Post office savings account interest up to Rs3,500 is tax exempted
If you have a post office savings account, interest earned on the same up to ₹3,500 in a financial year is tax exempt in case of an individual account. In case you have a joint account, the exemption goes up to ₹7,000.
A tax exemption along with higher interest rate makes it attractive than a bank savings account which is offering a very low interest rate. The interest rates on savings accounts are at historic low. The interest rate on the savings account of State Bank of India (SBI) is 2.7%. While you can earn an interest rate of 4% on a post office savings account. However, you can claim a deduction of up to ₹10,000 on the interest earned on a savings bank account.
A post office savings account can be opened with a minimum deposit of ₹500. The interest on the post office savings account is calculated on the minimum balance between the 10th of every month or last day of the month. In case account balance not raised to Rs. 500 at the end of financial year, Rs. 100 will be deducted as account maintenance fee and if account balance became nil the account shall stands automatically closed.
Small savings instruments are one of the most preferred instruments among retail investors as they generally offer interest rate higher than the other instruments such as bank deposits or savings accounts. The interest rates on small savings schemes including post office savings account are reviewed on a quarterly basis. For the July to September quarter the government has kept the interest rate on small saving schemes unchanged.
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