Post Office Savings Schemes are very popular among investors as these schemes are backed by the government. These schemes offer guaranteed returns and many tax-saving options.
However, not every POS scheme comes with tax benefits.
Here are some POS schemes that you should read about before investing, if you are looking for tax saving options.
Tax benefits are provided under Section 80C of the Income-tax Act, 1961. These are the POS schemes that don't come with section 80C benefit:
Kisan Vikas Patra (KVP)
Kisan Vikas Patra is not eligible for Section 80C deductions; returns are fully taxed. Annual interest is taxed under "income from other sources," but withdrawals after maturity aren't subject to TDS.
National Savings Recurring Deposit Account (RD)
This scheme offers a guaranteed return with a five-year lock-in period. Interest rates compounded quarterly. However, it doesn't come with Section 80C benefit.
Mahila Samman Savings Certificate
This scheme is specifically made for women, with interest subject to taxation; that means there will be no tax benefits unlike tax-saving fixed deposits. Interest income from Mahila Samman Savings Certificates is subject to taxation. TDS is subtracted depending on each person's tax bracket and total interest income.
National Savings Time Deposit Account (TD)
The time deposit account can be opened for one, two, three, or five years. You can extend the term of your account by formally applying to the post office. Benefits from income taxes are only offered for post office time deposits that last five years. For other deposits such as one, two, three there are no tax benefits.
Post office Monthly Income Scheme
This scheme allows investments up to Rs. 9 Lakhs. However, interest earned doesn't fall under Section 80C. TDS is applicable on interest earned beyond specified limits.