India Post offers a number of small savings schemes for various investor types and across tenures. Notably, returns on these investments are backed by the government.
The schemes on offer include the Senior Citizens Saving Scheme (SCSS), Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), Monthly Income Scheme (MIS) and Kisan Vikas Patra (KVP), among others. Today, we discuss lock-in periods and exit rules for each, the penalties that may apply and expected loss of return.
Your choice of small savings schemes differs based on individual needs and tax requirements. Notable options include PPF with 7.1% interest, SSY at 8.2%, and KVP at 7.5%, each with tax benefits, lock-in periods, and unique characteristics. Here's a quick look:
The Senior Citizens Savings Scheme (SCSS) is available to residents of India who are 60 years or older on the date of opening. Further, retired individuals between 55 and 59 years of age are allowed to open an SCSS account on furnishing proof of retirement benefits and a certificate from the employer indicating superannuation and such details.
Notably, retired defence services personnel (including civilian employees) and the spouse of a central or state government employee are eligible from 50 years of age, subject to specified conditions.
Rules for premature withdrawal: SCSS has a lock-in period of 5 years, but account holders are allowed extension in block of three years, indefinitely. Here, an account holder may withdraw the deposit and close the account at any time subject to the following conditions:
The Public Provident Fund (PPF) is available to individuals who are residents of India, where an account can be opened for a minor by a parent or guardian. All minor accounts must be converted once the holder reaches 18 years of age through submission of fresh KYC documentation.
You can open an account either offline or online (you must have a post office bank account for e-banking facility). Notably, each individual can only open one account with no provision for joint account under this scheme.
Premature withdrawal rules: While PPF has lock-in period of 15 years, an account holder can withdraw up to 50% of the eligible balance after five years from date of opening.
Further, after the 15-year tenure has been completed, an account holder can apply for closure or retain the account without making more deposits. The balance will continue to earn interest at applicable rate. In case of such extension, the account holder is allowed one annual withdrawal of any amount.
Extension of PPF account is also available for block period of five years, with deposits and interest at applicable rate.
Premature closure is allowed after five years from the date of opening in case of:
In such cases, the interest in the account shall be allowed at a rate lower by 1% of the applicable rate.
The Sukanya Samriddhi Yojana (SSY) is available to individuals who are residents of India, for a maximum of two girl children per family, who are below 10 years of age, at time of opening the account. Multiple accounts are only allowed in case of the birth of twins / triplets only if these are the first and second children and on furnishing of affidavit and birth certificate. The account(s) must be converted once the holder reaches 18 years of age through submission of fresh KYC documentation.
Rules for withdrawal require account holders to submit form 3, for withdrawal of up to 50% of the available balance for the purpose of education after the holder has turned 18 or passed the 10th standard, whichever is earlier.