Investors love to earn higher returns on their investments but without taking too much risk. Typically, high-risk investment options give you higher returns but the Post Office Savings Schemes give you several options where you can earn similar or even higher returns than fixed deposits (FDs) without any risk. Retired people and those who avoid market impact on their investments find the post office schemes the best option to park their money.
Post Office Savings Schemes provide a safe haven for those looking to preserve capital while earning decent returns. However, before investing, you must understand everything about these investment plans.
Interest Rates and Returns
Post Office Savings Schemes often offer competitive interest rates. For instance, schemes like the Senior Citizens Savings Scheme (SCSS) and National Savings Certificates (NSC) provide slightly higher returns than FDs. However, these rates are periodically revised by the government, typically every quarter, so investors must stay updated on any changes that could affect their earnings.
These days FDs by most bigger banks offer an average interest rates between 7% and 7.5% whereas post office schemes backed by the government and retirement plans give you higher returns (more than 8%). Therefore, you must compare your investment horizon and see what fits your goals before you park your money.
Also Read: SIP Calculator: Turn your SIP investments into Rs 1 cr with this simple strategy
Tenure and Lock-in Period
Each scheme comes with a different tenure and lock-in period. For example, the Public Provident Fund (PPF) has a 15-year maturity with a partial withdrawal facility, while NSC offers a 5-year lock-in period. Understanding these durations is crucial to aligning investments with financial goals. In FDs, you get flexibility with regard to tenures but returns in very short terms may not be very attractive and cater to only smaller financial goals.
Tax Benefits
Many Post Office schemes qualify for tax exemptions under Section 80C of the Income Tax Act, such as PPF and NSC. However, the interest earned may still be taxable. For instance, the interest on SCSS is fully taxable, so investors need to consider their tax liabilities when planning their investments. For tax benefits in FDs, you will have to invest in tax-saving FDs with a lock-in period of at least 5 years and early withdrawal may also attract penalties.
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