In turbulent times like these, safety of the investment is of utmost priority among people. For ages we have been hearing/seeing/using the post office for sending letters, documents etc. What the current generation does not know about the post office is the fact that, it has been an investment heaven for our fathers and their fathers. Ask somebody who is in their sixties, one of the top 3 choices for investment would be the Post Office.
Since the post office is owned by the Government of India whatever money we invest in it is totally 100% safe and secure. Whats more they give us competitive rate of interest on our investment as well.
Post Office Saving Facts:
Post Office Saving is the best form of savings schemes which provide substantially higher rates of interest and pose relatively lesser risks of suffering losses. Therefore, they are widely accepted among the different sections of the Indian society and among the different age groups.
The Indian postal sector has started numerous Post Office Saving schemes like:
* Post Office Time Deposits
* Deposit Scheme for Retiring Government Employees
* Post Office Monthly Income Scheme
* Post Office Recurring Deposits
* Deposit Scheme for Retiring Employees of Public Sector Companies
* National Savings Scheme
* National Savings Certificates
* Postal Life Insurance
* Public Provident Funds
* Kisan Vikas Patra
Let us look in detail about some of the best investment options using the Post Office.
Post office time deposits:
The post office time deposits scheme fall under the category of fixed deposits and are available at all the post offices throughout India. The investors are not entitled to receive any amount towards interests on a monthly basis but receive a lump sum amount as interest when the scheme matures. The interest rate in case of these schemes is directly proportional to the tenure of the scheme. The minimum amount required to start the post office time deposits scheme is only Rs. 200 but there is no set limit for the maximum amount. The scheme allows nomination facility and the tenure of the scheme ranges from 1-5 years. The rate of interest varies according to the tenure of deposit. For example, the interest rate for the post office time deposits scheme of 1 year is 6.25% per annum, 6.50% for 2 years per annum, 7.25% for 3 years per annum, and 7.50% for 5 years per annum.
Though banks today offer a much higher rate of interest on term deposits, post office being owned by the government of India safety is 100%
Post office monthly income scheme:
The monthly income scheme also falls under the category of fixed deposits and the tenure of this scheme is 6 years. The post office has made it a rule to accept only a single deposit in an account and the monthly income schemes are available in all the post offices in India. The minimum amount required to be submitted to start this scheme is Rs. 1,000, a maximum amount of Rs. 3 lakh in case the account is held by a single individual and Rs. 6 lakh in case it is a joint account. The rate of interest has been fixed at 8% per annum and the investors are entitled to receive monthly interest payments. The investors are also entitled to a bonus amount of 10% on the total loan amount which is paid when the scheme matures. The investors have the facility to get income tax relief in accordance with Section 80L of Income Tax.
Kisan Vikas Patra:
Kisan Vikas Patra certificates are secured by the backing of the central government of India which makes it the most effective post office saving. The best thing about Kisan Vikas Patra certificates is that the deposited amount doubles itself after the completion of stipulated period and the rate of interest offered by the post offices for these certificates remain same throughout the loan period. The tenure of Kisan Vikas Patra certificates is 8 years and 7 months. The face value of Kisan Vikas Patra certificates range from Rs. 100 to Rs. 50,000.
Post office recurring deposit:
The tenure of the post office recurring deposit accounts is 5 years which comprise of 60 equal monthly deposits of at least Rs.10 towards each installment. Default of at the most 4 payments are considered and forgiven by charging a minimal default fee. As the post office recurring deposit scheme matures, the investor of Rs. 10 denomination account is paid a sum of Rs. 728.90.
Public provident funds:
The public provident funds can be started with a sum of Rs. 500 and can extend to Rs. 70,000 and the account can be shifted from a post office to another post office or from a post office to a bank or from one bank to another. The interest change varies every year and is entitled to income tax rebates under Section 88 of Income Tax Act.
Showing posts with label Post office Time deposits. Show all posts
Showing posts with label Post office Time deposits. Show all posts
Saturday, 17 July 2010
Safe Investment Havens
At troubled times like these, safety of the investment is of prime concern to most investors across the country. When we check safety as a primary criterion, we may have to compromise on the return on investment (ROI)
Safe investments (Like the ones we are going to see in this article) would give you returns of around 8% per annum with a full 100% guarantee on the invested amount.
Even in such difficult times, I would suggest equities for investment because they would outpace the returns of all other asset classes always, considering the interests of the conservative investor is also important. This article is for the conservative investor for whom the motto “Safety First” is etched on stone and they would never compromise on that.
Let us have a look at some of these investment options and their strengths which would tempt us to choose them to park our funds.
1. Bank Fixed Deposits
2. Post Office Time Deposits
3. Kisan Vikas Patra
4. National Savings Certificate
5. Post Office – Monthly Income Scheme (POMIS)
6. Post Office – Recurring Deposits (PORD)
7. Public Provident Fund (PPF)
8. Senior Citizen Savings Scheme
Bank Fixed Deposits:
Bank FDs have been one of the most prominent saving instruments for the average Indian citizen. If you happen to ask a person who is of our father’s age (Assuming you are in your 20’s or 30’s) one of the first choices for saving money would be a Bank Fixed Deposit. These are very safe investments where the bank is bound to repay our money along with interest at maturity or even before maturity if you wish to close the account.
