MUMBAI (CU)_Over the recent months interest rates on savings accounts in India have reached a historic low, with the country’s largest lender, the State Bank of India offering a rate of 2.7 per cent on its savings accounts. One the other hand, post office savings accounts offer an interest rate of 4 per cent for its customers.
However, the higher interest rates are not the only factor which make them more attractive than a bank savings account. The government has now decided that interest of up to ₹3,500 earned from an individual post office savings account in a financial year would be exempted from tax. In the case of a joint account, this benefit will be provided for interest earned that is below ₹7,000.
These unique savings accounts are offered by post offices across India, and are considered to be a lucrative deposit scheme for those residing in rural parts of the country. An account can be opened with a minimum deposit of ₹500. The interest is calculated based on the minimum balance on the 10th of the last day of every month. If the required minimum balance is not maintained a maintenance fee of ₹100 will be charged at the end of the financial year.
In India, retail investors often prefer small savings schemes such as the post office savings account since they generally offer higher interest rates in comparison to other instruments like bank deposits and savings accounts. The government review small savings instruments on a quarterly basis and for the quarter beginning July 2021, it has been decided that the interest rates for these schemes should remain unchanged.
