While banks definitely offer attractive interests on their various investment schemes, their reach is somewhat limited to urban areas only. Individuals living in the rural and remote parts of the country, thus, often miss out on earning the benefits of such schemes, with their money not getting the opportunity to multiply quickly. This is where the Postal Services come in handy, offering individuals from all corners of the country the opportunity to earn decent returns.
What is a Post Office Savings Account?
A post office savings account is like the savings account offered by the different nationalised and private banks. It is a type of deposit scheme, wherein you’re paid a set amount of interest on your investment. The interest rate is decided by the Reserve Bank of India (RBI), which has the right to alter it. The current rate of interest on a post office savings account is 4%. You can open one of these at any post office across the country.
How do you open a Post Office Savings Account?
Opening a post office savings account is really easy and convenient. The required steps are:
- Visit the nearest post office and grab an application form. You can even download it from the online portal. Ensure that you have collected the right form, as the application form is different for senior citizens and the normal crowd.
- Carefully fill in the required details, and submit the form along with the required documents.
- You need to deposit a certain sum into the account. The minimum amount is ₹20. However, if you choose to open a post office savings account without a cheque book, then you’ll have to deposit a minimum of ₹50.
- After the payment is processed, your post office savings account is officially open.
What is the eligibility for opening a Post Office Savings Account?
You must only meet a few basic requirements in order to open a post office savings account. They are:
- You must be an Indian resident above 10 years of age. In case you’re a minor, you can still open an account but you’ll need to bring forth your parent or guardian as the co-signer.
- In the case of minors, the account must be maintained and operated by the parent or guardian until the minor turns 18 years of age.
- Even if you already have an account, you are allowed to open another one at the same post office. One individual can hold up to one single and one joint post office savings account.
Documents required to open a Post Office Savings Account:
Be prepared with the following documents in case you want to open a post office savings account.
For the Proof of Identity, you can present:
- Aadhaar Card (UID)
- PAN Card
- Voter ID
- Ration Card with photograph
- Driving License
- Photo Identity Card issued by a recognized university/education board/college or school, identity card from central government, state government, or PSU.
For the Proof of Address, you can carry:
- Aadhaar Card (UID)
- Voter ID
- Ration Card
- Driving License
- Bank or post office passbook/statement with current address
- Electricity bill
- Telephone bill, although it cannot be more than three months old
- Salary slip from a reputed employer with current address on it
- One (two in the case of EDBO) recent passport size photograph is to be given. In case of a joint account, photographs of all the joint holders are to be submitted.
What are the Benefits of a Post Office Savings Account?
There are multiple benefits of opening a post office savings account. The biggest ones are:
- Minimal risk
When most people think about an investment scheme, its risk profile is the first thing that comes to their mind. The good thing about a post office savings account is that it is a scheme by the Government of India. Your money is, therefore, safe and there’s next to no risk involved.
- Offers tax benefits
The interest that you earn on your post office savings account is exempt from tax for a given financial year. That said, the amount shouldn’t exceed ₹10,000.
- Investment flexibility
You don’t need a bag full of money to open a post office savings account. The minimum amount required to open one of these is only ₹20. This is significantly lower compared to the requirements set by private banks.
- Works for all
The biggest benefit of a post office savings account is that anyone, from any part of the country, can open it without any problem. Post offices are located in the most distant locations, which gives the people living there a chance to earn valuable returns.
- Minor can open an account
Minors below the age of 10 also have the right to open a post office savings account. The minor’s parent or guardian will be signed up at the time of opening the account, and the account will have to be managed and operated by them until the minor turns 18.
- No lock-in and maturity period
A lot of government schemes, like Public Provident Fund (PPF) and National Savings Certificate (NSC), have a lock-in period of a few years. It can be a frustrating requirement as you can’t remove your own money, unless there’s a major emergency. A post office savings account doesn’t have this feature, and neither is there a maturity period. That means you can remove money from your account at any time of your liking.
- Convert it into a joint account any time
A normal post office savings account, with one holder, can be easily converted to a joint account at any time.
What is the interest offered by a post office savings account?
A post office savings account earns you annual interest on the money deposited in your account. The rate is decided by the RBI, and it currently stands at 4%. It has been fluctuating between 3-4% in the last few years. While the interest earned on an account is calculated on a monthly basis, it is paid out in full at the end of the financial year.
If the amount is under ₹10,000, you won’t have to pay any tax, according to the income tax regulations. In case it exceeds that amount, there will be a certain tax deduction.