Incentivising Postal deposits

In India as interest rates went up from 6 to 7% to a healthy 9/10% most of the funds going into postal deposits dried up so much so that small savings did not find any takers. Then came the news that the 10% bonus on POMIS would be stopped.This meant that the small savings depositors deserted the last bastion of profits of the Indian Post and shifted to Bank deposits.

The govt has belatedly dangled some lollipops to bring back or woo the depositor.

Deposits qualify for Sec 80/c, in respect of investments with effect from April 1, 2007  ie Fy 2007/08 on

1. Senior Citizens Savings  Scheme or SCSS

2. Postal 5 yr time deposit

Secondly they have brought back 5% bonus on POMIS for investments made on or after December 8, 2007.

Now will this work and draw in fresh investments?

I still doubt it, as most banks still offer a 5yr tax deposit at 9 to 9.5% pa without the service snares and the delays that one is so accustomed to  while opening a postal deposit.

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2 thoughts on “Incentivising Postal deposits

  1. legally postal deposits do not have any advantage…
    but sir you forgot… that post offices are still not computerized.. so essentially in a single city you can find 30 post offices and deposit a large sum by way of large number of small accounts and escape the tax man….
    secondly the interest earned in PO is not taxable… the 9% which the banks offer in reality turn out to be only 6 % after TDS and declaring your taxes.

    btw i do have a ppf account… and if the rules do not change.. it will work out to be an excellent tax heaven.

  2. u hve misconceptions

    postal dept here in mumbai has started computerising
    they have a back office sort of system too

    secondly the interest earned in PO is not taxable

    its taxable not subject to tds

    me too my dad had opend it when i was a kid

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