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With the net asset value of mutual funds eroding by as much as 50 to 70 per cent, and lakhs of investors losing their shirt in the stock mar...

With the net asset value of mutual funds eroding by as much as 50 to 70 per cent, and lakhs of investors losing their shirt in the stock markets, investor confidence has been badly hit. It is in view of this that several investment schemes offered by the post office are interesting. The concluding part of an attempt to screen the various proposals:

6-year National Savings Certificate VIII issue: Minimum amount is Rs 100 and no ceiling. Interest is compounded every 6 months, but is paid on maturity. Rs 1,000 invested on or after March 1, 2002 becomes Rs 1,696 after 6 years. Tax rebate under Section 88 is allowed. Besides, the accrued interest qualifies under Section 88 on the one hand, while on the other the same is exempted under 80L within the overall Rs 9,000 limit. For those above 50 years, not interested in long-term investments this is recommended. The yearly accrual on interest on Rs 100 of NSCs bought after March 1, 2002 is Rs 9.2 in year 1, Rs 10.05 for year 2, Rs 10.97, Rs 11.98, Rs 13.09 and Rs 14.29 for each subsequent year. Given the tax rebate, the investment is even more attractive, but not recommended for those with taxable income over Rs 1 lakh from purely an investment avenue.

Public Provident Fund: Any individual or HUF or minor can open a PPF account with a minimum amount of Rs 100. Maximum deposit in a year is Rs 60,000, and the interest is compoundable on a yearly basis. Deposits after March 1, 2002 will get 9 per cent interest. Interest income is completely exempt under Section 10 of IT Act. Tax rebate under Section 88 also available. Loan can be availed from PPF Account after third year. PPF investments cannot be attached by courts. But lock in period is 15 years. But everyone should have a PPF Account, especially those with annual income over Rs 1 lakh. After 15 years, account can be extended for further blocks of 5 years each. Even NRIs can open this account.

National Savings Scheme A/c 1992: From March 1, 2002, the interest payable on this is 8.5 per cent8212;this is to be allowed for a calendar month on the lowest balance at credit of an account between the close of the 10th day and the end of the month and such interest shall be calculated and credited at the end of each year. Minimum deposit is Rs 100 and no maximum. Scheme has lost charm as a separate account is to be opened each year. Investment qualifies for Section 88 rebate. Deposit can be withdrawn after 4 years from the end of the year in which the account was opened. Interest is tax deductible under 80L.

Kisan Vikas Patra: Maturity period of the KVP after March 1, 2002 is now 7 years and 8 months. For every Rs 1,000 invested, you will get Rs 2,000 on maturity. Facility for premature withdrawal also permissible. No upper limit for investment in KVP. Interest given is at 8.5 percent per annum, and is paid only at the end of maturity period. Recommended only for taxpayers who have lower amount of taxable income. The biggest drawback of this investment is that it does not qualify either for tax rebate under Section 88 or for exemption for interest income under 80L. So, for rich tax payers and for all those who require monthly income from their investments, this is not recommended. Even trusts can invest in KVPs.

The author is a tax and finance consultant with a 30-year old practice in New Delhi and can be reached at slakhotiasatyam.net.in