Post Office Savings Schemes (RD, NSC, MIS, SCSS)-Premature closure rules

Since our father’s age we are fond of Post Office Savings Schemes. Whatever we say about equity or any newly launched alternative investments, but we have more faith in Post Office or Bank FDs. But when it comes to premature closure of these schemes, only few have idea about the rules. Let us learn those rules today.

India Post   Financial Services

Instead of going through product features, in this post I only concentrate on premature rules of each Post Office Savings Schemes.

1) 5 Yr Post Office Recurring Deposit

This is actually a five year product. Currently you are getting 8.4% compounding quarterly. But if you want to withdraw then you can do so only after 3 years. In case you try to liquidate it before maturity of 5 years the interest payable on such premature will be of Post Office Savings Account which is applicable from time to time.

But an extended account (Account which was extended after 5 years) can be closed at any time without any penalty.

One withdrawal of 50% of balance allowed only after one year completion.

2) National Savings Certificate-

Even though on Post Office site they claimed “If your certificate is issued on or after 1st November 2011 then no premature encashment will be possible.”, but when you check this link, it states that there is possibility of withdrawal only on special cases which are mentioned as below.

  • On death of holder or any holders in case of joint holding;
  • on forfeiture pledge by Gazetted Govt. Officer
  • When ordered by court of law.

In my view NSC is the only product which have less liquidity.

3) Post Office Monthly Income Scheme-

  • Before 3 years but after one year at the discount of 2% of the deposit.
  • After 3 years at the discount of 1% of deposit.

Here discount means deduction from the deposited amount.

4) Senior Citizen Savings Scheme-

  • After one year but before two years at discount of 1.5%.
  • After two years discount will be 1%.

Here discount means deduction from the deposited amount.

5) Post Office Time Deposits-

  • Withdrawal will be allowed only after 6 months.
  • If withdrawn after 6 months but before one year completion then simple interest applicable to post office savings account will be payable.
  • In case of deposit of 2,3 and 5 years of term deposit, if amount withdrawn after one year but before maturity then interest payable will be 1% lesser than the specified interest for the respective time deposits.

So there are the simple rules of premature withdrawal which you can use for liquidating any of your investments. Hope this information will be useful :)

Comments

  1. Arvind V SrivatsavArvind V Srivatsav says

    Dear Sir,

    I purchased an NSC worth 10k in Dec’06 (from Frazer Town, Bangalore Branch) which was up for maturity on Dec’12. During the course of time I have lost the original certificate. The procedure to get a duplicate and encash the same looks very lengthy and some of the documents demanded by the Post Office seems very challenging to get. Are there any agents whom I can approach to help me on this regard for a fee in Bangalore ?

    Regards,

    Arvind Vijayagopalan
    +91 9880462495

  2. Taufik ShaikhTaufik Shaikh says

    Dear Sir,
    I have taken National Saving Certificate worth Rs 4000/- for 5 years on March 19 2015, now I’m in urgent need of money, can I withdraw this amount.

  3. SHANKARSHANKAR says

    Sir, I had invested Rs. 4.5 Lakhs in POMIS in the joint name of myself and my mother in July 2010. My mother passed away in January 2015. Can I convert this joint Account to a Single Account. Will this have any effect on my maturity time or Maturity Value. Will I be eligible for bonus ? Please reply.

      • B SHANKARB SHANKAR says

        Sir, Thanks for your prompt reply. I have one more question sir. I have this POMIS in my town in Haryana. While opening this account, I was issued with ONLY a Pass Book. But one of my friends who opened a similar account in Delhi was issued with the Pass Book and a CERTIFICATE also. I was not issued with any certificate. Kindly help.

  4. RishikaRishika says

    I am holding PF account in Post Office. I want to transfer PF account to other bank PF account.
    Please let me know the procedure, if possible.

    • Basavaraj Tonagatti says

      Rishika-You have to fill the transfer form (SB10-b) and along with that a written application is required mentioning from where to where you want to transfer. Submit both the letters to Post Office, where you have account.

