Post Office Savings: Are They Worth It?
Dalal Street Investment Journal|October 11, 2021
When it comes to making investments, most people are attracted by the flashiness of the equity markets and mutual funds. What India Post has to offer is usually ignored. The article takes a deeper look at the various postal savings schemes and compares the risk-adjusted returns to conclude if they are good enough for investors.

The prime objective of any investor is to get the best risk-adjusted return on his or her investment. In fact, all investors keep searching for such opportunities. Nevertheless, very few, and especially millennial investors, do not even consider or know that the Indian Post Office also offers various investment opportunities. Consider the fact that the best return provided by traditional post office saving schemes currently is 6.7 per cent through its five-year time deposit offer. Compare this with the fixed deposit rate of 5.3 per cent offered by India’s largest lender, the State Bank of India (SBI), for the same duration. Even the mutual fund category of similar duration i.e. medium to long-duration fund has generated annualized return of 6.05 per cent for the last five years.

This clearly shows that as of now the rate of return offered by instruments from the Indian Post Office is the best. The most beneficial part is that all the post office investment schemes are tax-exempted under Section 80 C i.e. tax exemption of up to ₹1,50,000 is allowed. In a post office saving scheme, your principal and interest are both secured. Your risk on investment is negligible and the returns are also good. These are government-guaranteed schemes and therefore offer the highest security.

Categories of Savings Schemes

Currently there are nine postal saving schemes available for investment by the general public in India, as described below:

Post Office Monthly Income Scheme: This scheme allows you to invest a maximum of ₹4.5 lakhs individually and ₹9 lakhs jointly. As an MIS plan, it allows investors to generate a steady monthly income. The minimum investment required to be made is ₹1,000. Currently, the interest rate offered is 6.6 per cent per annum, which is payable monthly. Interest is payable on the completion of a month from the date of opening and so on till maturity. And if the interest payable every month is not claimed by the account holder, such interest does not earn any additional interest. All such interest amounts received are taxable.

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