Positives:
1. 100% safe
2. Tenure ranging from one month to 5 years is available
3. Rate of Interest ranging from 5% to 9% (An extra 0.5% for senior citizens)
4. Tax benefits on investment upto Rs. 1 lac for 5 year tax saving deposits
5. No upper limit on investment
Negatives:
1. Interest earned on the deposit is fully taxable
2. Penalty charges may be levied if you wish to close your deposit prematurely (i.e., before the scheduled maturity date)
Post Office Time Deposits:
Post office time deposits are similar to Bank fixed deposits with one major difference. You open the deposit account in a post office instead of a bank.
Positives:
1. 100% safe
2. Tenure ranging from 1 to 5 years is available
3. No upper limit on investment
4. Rate of interest ranging from 6.25% to 7.5% (Compounded Quarterly)
Negatives:
1. Interest earned on the deposit is fully taxable
2. No Income Tax benefits
Kisan Vikas Patra
KVP is similar to the Post office Time Deposits. These are close ended deposit products launched by Indian Post office where our money would double in 8 years and 7 months. Assuming you invest 1 lac today in KVP, your money would be worth 2 lacs at the end of 8 years and 7 months.
Positives:
1. 100% safe
2. No upper limit on investment
3. Rate of interest 8.41% (Accumulated Interest is compounded yearly and paid on maturity along with our principal)
Negatives:
1. Interest earned on the deposit is fully taxable
2. No Income Tax benefits
National Savings Certificate:
NSC certificates are certificates of deposits issued by the government of India. Any Indian can deposit cash in NSC. This money would be used by the government for its cash needs.
Positives:
1. 100% safe
2. No upper limit on investment
3. Rate of interest 8% (Compounded half yearly)
4. Tax benefits. Investments upto Rs. 1 lac are exempt from income tax under sec 80C
5. Investment tenure is 6 years
Negatives:
1. Interest earned on the deposit is fully taxable
Post Office Monthly Income Scheme (POMIS)
The POMIS is a scheme launched by the Indian post office where an investor can invest a lumpsum amount on which the interest would be paid out monthly. This is used as a regular source of income for many senior citizens.
Positives:
1. 100% safe
2. Rate of interest is 8% and is paid monthly
3. Investment tenure is 6 years
Negatives:
1. Interest earned is fully taxable
2. Upper limit on investment is Rs. 4.5 lacs for individual accounts and Rs. 9 lacs for joint accounts
Post Office Recurring Deposit (PORD)
The PORD is a recurring deposit scheme that is launched by the Indian post office. In this scheme, an investor can deposit a small sum of money on a monthly basis and the amount would be paid on maturity as a lump sum along with interest.
Positives:
1. 100% safe
2. Rate of interest is 7.5% (Compounded Quarterly)
3. No upper limit on investment
4. Tenure is 5 years
Negatives:
1. Interest earned is fully taxable
Public Provident Fund (PPF)
PPF is similar to the normal Provident Fund with the only difference being, anyone can open a PPF account by visiting the nearest State Bank of India branch. PPF is also managed by the government of India. Once we open a PPF account we can deposit cash in our PPF account anytime.
Positives:
1. 100% safe
2. Rate of Interest is 8% (Compounded yearly)
3. Investment tenure is 15 years
4. Tax benefits under sec 80C for investments upto Rs. 70,000/-
5. Returns on investment are tax free
Negatives:
1. One can invest only Rs. 70,000/- per year
2. Must invest atleast Rs. 500/- every year to keep the account active.
Senior Citizens Saving Scheme
Senior Citizens savings scheme is a special deposit scheme meant for senior citizens (Individuals who are over 60 years of age) You can invest in this scheme through either post offices or through nationalized banks like SBI.
Positives:
1. 100% safe
2. Rate of Interest is 9% per annum (compounded quarterly)
3. Tax benefits on investments upto Rs. 1 lac under sec 80C
4. Investment tenure is 5 years
Negatives:
1. Upper limit on investment is Rs. 15 lacs
2. Interest earned on investment is fully taxable.
Recommendation:
As the options discussed above are all 100% safe they are a must have in ones investment portfolio. Based on your age, the share of these investments in your portfolio would vary. As a rule of the thumb, you must have a % of your investments equaling your age in these instruments. Assuming you are 30 years old, 30% of your investments should be in such options and the remaining 70% in other options like equities, real estate, gold etc.
Happy Investing!!!
Safe investments (Like the ones we are going to see in this article) would give you returns of around 8% per annum with a full 100% guarantee on the invested amount.
Even in such difficult times, I would suggest equities for investment because they would outpace the returns of all other asset classes always, considering the interests of the conservative investor is also important. This article is for the conservative investor for whom the motto “Safety First” is etched on stone and they would never compromise on that.
Let us have a look at some of these investment options and their strengths which would tempt us to choose them to park our funds.
