With many banks reducing interest rates on fixed deposits (FDs) in 2025, new investors in FDs are receiving lower returns. While most public sector and private bank FDs now offer interest rates between 6% and 7%, several Post Office small savings schemes continue to provide higher returns, some exceeding 7%. Many of these schemes also offer tax benefits under the old tax regime, making them an attractive alternative for long-term investors.

Here’s a detailed look at the best Post Office small savings schemes:

1. 2-Year Time Deposit Scheme

This scheme offers competitive interest rates with quarterly compounding. For example, an investment of ₹10,000 for two years at a 7% annual interest rate yields approximately ₹719 in interest. It is ideal for investors looking for a safe short-term option with better returns than typical bank FDs.

2. Senior Citizen Savings Scheme (SCSS)

Designed specifically for senior citizens, this scheme provides an interest rate of 8.2%. For every ₹10,000 invested, the investor receives ₹205 quarterly. It is a reliable choice for retirees seeking regular income and capital protection.

3. Post Office Monthly Income Scheme (MIS)

The Monthly Income Scheme offers 7.4% per annum, paid out monthly. For a ₹10,000 investment, the monthly return is approximately ₹62, making it suitable for those who require a steady monthly income.

4. National Savings Certificate (NSC)

NSC is a long-term investment scheme offering 7.7% annual interest, compounded annually. A ₹10,000 investment grows to about ₹14,490 over five years, paid as a lump sum at maturity. It is a safe and reliable tax-saving option under Section 80C.

5. Public Provident Fund (PPF)

One of the most popular post office schemes, PPF offers 7.1% compound interest per annum. The scheme has a 15-year tenure but allows partial withdrawals at certain stages. PPF is fully tax-free and ideal for long-term wealth creation.

6. Kisan Vikas Patra (KVP)

KVP is a small savings scheme designed to double the investment over a fixed period. The interest rate is revised periodically by the government. It is suitable for individuals looking for a safe, long-term, fixed-return investment with guaranteed maturity.