Dear Comrades,
These are still turbulent times when it comes to the money market. Look beyond the stock market and mutual funds, you will notice that most ponzi schemes have taken a nosedive since investigations began and the government cracked down on chit funds.
Many people have lost their hard-earned money, having succumbed to the lure of abnormally high returns. Financial planners and advisers suggest that this is the time to look at some of the savings and other financial schemes being offered by post offices, more so if the safety of your funds is your top priority.
“Post office schemes come with sovereign guarantee. They are like AAA+ papers,” said Nilanjan Dey, a financial planner and director, Wishlist Capital Advisors. And mind you, that the Indian postal network has 154,822 post offices. Of these, 139,086 are in rural areas and 15,736 in urban regions. Therefore, accessibility is no problem at all. Significantly, the department of post has also applied to RBI for a licence to offer full-fledged banking services. The department has plans to start 50 bank branches in the first year and scale it up to a total of 150 branches in five years. Once that comes through, it will be like a financial powerhouse, offering various financial products, possibly more accessible than any other similar product.
Some of the attractive schemes being offered by post offices include the recurring deposit scheme, senior citizen’s savings scheme, public provident fund and national savings certificate (NSC). Besides, post offices also distribute LIC and mutual funds.
The recurring deposit schemes come with an 8.3 per cent interest for a period of five years. On maturity, the term can be extended up to five years. Besides, the account holder can appoint a nominee at the time of opening and also after opening an account. The account can be transferred from one post office to another and any number of accounts can be opened in any post office. In case the account holder deposits six instalments in advance, he is also entitled to a rebate. The investor is also given a flexible window of up to 15 days to deposit the sum.
The senior citizens’ savings scheme comes with an interest rate of 9.2 per cent, again for a period of five years. The beauty of it is that individuals taking superannuation or VRS can open an account, but the account should be opened within one month of the receipt of retirement benefits. The account can be opened in cash for amounts below Rs 1 lakh. For amounts above, it is to be opened by cheque. The depositor can operate more than one account in individual capacity or jointly with spouse (husband/wife).
Interest can be drawn through auto credit into savings account standing at the same post office, through PDCs or money order. In this case, the maximum amount per individual is Rs 15 lakh and it is eligible for deduction under Section 80C of the Income-tax Act. The PPF at post office has a tenure of 15 years and comes with an interest rate of 8.7 per cent. This investment also qualifies for 80C deduction and the interest earned is totally tax-free. One can also avail loans against this from the third year. But premature closure is not allowed in this case.
Post offices also offer NSCs specially designed for government employees, businessmen and other salaried classes who are income tax assesses, with an 8.5 per cent interest rate. There is no fixed limit of investment and no tax deduction at source. The certificates can also be used as collateral security to get loans from banks. Investment up to Re 1 lakh per annum qualifies for I-T rebate under 80C.
Dey said, “Administered rates offered by post office will have an edge till managed assets like MFs turn around. And a section of investors will always need post office schemes as they assure safety, no-default of interest or principal, although the rates may be low.”
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