month of receiving their retirement benefits).

3. 50 to 60 years: retired defense employees (within a month of receiving their retirement benefits).

Any individual with valid KYC proof can open the following types of SCSS accounts for ₹1000:

  • Single account
  • Joint account (only with spouse)

The maximum deposit limit is up to ₹15,00,000 and can be made in multiples of ₹1000. SCSS carries an interest rate of 7.4% per annum as of 04-2020. The interest is paid in segments from the date of deposit: 

  • First time: 31st March or 30th Sept or 31st December 
  • Second time onwards: 31st March, 30th June, 30th September, and 31st December

Building a perfect portfolio is one of the most ideal alternatives to investing in options like SCSS or NPS. Cube's perfect portfolio philosophy sets you up for various timeframes and investment goals.

A perfect portfolio can generate solid returns that are generally better than traditional investment options and ensure that your portfolio produces inflation-beating returns. 

Curious about building a perfect portfolio? Read this blog to know more

6. 15 year Public Provident Fund Account (PPF)

The Post Office Public Provident Fund (PPF) account carries a lock-in period of 15 years. PPF follows the 1 PAN card = 1 account rule (across post offices and banks) and gives resident Indians the option to open:

  • Single account

The PPF account opening privileges also extend to:

  • Guardians (for children)
  • Guardians (for people with mental health issues)

You can open a PPF account by depositing ₹500 and future deposits can be made in multiples of ₹50. The maximum investment amount per financial year is ₹1,50,000. 

This particular figure might ring a bell in case you've been investing for a while. It's the exact amount that you can claim as a tax deduction under Section 80C. Thus, PPF can help you save tax under Section 80C. 

However, another tax saving investment option that carries the same maximum tax deduction (investment amount per financial year) offers better returns with a lower lock-in period. The asset is ELSS funds. 

 

Investment Option

Lock-In Period

Average Returns

Tax Benefit Under Section 80C

Maximum Investment Amount

PPF

15 years

7.1%

₹1,50,000

ELSS Funds

3 years

8-12%

₹1,50,000


Wealth First, Cube's mutual fund advisory partner, handpicks and curates a list of top ELSS funds every month for Cube users. Download Cube For Free to know more

7. Sukanya Samriddhi Account

A Sukanya Samriddhi account can be opened by a parent or guardian for a girl child below the age of 10. A maximum of two accounts can be opened per family for two girls. 

However, there is an exception. You can open more than two Sukanya Samriddhi accounts in case you have twins or triplets, all girls.  Withdrawals are possible only after the girl child turns 18. 

The account is closed after 21 years from the date of opening. You can open a Sukanya Samriddhi account by investing ₹25​0. The maximum investment allowed per financial year is ₹1,50,000. 

The deposits you make to Sukanya Samriddhi accounts are eligible for tax deduction under Section 80C. Interest earned on this investment is tax free. The rate of interest as of 04-2020 is 7.6​​%.

8. National Savings Certificates (NSC)

There's a high chance that you might be aware of National Savings Certifications (NSCs) if you've grown up in a typical Indian household. They're the most recognizable assets offered by the Post Office.  

NSCs carry a lock-in period of 5 years and you can start investing in NSCs for ₹1000. You can deposit multiples of ₹100 second time onwards. The Post Office allows you to maintain multiple NSCs. 

Any individual with valid KYC proof can open an NSC account of the following types:

  • Single account
  • Joint account (up to 3 adults)

The account opening privileges also extend to:

  • Minors above 10 years
  • Guardians (for children)
  • Guardians (for people with mental health issues)

NSC returns as of 04-2020 are 6.8%, relatively less than investments like debt funds, equity funds, alternative assets, and more that also provide no lock-in options as well. Explore Options On Cube

9. Kisan Vikas Patra (KVP)

Kisan Vikas Patra is a small savings certificate scheme offered by the Post Office. You can start investing in it for ₹1000 and in multiples of ₹100 from the second time onwards. 

There's no maximum investment amount for KVP and individuals with valid KYC proof can open the following accounts:

  • Single account
  • Joint account (up to 3 adults)

KVP account opening privileges also extend to:

  • Minors above 10 years
  • Guardians (for children)
  • Guardians (for people with mental health issues)

The Ministry of Finance governs the date of maturity of KVP investments. The interest rate as of 04-2020 is 6.9% with options like debt funds comparatively outperforming the investment historically. 

Read this blog to know more about the best SIPs for 5 years investments

Benefits Of Post Office Saving Schemes

1. Affordable

Post Office Saving Schemes carry a low minimum investment amount that usually ranges from ₹250 to ₹1000. Thus, investors may be tempted to buy these investments to build long term wealth at a low cost.

However, you can start investing in options like liquid funds for as low as ₹500 on Cube Wealth. Furthermore, liquid funds have historically produced better returns than most traditional investments. 

2. Reliable Returns

Post Office Saving Schemes are backed by the government and thus generate predictable returns that range from 4 to 7.5%. Debt funds, overnight funds, bond funds, and liquid funds offer similar returns.

3. Easy Access

Not long ago, it was easy for investors to simply walk into a post office or accredited bank, provide the required documents, and start investing in Post Office Savings Schemes.

The pandemic has put a dent in this simple flow. However, powerful apps like Cube Wealth give you access to mutual funds, stocks, and alternative assets that you can invest in from the comfort of your home. 

What's The Highest Interest Rate Of Post Office Saving Schemes In 5 Years?

Here's the interest rate for Post Office Savings Schemes arranged in ascending order:

 

Post Office Savings Scheme

Interest Rate (Per Annum)

Post Office Savings Account

4%

Post Office Time Deposit Account

5.5-6.7%

5-Year Post Office Recurring Deposit Account

5.8%

Post Office Monthly Income Scheme Account

6​.6%

National Savings Certificate

6.8%

Kisan Vikas Patra

6.9%

15 year Public Provident Fund Account

7.1%

Senior Citizen Savings Scheme

7.4%

Sukanya Samriddhi Account

7.6%

Investment Options Better Than Post Office Investment Schemes

 

Investment Option

Lock-In Period

Average Returns

Risk

Tax Benefits

Post Office Savings Scheme

0-15 years

4-7.5%

Low

Mutual Funds

0-3 years

4-18%

Low-High

Stocks

-

9-16%

Medium-High

Alternative Assets

0-3 years

8-12.5%

Low-Medium

Digital Gold

-

4-7%

Medium


Conclusion

Post Office Savings Schemes offer decent returns that are predictable, low-risk, and easily accessible. However, the schemes carry a significant lock-in tenure and are relatively less tax efficient. 

Investing in assets like mutual funds, stocks, alternative investments, and digital gold using the Cube Wealth app is a viable option for investors looking to build a solid portfolio of diversified securities.

Download Cube Wealth app now to know more 

Watch this video to know more about why you should invest using the Cube Wealth app


Shriram Shekhar
Shriram is a Consultant at CubeWealth. He has developed cutting edge IT products for over 2 years before turning to his passion for the written word. His love for philosophy, developing products, and empowering people through quality content is what got him to CubeWealth.

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