University Of Delhi

Commerce

Finance For Everyone

Unit-3 / Lesson-1

FINANCIAL SERVICES
FROM INDIA POST
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 INTRODUCTION
• The benefits of saving are a keenly discussed topic in our society.
• In India, there are several options available to a person who wants to
save some amount of money.
• Post office Savings Schemes are one such option .
• The Department of Posts (India Post) has a network of more than
1,50,000 Post Offices
• largest postal network in the world
• There are 9 different savings schemes offered by Post offices
• they offer several benefits in the form of high interest, tax planning etc.
• handling one’s own personal finance, it is important to know about Post
office Saving Schemes.
 HOW TO COMPARE SAVINGS SCHEMES?
Eligibility:
• Let us consider a situation wherein Vikas a government employee due to
retire in one year and his daughter Mala a fresh graduate who has just joined
her first job are both considering where to invest. Do you think the needs
and expectations of Vikas, and Mala would be the same? Obviously not
• Typically, someone who is about to retire will be more concerned about
preserving the corpus of money.
• It is this difference among needs and expectations of people that leads
savings schemes
• the first and fundamental question we need to ask is: am I eligible to invest
in a particular Savings Scheme?
• age and gender are two important factors that determine eligibility to invest
in Post Office Savings Schemes.
 Rate of interest:
❖Post Office Savings Schemes differ with each other on this criterion
❖Another important factor is the periodicity of interest
❖We know from basic arithmetic that compounding of interest/ amount
leads to greater growth in invested amount .Basically, compounding
means earning interest over interest.
Maturity:
❖ In schemes where a sum of money or a series of sums of money are
invested for a particular period, the investment is said to “mature” after a
particular period.
❖ an investment that has matured can be withdrawn.
❖ It is important to find out information related to the time taken till
maturity as it will help us in planning our expenditure and savings better.
 Tax treatment:
• Interest up to a certain amount is exempt from income tax.
• Investment in certain saving schemes can be used for deduction in taxable
income.
• This is also called rebate in income tax