1. Bank Fixed Deposits
2. Post Office Time Deposits
3. Kisan Vikas Patra
4. National Savings Certificate
5. Post Office – Monthly Income Scheme (POMIS)
6. Post Office – Recurring Deposits (PORD)
7. Public Provident Fund (PPF)
8. Senior Citizen Savings Scheme
Bank Fixed Deposits:
Bank FDs have been one of the most prominent saving instruments for the average Indian citizen. If you happen to ask a person who is of our father’s age (Assuming you are in your 20’s or 30’s) one of the first choices for saving money would be a Bank Fixed Deposit. These are very safe investments where the bank is bound to repay our money along with interest at maturity or even before maturity if you wish to close the account.
Positives:
1. 100% safe
2. Tenure ranging from one month to 5 years is available
3. Rate of Interest ranging from 5% to 9% (An extra 0.5% for senior citizens)
4. Tax benefits on investment upto Rs. 1 lac for 5 year tax saving deposits
5. No upper limit on investment
Negatives:
1. Interest earned on the deposit is fully taxable
2. Penalty charges may be levied if you wish to close your deposit prematurely (i.e., before the scheduled maturity date)
Post Office Time Deposits:
Post office time deposits are similar to Bank fixed deposits with one major difference. You open the deposit account in a post office instead of a bank.
Positives:
1. 100% safe
2. Tenure ranging from 1 to 5 years is available
3. No upper limit on investment
4. Rate of interest ranging from 6.25% to 7.5% (Compounded Quarterly)
Negatives:
1. Interest earned on the deposit is fully taxable
2. No Income Tax benefits
Kisan Vikas Patra
KVP is similar to the Post office Time Deposits. These are close ended deposit products launched by Indian Post office where our money would double in 8 years and 7 months. Assuming you invest 1 lac today in KVP, your money would be worth 2 lacs at the end of 8 years and 7 months.
Positives:
1. 100% safe
2. No upper limit on investment
3. Rate of interest 8.41% (Accumulated Interest is compounded yearly and paid on maturity along with our principal)
Negatives:
1. Interest earned on the deposit is fully taxable
2. No Income Tax benefits
National Savings Certificate:
NSC certificates are certificates of deposits issued by the government of India. Any Indian can deposit cash in NSC. This money would be used by the government for its cash needs.
Positives:
1. 100% safe
2. No upper limit on investment
3. Rate of interest 8% (Compounded half yearly)
4. Tax benefits. Investments upto Rs. 1 lac are exempt from income tax under sec 80C
5. Investment tenure is 6 years
Negatives:
1. Interest earned on the deposit is fully taxable
Post Office Monthly Income Scheme (POMIS)
The POMIS is a scheme launched by the Indian post office where an investor can invest a lumpsum amount on which the interest would be paid out monthly. This is used as a regular source of income for many senior citizens.
Positives:
1. 100% safe
2. Rate of interest is 8% and is paid monthly
3. Investment tenure is 6 years
Negatives:
1. Interest earned is fully taxable
2. Upper limit on investment is Rs. 4.5 lacs for individual accounts and Rs. 9 lacs for joint accounts
Post Office Recurring Deposit (PORD)
The PORD is a recurring deposit scheme that is launched by the Indian post office. In this scheme, an investor can deposit a small sum of money on a monthly basis and the amount would be paid on maturity as a lump sum along with interest.
Positives:
1. 100% safe
2. Rate of interest is 7.5% (Compounded Quarterly)
3. No upper limit on investment
4. Tenure is 5 years
Negatives:
1. Interest earned is fully taxable
Public Provident Fund (PPF)
PPF is similar to the normal Provident Fund with the only difference being, anyone can open a PPF account by visiting the nearest State Bank of India branch. PPF is also managed by the government of India. Once we open a PPF account we can deposit cash in our PPF account anytime.
Positives:
1. 100% safe
2. Rate of Interest is 8% (Compounded yearly)
3. Investment tenure is 15 years
4. Tax benefits under sec 80C for investments upto Rs. 70,000/-
5. Returns on investment are tax free
Negatives:
1. One can invest only Rs. 70,000/- per year
2. Must invest atleast Rs. 500/- every year to keep the account active.
Senior Citizens Saving Scheme
Senior Citizens savings scheme is a special deposit scheme meant for senior citizens (Individuals who are over 60 years of age) You can invest in this scheme through either post offices or through nationalized banks like SBI.
Positives:
1. 100% safe
2. Rate of Interest is 9% per annum (compounded quarterly)
3. Tax benefits on investments upto Rs. 1 lac under sec 80C
4. Investment tenure is 5 years
Negatives:
1. Upper limit on investment is Rs. 15 lacs
2. Interest earned on investment is fully taxable.
Recommendation:
As the options discussed above are all 100% safe they are a must have in ones investment portfolio. Based on your age, the share of these investments in your portfolio would vary. As a rule of the thumb, you must have a % of your investments equaling your age in these instruments. Assuming you are 30 years old, 30% of your investments should be in such options and the remaining 70% in other options like equities, real estate, gold etc.
Happy Investing!!!
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