Savings Schemes
by 5paisa Research Team Last Updated: 2023-09-25T18:48:35+05:30


Investments have become one of the most important steps an individual can take to secure their financial future. It is a known fact that piling cash into a bank’s savings account is the least fruitful as the returns are lower than the prevailing inflation rate, which may result in a substantial decrease in the value of the money over time. Instead, an ideal way to ensure that the savings multiply and create wealth over time is to invest it in a savings scheme that offers comprehensive features to save money, such as tax benefits. 

Among numerous wealth creation avenues, post office tax saving schemes are the safest and offer various tax benefits while providing good returns. 

Types of Post Office Tax Saving Schemes

Post Office tax saving schemes are flagship investment schemes that post offices offer all over India. The main aim of the post office tax saving schemes is to offer investors an effective avenue to invest, save, grow and earn effective returns on their investments, all while getting tax deductions under various sections of the Income Tax Act of 1961. 

Here are the most widely invested post office tax-saving schemes for effective investment and wealth generation over time: 

1.    Public Provident Fund (PPF)

The Public Provident Fund (PPF) is a government-backed scheme that allows investors to invest a minimum of Rs 500 per year, which is capped at Rs 1.5 lakh annually. Individuals can open a PPF account in their name, as no provision for a joint account exists for a PPF. 

The scheme comes with a tenure of 15 years which the investors can extend for five-five years in blocks. The scheme allows full withdrawal after five years for reasons such as life-threatening disease, higher education etc. However, they can make a partial withdrawal after seven years. Using the scheme, investors save tax up to Rs 1.5 lakh annually under section 80C of the Income Tax Act, 1961. Furthermore, the returns and the interest earned are also not taxed for a PPF investment. 

2.    National Savings Certificate

The National Savings Certificate is a post office scheme for tax exemption that requires investors to pay the whole investment amount at once. They receive a lump sum corpus at the end of the maturity period that includes the principal amount and the interest payments. 

The latest issue of NSCs allows an investor to choose from two products having five years and ten years as maturity periods. Investments up to Rs 1 lakh are deductible under section 80C of the Income Tax Act, 1961. However, the semi-annual interest is taxable under the same. If the interest earned is reinvested for the first four years, it is tax deductible under the same section. The minimum investment amount in the scheme is Rs 1,000 and in further denominations of Rs 100. 

3.    Sukanya Samriddhi Account

A legal guardian of a girl child can open a Sukanya Samriddhi account under the Sukanya Samriddhi Yojana that the Indian government started to cater to the financial needs of girl child for higher education and marriage. Under the post office tax saving scheme, a legal guardian can create an account and invest a minimum annual amount of Rs 50 and a maximum annual amount of Rs 1.5 lakh. 

The account has a maturity of 21 years, irrespective of the girl child’s age at the time of opening of the account. However, the legal guardian can only open the account for a girl child who is below the age of 10. The current interest rate for the Sukanya Samriddhi Account is 7.6%, and the invested amount is tax-exempted under section 80C of the Income Tax Act, 1961. 

4.    Senior Citizens Savings Scheme (SCSS)

The Senior Citizens Savings Scheme (SCSS) is a flagship post office tax savings scheme targeted towards senior citizens. Individuals over 60 years old are eligible to invest in the SCSS. However, individuals over 55 and under 60 are also eligible to invest if they have retired or taken VRS. The maturity period for the scheme is 5 years, and individuals can open the account separately or jointly with their spouse. 

Although investors can open multiple SCSS accounts, the joint investment amount is capped at Rs 15 lakh. If the investors close the account before 1 year, the post office pays no interest on the invested account. After the maturity, the investors can extend the tenure for three years, and the invested amount qualifies for tax deduction under section 80C. However, investors have to pay TDS if the total interest payment exceeds Rs 40,000. The current interest rate for the scheme is 7.40% annually. 

5.    Post Office Time Deposit

The Post Office Time Deposit account is a post office tax savings scheme that is targeted towards tax savings in the post office. Under the scheme, an individual can open an account which mirrors the process of a fixed deposit. The tenure for deposits in such a scheme is 1, 2, 3 and 5 years, with different interest rates for various tenures. The minimum annual investment amount for the scheme is Rs 1,000, and there is no maximum upper limit. 

However, there is a lock-in period of 6 months, and investors can only en-cash their TDs after the completion of the lock-in period. Investors can make premature withdrawals between 6 and 12 months with the applicable interest rates. The investment amount under the scheme is tax-deductible under section 80C of the Income Tax Act, 1961, up to Rs 1.5 lakh. Furthermore, the interest earned is tax-exempted if the account has a tenure of 5 years. Otherwise, the interest is fully taxable. 

