Not for short-term flings

While post office schemes trounce most other fixed income options for the long haul or on tax savings, they fall short as parking ground for your temporary surpluses. Interest rates for one, two and three-year post office time deposits have been increased to a uniform 8.4 per cent for 2014-15.

Today, most banks, trying to boost their deposit inflows, offer interest rates of anywhere between 9 and 9.5 per cent for one- to three-year deposits, far better than the post office schemes.

If you don’t mind slightly higher risk for better returns, top-rated NBFCs such as Mahindra and Mahindra Financial Services and Shriram Transport Finance offer 9.5-10 per cent interest.

Hence, investors can give the post office deposits the go-by for now. They will turn attractive only if bank deposit rates plunge to 8.4 per cent.

What about the Post Office Monthly Income Scheme (MIS)? Offering only 8.4 per cent return, the POMIS isn’t the best option if your goal is better returns. Rather than the MIS, these bank and NBFC deposits will better suit those who want regular cash flows as well.

Most banks offer quarterly payouts while some give monthly payouts.

But if you are absolutely paranoid about safety, POMIS is certainly your best bet, considering that even bank deposits are insured only up to ₹1 lakh and NBFC deposits don’t have any insurance cover at all.

Remember, though, that interest on all these options is taxable.

Senior citizens who need regular cash flows but don’t have taxable income can consider bank/NBFC deposits over the Senior Citizens Savings Scheme (SCSS) from the post office. Most banks have special rates for senior citizens.

Investing in SCSS will help those who have taxable income as the initial Section 80C deduction will increase the post-tax yields to higher than 9.2 per cent for an investment of ₹1 lakh.

You can invest up to ₹15 lakh here and interest is paid out quarterly.

But if you are savvier, you can still choose five-year tax-saver deposits of select banks that offer higher than 9.2 per cent to senior citizens. For instance, Karnataka Bank gives 9.5 per cent while the National Housing Bank gives 9.85 on its tax-saver deposits for seniors. Regular interest payouts are available here as well.

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