Most saving schemes like Public Provident Funds (PPF), Monthly Income scheme (MIS), National Savings Certificate (NSC) at post offices are among the most popular investment schemes after bank fixed deposits. However, only few of them are eligible for tax benefits as such one has to be check before selecting the scheme for investing.
Amount invested in Public provident fund, popularly known as PPF, is completely exempt from tax as PPF qualifies for exemption under section 80C of the Income Tax Act. Not only this, the interest earned on the amount invested is also exempt from all taxes. This features makes it the most preferred choice in its class for investors as compared to other saving schemes.
The amount invested in NSC is eligible for deduction from taxable income under section 80C of Income tax act. Other schemes offered by post office like Monthly income plan, National Savings Certificate attracts tax on the interest earned. As such the the interest earned on the amount invested in these schemes needs to be aggregated with total income for tax calculations.
Presently, the 5 year National Savings certificate offers an interest rate of 8.5% compounded six monthly payable at maturity. As such amount invested of INR. 100/- grows to INR a151.62 after 5 years. However, 10 year NSC offers an interest rate of 8.80% compounded six monthly payable only at maturity. As such invested amount of INR 100/- grows to INR 236.60 after 10 years.