  5. MaheshMahesh says

    Dear Sir,
    There is confusion about AIR reporting of MF. One may invest some amount or switch from one scheme to another or reinvest dividend ditributed or do all of them. In switch it is not really fresh investment. Similarly div reinvestment is like growth schemes where amount is reinvested withour becoming one’s income. Could you please clarify what amount MFs consider while reporting. In many cases a person may cross Rs 200000 because of switch plus dividend reinvested.
    Thanks

  6. MaheshMahesh says

    Dear Mr Basavaraj,
    Thanks for helping people. I like your attending to all queries with clear replies. I have following query wrt to budget for 15-16:
    Will TDS be applicable on RD of banks and PO and aslo on all schemes of PO like MIS and NSC etc. If yes, what would be the interest beyond which it will be applicable. Will senior citizens be able to give form 15H in PO also.
    Please also let us know whether TDS will be applicable to any other investments where it was not applicable earlier and any other provision affecting senior citizens adversely.
    Thanks

  7. Vinod V MakhechaVinod V Makhecha says

    Dear Sir,

    I had taken NSC Six years ago & its Maturity date is 17.04 2015. But, i am in need of the amount very urgently as i have to go to abroad for job for around 2 years. I want to have the NSC’s pre-matured in this case so that i can use my funds for my further usage while going to abroad ?

    How can i get this amount before maturity which is just 2 months away from now.

    Vinod Makhecha, Ahmedabad.

  8. Suraj KamatSuraj Kamat says

    Hi Sir,

    I have a querry as the information I have collected so far is contradictory. I need to know in case of a premature closure of a National Savings Certificate say after one year, whether the deduction by Postal authorities will be from the Principal itself or only rate of interest will be reduced as happens in the banks? Are there separate rules when the premature withdrawal takes place after a short duration and when it happens after a longer duration. Kindly guide.

    Regards.

    Suraj Kamat

  9. AmandeepAmandeep says

    Sir,
    I have a few questions on schemes offered by post offices.

    1. How do schemes like NSC, PPF manage to provide somewhat higher 10-year interest rates than nationalized banks? I am assuming NSC and PPF will invest only in government-guaranteed sovereign debt instruments, unlike banks which can get money by lending to private borrowers as well and also have bigger customer base. Don’t government bonds mostly offer lower rates than non-government debt instruments?

    2. Is there any initiative by postal department to provide online services to its customers, just like banks do? While one still does find queues in nationalized banks, the situation is better than over a decade ago. The same is not the case with post offices. Would postal interest rates drop if such additional services are provided, because it would mean addition cost to postal department?

    3. Do the initiatives of the current central govt to increase privatization and globalization pose a threat to the safety of deposits in nationalized banks? During the financial crisis of 2008, it was reported that it was Indian banking sector’s limited exposure to private markets was a factor in saving Indian economy. If there is an increased threat due to increased exposure to private/foreign investments, then it would be better for senior citizens to shift from bank FDs to postal schemes. But poor customer service from postal service is a reason why many senior citizens who have bank accounts prefer bank deposits over post office deposits.

    • AmandeepAmandeep says

      Sir,
      Another question. Are post office deposits safer than deposits in nationalized banks? I am told that deposits in banks are insured only up Rs. 100000. Do post-office deposits have a sovereign guarantee from government and so do not have the risk associated with banks?

    • Basavaraj Tonagatti says

      Amandeep- 1) There is something called political gimmick that very much play with post office savings and EPF. Banks run on business module and these schemes on social and political gimmick.
      2) As of now not such facility. But let us hope for the best :) Service will not your interest but they need a mind to think about customer friendly.
      3) Not like that and no need to worry.

  10. GaganGagan says

    Hi

    Can we withdraw Post Office Time Deposits before 6 months in case of urgent need. And what is the tax deduction rate for 50k for a duration of 1 year

  11. deepakdeepak says

    Hi Basavaraj,

    Your website gives us very good explanation on various fincial plans and terms, I am planning to RD though SBI for < 2 year for 15K (@ 9% PA). Since the finacial budget is with in couple of days, Is it good time to open now. please suggest me

    Deepak

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