ASSIGNMENT OF SECURITY

ANALYSIS & PORTFOLIO

MANAGEMENT ON POST
OFFICE DEPOSITS

SUBMITTED TO: SUBMITTED BY:

PROF. HARPREET KAUR SHUBHAM SINGH
M.B.A II SEM 4th
ROLL NO. 21
 POST OFFICE INVESTMENT: SAVING SCHEMES
Post Office Investments include a number of saving schemes that provide high rate of interest as well
as tax benefits and most importantly, carry the sovereign guarantee of Indian Government. All these
schemes are tax exempt under Section 80c, i.e. tax exemption up to Rs. 1,50,000 is allowed. Some
schemes like Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), National Savings
Certificate (NSC), Post Office Time Deposit for a 5 Year Term and Senior Citizen Savings Scheme
(SCSS).

Interest rates are reviewed every quarter by the Government for these schemes. Investing in Post
Office Time Deposit, Post Office Recurring Deposit, Post Office Monthly Income Scheme, National
Savings Certificate (NSC) and Kisan Vikas Patra (KVP) in a given quarter will lock-in the rate in
that quarter for the entire tenure of the savings scheme. However for Public Provident Fund (PPF)
and Sukanya Samriddhi Yojana, the revised rate will be applicable in the concerned quarter and so
on. In other words, the applicable rate keeps changing.

Post Office Saving Scheme for Senior Citizen – Senior Citizen Saving Scheme

Post Office Saving Scheme for Girl Child – Sukanya Samriddhi Yojna

Post Office Savings Account

This account is like a savings account with a bank, except that it is held with a post office.

Only one account can be opened with one post office and can be transferred from one post office to
another.

You can also open an account in the name of a minor. The interest rate is 4% and is fully taxable.
However no TDS is deducted on the same.

Under the non-cheque facility, minimum balance which is required to be maintained is Rs.50/-

However a deduction of Rs 10,000 per annum is available on your total savings account interest
including post office savings interest under Section 80TTA of the Income Tax Act, 1961.

Post Office Monthly Income Scheme (POMIS)

Unique scheme which offers guaranteed fixed monthly income on the lump sum investment made by
the investor.

Any resident individual can open the MIS account in single or joint holding pattern. A minor can
also invest in this scheme. If minor is of more than 10 years, then he can even operate the account.

Minimum limit for investment is Rs.1500 and maximum investment limit is Rs.4.5 lakhs in single
holding account and Rs.9 lakhs for joint accounts.

This scheme currently offers a rate of interest of 7.6% per annum payable monthly with the maturity
period of 5 years. For example, Mr. Suresh invests Rs. 2 00,000 (or Rs 2 lakhs) in Post Office
Monthly Income Scheme. He will receive Rs.1300 every month as an interest for 5 years. He will
receive back the deposit on completion of the tenure. Amount so received monthly can also be
further invested in post office recurring deposits.

Investor can hold multiple accounts with maximum investment of Rs.4.5 lakhs by combining
balances in all the accounts. Joint accounts will have equal shares from all holders. If we continue
with the above example, Mr. Suresh would be able to open a joint account with his wife for a
maximum amount of Rs.2.5 lakh.

The scheme also offers liquidity by allowing investors to withdraw the deposit after 1 year.
However, there will be a penalty of 2% on deposit if withdrawn between 1 year-3 years and 1%
penalty on withdrawals after 3 years.

Accounts are transferable from one post office to another across the country.

There is no major tax benefit in this scheme. Interest received on monthly basis is a part of taxable
income. There is no TDS on the interest payout and deposits are exempt from wealth tax. This
Scheme is a preferable choice for risk-averse investors looking for regular monthly income.

Post Office Recurring Deposit

Post office RD is basically a monthly investment for a fixed period of 5 years with a interest rate of
7.2% per annum (compounded quarterly). On completion of the fixed tenure of five years, RD
account with Rs. 10,000 invested every month will fetch you Rs. 7,25,051.

After completion its tenure, account can still be continued for 5 more years on year to year basis.

Post Account RD helps a small investor by allowing them to invest as little as Rs.10 per month and
any amount in multiples of Rs.5. There is no upper limit for the investment.

Joint accounts can also be opened by two adult individuals. Account can also be opened in the name
of minor. Multiple accounts can also be opened.

RD can be transferred from one post office to another.

There is default fee of 5 paise for every 5 rupee in case if you miss on any monthly investment.

The account offers flexibility by allowing a partial withdrawal upto 50% of the balance after a year.

There is no TDS on interest from post office RD. However, income is taxable in the hands of
investor as per their individual tax slab. It’s one of the best investment choices for every investor
who is looking for risk-free investment avenue to save some amount every month systematically.

Post Office Time Deposit

Post office time deposit comes with different tenure options for investment. Current rate of interest
applicable is below:

The minimum amount that can be invested is Rs. 200. There is no upper limit. There is no restriction
on the number of accounts one can hold.
Accounts can be opened in single holding or joint holding pattern. An investment in the name of
minor is also allowed.

Accounts can be transferred from one post office branch to another across India.

Once the time deposit is matured, it will automatically renew for the same tenure again with the
prevailing rate of interest on the day of maturity.

There is a tax benefit for the investment made in the 5 year post office time deposit. The investment
qualifies for the deduction under Section 80C of The Income Tax Act, 1961.

Kisan Vikas Patra

KVP offers an interest rate of 7.6% compounded annually. It can be purchased from any post office.
The invested amount doubles every 112 months (9 years and 4 months).

Investment is available in denominations of Rs.1,000, Rs. 5,000, Rs.10,000 and Rs. 50,000.
Investment comes with the minimum limit of Rs.1,000 and with no maximum limit.