6.    Post Office Monthly Income Scheme

This scheme is one of the post office schemes for tax exemption that works as a savings account to provide interest on the credited account. Investors can invest a minimum of Rs 1,000 in the account, with the maximum capacity capped at Rs 4.5 lakh for an individual account and Rs 9 lakh for a joint account. 

The post office provides an interest of 6.9% on the credited account which allows for steady monthly income through this post office tax savings scheme. Investors can make a premature withdrawal only after one year, and any withdrawal before that can attract penalties. The amount invested in the Post Office Monthly Income Scheme is eligible for tax deduction under section 80C of the Income Tax Act, 1961. 

One of the best benefits of this tax saving in post office scheme is the credit of the interest which the investors receive monthly rather than at the end of the term like other savings schemes. 

A Comparative Study of Post Office Schemes for Tax Exemption

If you want to invest your savings to earn steady and regular returns while increasing your corpus through various tax exemptions, it is important to deeply analyse the returns post office tax savings schemes can provide. Here is a comparative study of post office schemes for tax exemptions: 

Post Office Tax Savings Schemes


Tax Benefits



Public Provident Fund

15 years

Principal: Yes

Interest: Yes

Maturity: Yes


National Savings Certificate

5 years

Principal: Yes

Interest: Yes

Maturity: No


Sukanya Samriddhi Account

21 years

Principal: Yes

Interest: Yes

Maturity: Yes


Senior Citizens Savings Scheme

5 years

Principal: Yes

Interest: No

Maturity: No


Post Office Time Deposit:

5 years

Principal: Yes

Interest: No

Maturity: No


Post Office Monthly Income Scheme

5 years

Principal: Yes

Interest: Yes

Maturity: Yes



What are the Overall Advantages of these Schemes?

The post office schemes targeted towards tax exemption have numerous other benefits to provide regular returns to the investors. Here are the overall advantages of tax savings in post office schemes.

●    Safe Returns: The schemes offered by the post office are government-backed and safe to offer risk-free returns. 

    Easy process: The investment process in the post office schemes investment process is easy as post offices have branches all over the country. 

●    Regular Returns: Post office investment schemes offer steady and regular returns which are credited directly into the bank accounts of the investors. 

●    Minimum Deposit: Post office investment schemes have a minimum deposit requirement as low as Rs 50, allowing investors to start investing without having a large capital amount. 

How to Apply for Tax Saving Schemes in the Post office?

Indian post offices have designed a hybrid process to apply for all the tax savings schemes of the post office. You can visit the official website of the post office and download the relevant application form of the scheme you want to apply to and fill out all the necessary information needed along with submitting the documents. Furthermore, you can also apply to the post office schemes by visiting the nearest post office branch, physically filling the application form and attaching the relevant documents. 

Who Should Apply For The Post Office Tax Saving Schemes?

The Indian post office has established itself as an ideal institution to offer investment and tax benefits to investors. Individuals with enough savings or regularly earn through a salary or a business can consider investing in these schemes. 

The post office investment schemes are the safest investment schemes and offer assured returns on a regular basis through interest payments. If you are looking for steady earnings and effective tax benefits and want to mitigate the risk of market fluctuations on your investments, you can consider investing in the above post office investment schemes. 

Documentation and Procedures

The procedure for investing in the above post office investment schemes requires visiting the post office or downloading the application form from the post office’s website. After filling out the necessary information, you will be required to submit the below documents. 

●    Account Opening Form 
●    PAN Card of the applicant 
●    Aadhar Card of the applicant 
●    If an Aadhar Card is not available, then any other document such as a Driving License, Passport, Voter ID, Job Card issued by MNREGA etc. 
●    Letter issued by National Population Register 
●    Proof of date or Birth Certification, in case of a minor

Steps to Open a Recurring Deposit or Term Deposit Account Through Mobile

Here are the steps to open an RD or TD through mobile online: 

●    Download the India Post Mobile Banking App from the app store and create an account. 
●    Login to your account and open a POFD account by selecting the “Requests” Tab on the home screen. 
●    Enter all the relevant details, such as deposit amount, scheme tenure, nominee name, bank account etc. and click on submit. 

Steps to Open Any Other Post Office Savings Scheme

Apart from RD and TD, no other post office account can be opened online. Here are the steps.

●    Visit the official website of the post office. Download and print the relevant application form. 
●    Fill out the application form and attach the relevant documents. 
●    Visit the home branch of the post office situated in your city and submit the application form. 

Bottom Line

Post office tax savings schemes are one of the best investment schemes one can apply to earn steady returns and increase the saved amount through tax exemptions. However, it would be best if you chose a mix of schemes that are best suited to your financial situation. 


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Frequently Asked Questions

Yes, you can visit the website of the post office to apply for the schemes. 

No, as these schemes are not market-linked, they have no such risk. 

Yes, you can open multiple accounts for different schemes as long as you are eligible.