There is no dearth of long-term savings schemes in India; some of which even offer guaranteed tax benefits. It is worth mentioning that most post office savings schemes come along with guaranteed tax benefits to investors, providing guaranteed returns in exchange for a nominal amount of investment on a monthly or yearly basis.
Some of the post office savings schemes that come along with guaranteed tax benefits are Senior Citizen Savings Scheme, Public Provident Fund Scheme, National Savings Certificate NSC), certain time-bound post office deposit schemes and Sukanya Samriddhi accounts. All these schemes not only generate steady interest income but also offer more security than other types of investment schemes:
Public Provident Fund (PPF): This is one of the most popular long-term savings schemes which can open in banks and post offices. With a tenure of 15-years, this post office savings scheme has an interest rate of 7.6 per cent currently. Since it falls under the Exempt-Exempt-Exempt category, the contribution towards monthly/annual PPF, interest income and amount after maturity is exempt from taxes. Worth mentioning that contributions up to Rs 1.5 lakh per year qualify for tax deduction under Section 80C, thus reducing your overall tax liability. Under the scheme, you can start making withdrawals from the seventh year. It may be noted that the minimum amount that can be deposited in a PPF account is Rs 500 while the maximum is Rs 1.5 lakh on a yearly basis.
National Savings Certificates (NSC): Another small-scale post office savings scheme which has a maturity period of five years. As of now, the interest rate on deposits for NSC is at 7.6 per cent and is compounded on an annual basis. Unlike PPF, there is no upper limit for investments in the NSC while the minimum account balance required is Rs 100.
It, however, is eligible for tax deduction under Section 80C, provided it is under the Rs 1.5 lakh threshold. However, you will only have to incur tax expenses in the final year as interest is not reinvested for the particular year, thus it cannot be claimed as a deduction from taxable income under Section 80C.
Senior Citizen Savings Scheme (SCSS): This is another popular post office savings scheme for people above the age of 60 years on more. Other than that, individuals who have taken a voluntary retirement (VR) at the age of 55 or more are also eligible for opening this account. Like the NSC, the SCSS also has a tenure of five years and can be extended for three years.
It currently offers an attractive interest rate of 8.3 per cent, and an individual cannot deposit more than Rs 15 lakh under the scheme. This, too, is eligible for tax deduction up to Rs 1.5 lakh in line with Section 80C rules. However, starting this year Section 80TTB of the I-T Act will allow a deduction of up to Rs 50,000. In this scheme, senior citizens will be eligible for payouts at the end of each quarter.
Sukanya Samriddhi Yojana Scheme (SSYS): This is another savings scheme for girl children, where Rs 1.5 lakh can be deposited in the account every year. The interest offered in SSYS for the July-September quarter has been set at 8.3 per cent. Like all other aforementioned schemes, this is also eligible for tax deductions under Section 80C.
This means that all your maturity income will be exempted from income tax. It should be noted that the SSCY works on a quarterly basis, like PPF, and its interest rate is revised on a quarterly basis. Apart from post office, you can also open the account at some designated banks.
An annual deposit of up to Rs. 1.5 lakh in the popular girl child savings scheme Sukanya Samriddhi Yojana qualifies for tax deduction under Section 80C. The maturity proceeds are fully exempted from income tax. The maximum amount that can be deposited in a year is Rs. 1.5 lakh. The interest rate for the Sukanya Samriddhi Yojana is revised every quarter, like the PPF. For the July-September quarter, the rate has been set at 8.1%. Apart from post offices, Sukanya Samriddhi accounts can be opened in designated banks.
Post Office Time Deposit Scheme: This is another five-year post office savings scheme and is similar to 5-year bank deposits. While this post office deposit schemes have a lock-in period of five years, it can also be extended. Worth mentioning that the amount that will be deposited in these accounts will be qualified offer tax deductions to the tune of Rs 1.5 lakh per financial year. However, there is no tax benefit under Section 80CC on deposits if the tenure is less than five years.