Post office investment options and tax benefits
Public Provident Fund
Any individual (other than a non-resident) can make an investment of R500 to R1,00,000 in a financial year in a Public Provident fund (PPF). The rate of interest available is 8.8%. The entire investment is eligible for deduction under Section 80C of the Income Tax Act, 1961, subject to a limit of R1,00,000. Interest earned on this deposit is exempt from tax and the investment is not chargeable to wealth tax.
National Savings Certificates
National savings certificates are more like fixed deposits with the post office wherein you purchase a certificate that is generally redeemable in a specified time. These certificates provide a return of 8.6-8.9%. They are in denominations of R100, R500, R1,000, R5,000 and R10,000. Tax deduction is available up to R1,00,000 under Section 80C of the IT Act. The interest earned every year on NSC gets reinvested and forms part of the capital and also entails deduction under Section 80C, except the final year’s interest that does not get reinvested. It is not chargeable to wealth tax.
Post Office Savings Account
Any individual can open a savings account with the post office.