Before investing in Post Office schemes, know these 8 important rules and charges; Due to one mistake, money will be stuck and fine will be imposed

Small Savings Schemes run by the Indian Postal Department (India Post)—such as PPF, Senior Citizen Savings Scheme (SCSS), Monthly Income Scheme (POMIS), Kisan Vikas Patra (KVP), National Savings Certificate (NSC) and Time Deposit (FD)—are the biggest symbol of security and assured returns for crores of investors across the country. But often investors deposit money only after seeing the attractive interest rates (6.7% to 8.2%) and do not pay attention to the stringent rules, penalty clauses and administrative conditions of the post office. The rules of the postal department are much stricter than conventional banks. If you are even slightly careless in premature withdrawal, minimum balance, KYC or tax rules, not only can your huge interest be deducted, but the money needed in an emergency can also get stuck for months due to account freezing. Before investing your hard-earned money in any post office scheme, make sure to understand these 8 most important rules and charges.

As per the revised guidelines of the Ministry of Finance and Department of Posts, it is legally mandatory to provide Aadhaar number and PAN card details while opening a new account in any post office savings scheme. If Aadhaar was not available at the time of account opening, the account holder has to submit the Aadhaar details to the post office within 6 months from the date of account opening. If Aadhaar and PAN are not submitted within the stipulated time frame, your account is ‘de-activated’ (frozen) with immediate effect. This simply means that:

• The quarterly or monthly interest received in the account will stop being credited to your bank account.

• You will neither be able to make any withdrawals from the account nor will new deposits be accepted.

• Your money will remain blocked until you visit the post office in person and complete the biometric authentication and PAN-Aadhaar linkage.

The rules for lock-in period and premature account closure in various post office schemes are very strict. Like bank FD, it is never easy to withdraw money without paying the usual 1% penalty here:

• Time Deposit (Post Office FD): FDs of 1, 2, 3 and 5 years cannot be closed under any circumstances within the first 6 months of account opening. If withdrawn between 6 to 12 months, only 4% interest is available on ordinary savings account. On closing FD of 1, 2 or 3 years after 1 year, a direct deduction of 2% is made from the fixed interest rate.

• Monthly Income Scheme (POMIS): Withdrawals are not allowed before 1 year. If the account is closed within 1 to 3 years, a penalty of 2% of the principal amount is deducted and if the account is closed between 3 to 5 years, a penalty of 1% of the principal amount is deducted.

• Senior Citizen Scheme (SCSS): If the account is closed before 1 year, no interest is given and the interest paid is recovered from the principal amount. On withdrawal between 1 to 2 years, 1.5% of the principal amount is deducted and after 2 years, 1% is refunded.

• KVP and NSC: Kisan Vikas Patra has a strict lock-in of 2 years 6 months (30 months), whereas in NSC, withdrawal before 5 years under normal circumstances is completely prohibited.

Interest payment on most post office schemes (like MIS, SCSS, TD) is directly credited to the Post Office Savings Account (POSB). The Postal Department has a clear rule for this savings account that it is mandatory to maintain a minimum balance of ₹ 500 in the account.

• If the account balance goes below ₹500 during a financial year, the Postal Department deducts an Account Maintenance Fee/Penalty of ₹50 at the end of the financial year.

• If the balance in the account becomes zero, the account is automatically closed permanently, due to which the interest payment of other schemes linked to it also gets stuck.

In the 5-year RD of the post office, it is necessary to deposit the fixed installment by a fixed date of every month (15th or end of the month). If you forget to deposit your installment on time in any month:

• A default charge (penalty) of ₹1 per month is charged for every ₹100 installment.

• If installment is not deposited for 4 consecutive months, the RD account is declared ‘default’. There is a time period of 2 months to restore the default account; If the outstanding installments and penalty are still not paid, no further deposits are accepted in the account and one has to suffer huge loss in interest on maturity.

Many investors are under the misconception that no tax is deducted on money deposited in the post office. The truth is that all the interest income of the post office (except PPF and Sukanya Samriddhi) is subject to income tax:

• TDS Deduction: In schemes like Time Deposit, MIS and SCSS, if the annual interest for a general citizen below 60 years of age exceeds ₹40,000 (and ₹50,000 for senior citizens), the post office directly deducts TDS at the rate of 10%.

• If you have not linked PAN card, the TDS rate will be straight instead of 10%. 20% Is cut.

• If your total annual income is less than the taxable limit, submit it to the post office in the month of April of every financial year to avoid deduction of TDS. Form 15G (ordinary citizen) or Form 15H (Senior Citizens) It is very important to deposit on time.

As per Post Office Savings Rules 2019, it is mandatory to enter at least one and maximum four nominees (heirs) while opening any account. If the nomination is not updated in old accounts, then after the sudden demise of the account holder, the family members have to make rounds of the courts to withdraw the deposited capital. To withdraw more than ₹ 5 lakh in accounts without nomination, one has to submit Succession Certificate or legal heir affidavit, which takes months of time and huge legal expenses.

Many popular post office schemes have strict upper limits for individual investments:

• SCSS: Maximum ₹30 lakh per person.

• POMIS: Maximum ₹9 lakh in single account and maximum ₹15 lakh in joint account.

• PPF: Maximum ₹1.5 lakh per financial year.

• Mahila Samman Savings Card: Maximum ₹2 lakh. If an investor deposits an amount in excess of these limits by mistake or by opening accounts in different post offices, then as per the post office rules, the amount deposited in excess of the limit will be charged Rs. 0% interest Get it. The excess amount is returned without any interest, thereby losing the investor’s entire potential return on that capital.

If there is no transaction (deposit or withdrawal) in your post office savings account for 3 consecutive financial years, the account is declared ‘silent’ i.e. inoperative. Once the account is deactivated, the ATM card, check book and internet banking services linked to it are immediately stopped. To reopen this account, the account holder has to be physically present at the main post office with fresh KYC documents (Aadhaar, PAN, photo) and written application.