Other factors:
• possibility of premature closure, minimum/maximum amount that can
be invested, additional facilities are other factors that can be used to
compare savings schemes including Post Office Savings Schemes.
TYPES OF POST OFFICE SAVINGS SCHEMES
Post Office Savings Account (SB):
• This account can be used to keep funds secure, withdraw cash, deposit
money and perform easy remittances.
• In simple words an account which can be used to save money and carry
out day to day transactions.
• This account can be opened with Rs 500/- by a single adult or two
adults or a guardian on behalf of minor (or a guardian on behalf of
person of unsound mind or a minor)
• Nomination is mandatory at the time of opening of account.
• Interest at the rate of 4% per annum.
• Interest is credited in account at the end of each Financial Year.
 5-Year Post Office Recurring Deposit Account (RD):
• Recurring” means happening regularly rather than once.
• RD schemes are intended to encourage individuals to save regularly.
• RD account can be opened with minimum Rs 100/- per month or any
amount in multiples of INR 10/-.
• These deposits earn interest as per applicable rate compounded on a
quarterly basis
• There is an option available for extension of RD account by further 5 years
• Recurring deposits are believed to be risk-free as they do not depend on
the market.( Interest rate currently is 5.8% compounded quarterly )
• The Post Office RD allows applicants to withdraw their funds from the
account with ease.
• Account-holders can withdraw up to 50% of their deposit balance a year
after the account has been opened.
 Post Office Time Deposit Account (TD):
• You deposit a certain sum of money for a certain period of time and at
the end of this period, you get the maturity amount.
• Interest on all TD accounts is payable annually but calculated quarterly
• Minimum amount for opening a TD account is Rs 1000/-
• You can keep a term deposit (TD) for one, two, three, or five years
• A minor who is older than ten years old can invest in the plan. Interest is
paid annually.
• Like RD account, there is a possibility of extension of TD account as well.
 Post Office Monthly Income Scheme Account (MIS):
• If you have a substantial sum of money you may want to invest it in a
manner that pays you a certain sum on regular (monthly) basis.
• MIS is intended to cater to such requirement
• MIS account can be opened with a sum of money in multiples of Rs.
1,000/- and the maximum investment limit is Rs 4.5 Lakh in single
account and Rs 9 Lakh in joint account.
• The rate of interest is 6.7% (7.1%current ) per annum payable monthly
• Interest is payable on completion of a month from the date of opening
• There is an option of premature withdrawal after 1 year from the date
of deposit .
 Senior Citizen Savings Scheme (SCSS):
▪ A Senior Citizens' Saving Scheme (SCSS) is a government-backed
retirement benefits Programme.
▪ Senior citizens resident in India can invest a lump sum in the scheme,
individually or jointly, and get access to regular income along with tax
benefits.
▪ Minimum deposit under the scheme is Rs. 1,000/- and more can be
deposited in multiples of 1,000 subject to maximum limit up to Rs. 15
lakhs.
▪ The maturity period of SCSS is five years.
▪ In case of SCSS, interest is payable on quarterly basis and applicable from
the date of deposit (MIS, interest is paid on monthly basis )
▪ the tenure can be extended by three more years after the maturity
period of five years is over.
 Public Provident Fund Account (PPF):
• A PPF account can be opened by an adult for self or on behalf of a
minor.
• It is a long-term (15 years) scheme that encourages regular savings.
• The interest payable is compounded yearly.
• The minimum deposit in a PPF account in one Financial Year is Rs. 500
and the maximum amount that in one Financial Year is Rs. 1.50 lakh.
• Deposit in PPF account is eligible for tax deduction under Section 80C of
Income Tax Act, 1961.
• The deposit can be made in a lump sum or in instalments
• Such interest is free from Income Tax.
• facility of withdrawal is also available.
 Sukanya Samriddhi Account (SSA):
• Sukanya Samriddhi Yojana is a saving scheme by Government of India, which
is aimed at the betterment of girl child in India.
• Help parents build a fund for the higher education and other expenses of their
girl child.
• SS account may be opened by the parent/ guardian in the name of girl child
below the age of 10 years
• SS account can be opened with minimum deposit Rs. 250. Minimum deposit
and maximum deposit that can be Rs. 1.50 lakh.
• Deposits can be made until 15 years are completed from the date of opening.
• deposits qualify for income tax deduction under Section 80C of Income Tax
Act, 1961. The current rate of interest on SS compounded yearly
• Withdrawal may be taken from account after girl child attains age of 18 or
passes 10th standard
• SS account matures after 21 years from the date of opening of the account.
 National Savings Certificates (NSC) (VIIIth Issue):
• it has no limit on the maximum investment possible.
• NSC 8th issue is a savings option with 5 years maturity and investment of a
lump sum at the beginning.
• The rate of interest is compounded annually but payable at maturity
• NSC can be opened by a single adult, by up to 3 adults in case of joint
account, a guardian on behalf of minor or on behalf of person of unsound
mind or a minor above 10 years in his own name.
• eligible for tax exemption under Section 80C of Income Tax
• now NSC is bought in a dematerialized (paperless) form.
 Kisan Vikas Patra (KVP):
• Kisan Vikas Patra is a certificate scheme from the Indian post office.
• It doubles a one-time investment in a period of approximately 10 years
(120 months).
• India Post introduced the Kisan Vikas Patra as a small saving certificate
scheme in 1988.
• Its primary objective is to encourage long-term financial discipline in
people.
• KVP can be opened by a single adult, by up to 3 adults in case of joint
account, a guardian on behalf of minor or on behalf of person of unsound
mind or a minor above 10 years in his own name.
• not eligible for tax exemption under Section 80C of Income Tax Act, 1961.
• now KVP is bought in a dematerialized (paperless) form.
MONEY TRANSFER SERVICES
Electronic Money Order (e-MO):
• Electronic Money Order is a web based rapid money transfer service
offered by India Post between two individuals within India
• A fast money remittance service which as the word “e” indicates is carried
out via internet. This service has been offered by India Post since 2008
• Physical Paper-based Money Orders are no longer accepted or processed.
• Parties involved in the chain of a Money Order.
Payee: The person who approaches Post Office FOR money TRANSFER
Post Office: Works as the agent of the Payee; and
Beneficiary: The person to whom the Payee wants to send the money
• Money Order enables delivery of physical cash at the house
• At the time of booking, a unique ID for every Money Order is generated
• Using this unique ID Money Order can be tracked.
• The amount must not exceed Rs 5,000/.
 Western Union Money Transfer
• This service is a result of a collaboration between India Post and Western
Union.
• This service enables receiving money from abroad.
• This service is available from around 195 countries on a real time basis.
INDIA POST PAYMENTS BANK
• Payments Banks are basically part-banks because they are focused on
acceptance of demand deposits and provision of payments and remittance
services.
• Payments Banks unlike usual Banks do not give loans.
• India Post Payments Bank (IPPB) was launched on 1st September 2018.