Certificates are easily transferable and can be endorsed to third person.

Certificate is comparatively liquid in nature as it offers encashment facility after 2.5 years of
investment.

There is no tax deduction on the principal amount invested and interest on the KVP is also taxable.
The scheme is thus not tax-efficient. It works for new and small investors from remote areas who do
not have access to other financial products.

Senior Citizen’s Savings Scheme

The minimum age of entry is 60 years for SCSS. Someone who has taken voluntary retirement after
55 years of age can also open this account within a month of receiving the retirement benefits. The
amount invested in such cases should not exceed the value of corpus received on retirement.

Maximum limit of investment allowed per individual (combined balances in all account) is Rs. 15
lakhs. The investment amount can be in multiples of Rs.1000.

An individual can hold multiple accounts in his name or in joint holding with his spouse.

Current rate of interest offered is 8.6% per annum payable on 1st working day of each quarter. The
deposit has a maturity period of 5 years. For an instance, if you invest Rs. 12 lakh in this scheme
today, you will be receiving quarterly interest of Rs.24,900.

The scheme also allows premature withdrawals of deposits after a year with a penalty of 1.5%.
Penalty of 1 % is levied after 2 years of deposit.

Account can be extended for three more years after the scheme matures.

Investments are eligible for tax deduction under Section 80C of The Income Tax Act. However, tax
will be deducted at source if the amount of interest exceeds Rs.10,000 in a year.
Public Provident Fund (PPF)

PPF is a long-term investment for a period of 15 years currently offered at an interest rate of 7.9%
per annum (compounded yearly).

There is no minimum or maximum age of account opening.

Investments are allowed with the minimum amount of Rs. 500 and maximum of Rs. 1.5 lakhs in a
financial year. Investments can be made in lump sum or in 12 equal installments.

Account can only be opened in a single holding form.

You can invest in the name of minor also without exceeding your maximum limit of investment by
combining balances of all your accounts.

Maturity period can also be extended to 5 more years on completing the period of 15 years. You can
keep extending maturity in blocks of five years, indefinitely.

PPF is a pure long term investment plan with premature closure facility allowed only after 5 years
from account opening and only for serious ailments or higher education. Partial withdrawal is also
permissible after the expiry of 5 years from the end of the year in which the account is opened.

Investor can avail loan facility from the 3rd financial year to the 6th year of account opening..

Investment in PPF account qualifies for tax deduction under Section 80C of The Income Tax Act. It
also offers a tax efficient return as its interest is fully tax-free. However you have to report PPF
interest in your income tax return.

It is a good scheme for investors who want to get the tax exemption along with safety of principal
and tax-

Post Office Investments include a number of saving schemes that provide high rate of interest as well
as tax benefits and most importantly, carry the sovereign guarantee of Indian Government. All these
schemes are tax exempt under Section 80c, i.e. tax exemption up to Rs. 1,50,000 is allowed. Some
schemes like Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), National Savings
Certificate (NSC), Post Office Time Deposit for a 5 Year Term and Senior Citizen Savings Scheme
(SCSS).

National Savings Certificate (NSC)

The NSC has a maturity period of 5 years. The NSC rate of interest is 7.9% per annum compounded
half-yearly but payable at maturity. That means, your investment of Rs. 100,000 will yield you Rs.
144,231 after 5 years.

There is no maximum limit on investment with a minimum amount of investment of Rs.100.

Investments can be done in denominations of Rs.100, Rs. 500, Rs. 1,000, Rs. 5,000 and Rs.10,000.

The NSC Certificate can be purchased in single holding or on behalf of a minor.

Investment in NSC is tax deductible under Section 80C of The Income Tax Act. Interest on NSC is
deemed to also be reinvested under Section 80 C and hence tax deductible, except interest in the final
year of the NSC.

NSC certificates can be pledged as security for availing bank loans.

Certificates are transferable. Transfer from one person to another person is allowed only once during
the investment tenure.

NSC is a risk-free and tax efficient saving scheme for long-term and traditional investors with no risk
appetite.

Sukanya Samriddhi Scheme

Sukanya Samriddhi is a scheme introduced for the benefit of the girl child. It currently offers an
attractive interest rate of 8.4% per annum compounded annually.

The minimum amount of investment is Rs.1000 and maximum of Rs.1,50,000 in a financial year.
You have to invest at least the minimum amount every year for 15 years from the date of account
opening. Thereafter the account will continue to earn interest till maturity.

Investment in the Sukanya Samridhhi Account is tax deductible under Section 80 C up to Rs 1.5 lakh
per annum. The interest on the Sukanya Samriddhi Account is also tax free and the maturity amount
is tax free.

Investment will mature after the completion of 21 years from the date of opening the account or upon
marriage of the girl child after attaining the age of 18. The account will also have to be closed if the
girl child becomes an NRI or loses her Indian citizenship.

Sukanya Samriddhi account can be opened only in the name of girl child by her parents or legal
guardians. Girl’s age should be 10 years or less on the date of opening the account.

Multiple accounts cannot be opened in the name of one girl child. A parent/guardian can open
maximum of two accounts in the name of two different girl children.

There will be a penalty of Rs.50 if minimum amount is not deposited in a financial year.

Premature closure can only be done by a girl child on attaining the age of majority that is 18 years
for the purpose of marriage or higher education.

Girl can also avail partial withdrawal facility (not more than 50% of the balance) after attaining the
age of 18 years.

Parents/guardian can avail a tax benefit for the invested amount under Section 80C of The Income
Tax Act. Maturity proceeds are paid to the girl child and are completely tax free in her hands.

This scheme has gained lot of popularity especially in rural India. It’s a good means to provide
financial security to the next generation of women in the country