Post office Savings Deposit Schemes

These include savings bank account, time, and recurring deposit accounts. These accounts can be operated in the post offices throughout the country. Interest so earned is totally tax free under section 10 of the Income Tax Act.

Interest on the time deposit schemes qualifies for deduction under section 80L of Income Tax Act. Premature withdrawal of deposits is, however, allowed only after 6 months at a discount.

The Post office 5 year Recurring Deposit Account carriers a comparable compound interest rate (9.5%). The interest on recurring deposits is covered by Section 80L of the Income tax Act.

Investment in post office/bank accounts also qualifies for exemption under the Wealth Tax Act subject to the overall exemption.