Post Office Money Double Plan: How It Compares with Other Saving Schemes

In the realm of financial planning and wealth generation, Indian investors are perpetually on the lookout for robust investment opportunities that assure security while promising considerable returns. Amongst various schemes, the Money Double Plan in post office proudly stands as a prime contender. This article aims to dissect the intricacies of this plan, juxtaposing it with other prevalent saving schemes.

 Understanding the Money Double Plan in Post Office

The allure of doubling your money draws many to the Money Double Plan. Essentially, this plan is a recurring term deposit, which doubles the principal amount over a set period. Predominantly offered under the Kisan Vikas Patra (KVP) scheme, this plan operates with a specific maturity period at which the initial investment doubles. As of 2023, the KVP scheme promises a return that doubles the investment in approximately 124 months at an interest rate of 7.5%.

 Example Calculation:

Let’s illustrate the double plan with a typical investment. Suppose an investor commits INR 50,000 to the Money Double Plan.

– Principal Amount: INR 50,000

– Interest Rate: 7.5% compounded annually

– Time Taken to Double: Approximately 10 years and 4 months (124 months)

 Comparing with Other Saving Schemes

To fully appreciate the Money Double Plan’s value, it is imperative to measure its benefits and shortcomings against other savings options.

1. Public Provident Fund (PPF):

– Interest Rate: Approximately 7.1% compounded annually.

– Duration: 15 years, extendable in blocks of 5 years.

– Tax Benefits: Offers tax exemption under Section 80C of the Income Tax Act.

– Risk: Offers a safe investment with government backing.

Comparison: While both the Post Office Money Double Plan and PPF provide government-backed security, the PPF’s tax exemption feature significantly enhances net returns for taxpayers, although capital doubles in a longer frame than KVP.

2. Fixed Deposits (FDs):

– Interest Rate: Between 5.5% to 7% depending on the bank and term.

– Tax Benefits: Tax-saving FDs allow deductions under Section 80C but have lower interest rates.

– Liquidity: Offers more liquidity with varied tenure options.

Comparison: FDs provide greater flexibility in terms of liquidity and tenure but generally yield lower interest rates than the Post Office Money Double Plan, delaying the doubling time significantly.

3. National Savings Certificate (NSC):

– Interest Rate: Around 6.8% compounded annually.

– Duration: 5-year tenure.

– Tax Benefits: Qualifies for tax deduction under Section 80C.

Comparison: NSC tends to mature faster than the Money Double Plan but does not double the investment in its term. Meanwhile, its tax saving feature could offset some of the lower returns.

4. Mutual Funds (Equity and Debt):

– Risk-Return Ratio: High risk-equity funds may offer 12% or more, while debt funds offer safer 6-8%.

– Tax Efficiency: Long-term capital gains tax applied but only after INR 1 lakh.

Comparison: For those comfortable with market risks, mutual funds can significantly outperform the Money Double Plan in returns, albeit without guaranteed doubling in a fixed period.

5. Sukanya Samriddhi Yojana (SSY):

– Interest Rate: Approx 7.6%, compounding annually.

– Duration: 21 years from account opening, partial withdrawals permitted after maturity.

– Tax Benefits: Completely tax-free on investment, interest earned, and maturity amount.

Comparison: While SSY offers higher interest rates, its rigid withdrawal rules and specific eligibility criteria limit its accessibility compared to the Money Double Plan.

 Summary

The Post Office Money Double Plan through KVP serves as a trusted financial instrument for risk-averse individuals seeking assured returns with minimal risk. However, it lacks the tax incentives offered by plans like PPF, NSC, or SSY. It aligns suitably with investors searching for predictable growth without early liquidity needs or tax-saving priorities.

In summary, investors should weigh the Post Office Money Double Plan against alternative schemes based on factors such as interest rates, liquidity, tenure, risk, and tax benefits. While KVP offers the security and predictable growth many desire, a mixture of diverse financial instruments could potentially optimize returns and mitigate risks.

Disclaimer: All information provided here is for educational purposes. Potential investors must thoroughly examine the pros and cons of any investment in the context of their financial objectives and the economic environment of the Indian market before committing.