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How to Obtain Great Benefits from Small Saving Schemes

dateKnowledge Centre Team dateFebruary 26, 2021 views212 Views
How to Obtain Great Benefits from Small Saving Schemes

Savings is the most important step once you start earning. The practice of saving gives a sense of security as it tends to make you financially independent. With the help of a money-saving plan, an individual can get financial gains over a particular time. There are schemes offered by various institutions like a public or private sector bank, the Government of India, and other financial institutions.

The interest rate of the schemes offered by the Government or the banks is decided by them and are updated periodically. The savings acquired from these saving plans can be used for emergency purposes, higher education or children's education, marriage, to lessen debts, and more.

Importance of investing in saving schemes

Here's why an individual should invest in money-saving plans:

  • Safety

    Since holding onto liquid money might lead to excess spending, it is a wise decision to deposit the extra money from your hard-earned income in saving schemes.

  • Retirement funds

    With time, the money that was deposited in the savings schemes will help you reap the benefits in the form of a retirement corpus. Once retired, you will be able to lead a comfortable life as the money saved would have become a huge corpus.

  • Long-term benefits

    Long-term investments will always reward you with great returns as most schemes calculate interest using the compound interest concept. In money-saving plans, the lock-in period can range from a minimum period of 5 years to a maximum period of you reaching the age of 60 years. On maturity, you will end up with a huge sum by receiving interest on interest due to the compounding of returns that are added with long term savings.

  • Tax savings

    A lot of saving schemes offer various kinds of tax benefits such as tax exemption, deduction, or both. Under Income Tax Act 1961, Section 80C, upon the investment of up to Rs.1.5 lakh, you get qualified for a tax deduction. There are also saving schemes that offer tax exemption on the investment, interest ensued, and the maturity amount.

  • Avoid unwanted expenses

    Instead of spending the money earned on less important items or matters, saving up the excess money after dealing with the mandatory expenses in the best saving plan will help avoid unwanted expenditure.

Types of saving schemes in India

In India, several saving scheme options are available. Most of these are backed by the Government, while the others are supervised by the RBI and SEBI. Besides, these schemes provide some or the other kind of tax benefits such as tax deduction or tax exemption. Here are some of the best saving plans:

1. Equity-Linked Savings Scheme (ELSS)

ELSS is a mutual fund and is also known as tax saving funds. Under Section 80C, the investments made in this money-saving plan get tax deductions up to Rs.1.5 lakh. This investment follows a compulsory lock-in period of 3 years. Like capital gains, the returns on the redemption of the investments are taxable. There is a tax exemption of up to Rs. 1 lakh on these gains, and on exceeding this amount, a tax of 10% is levied.

ELSS savings have an equity market exposure of underlying assets in a debt and equity ratio. Higher returns are provided by the equity portion, and debt offers a buffer against uncertainty. In the long run, the scheme provides higher returns, exceeding five years. A SIP (systematic investment) offers investment stability and earns higher returns, making this one of the best saving plans. At Rs.500, the minimum investment begins.

2. Fixed deposits (FD)

It is known that fixed deposit accounts are hassle-free and the best saving scheme in the market. For a given duration, you deposit any amount that is convenient for you, earning interest as per the rate applicable on the date of deposit. The method provides flexibility in terms of duration and interest pay-out rate.

The interest given on an FD account is even higher than the interest offered on a bank savings account. You may opt to break the FD or even take an overdraft credit on it if you need the money before the maturity date. You will have the option at the end of the tenure of reinvesting the interest to receive a higher lump sum. The interest is taxable, and payments above Rs.40,000 may be subject to TDS.

3. Public Provident Funds (PPF)

The PPF is a long-term tax-free money-saving plan supported by the Government. Under Income Tax Act Section 80C, the funds deposited with your PPF account will be tax deducted. The interest gained on such savings is tax-exempt as well. A PPF account can be created at your nearest bank or post office.

The money will be locked in for 15 years and can be renewed after the expiration of the lock-in duration in periods of five years. Returns will be calculated based on compound interest at the rate of 7.1% p.a. It is possible to make a minimum yearly investment of Rs.500. Up to Rs.1.5 lakh can be invested per annum.

4. National Savings Certificate (NSC)

Another government-backed saving scheme, the National Savings Certificate, offers assured returns along with a tax-saving alternative. You can invest in this plan at the nearest post office. For the scheme, the lock-in duration is five years. Once every quarter, the Government checks the interest rate of the scheme and makes decisions on it. However, once you buy the certificate, the interest rate does not alter during your term.

Under Section 80C, tax deductions on the investment can be claimed up to Rs.1.5 lakh. Presently, the interest rate of 6.8% p.a. is applicable. Interest will be accumulated annually and paid only upon maturity. The interest accrued is taxable upon maturity and must be added to the gross annual income. Under Section 80C, the interest reinvested and multiplied is eligible for a tax deduction.

Apart from these government-related saving schemes, there are also schemes offered by private banks and financial institutions, one such institution being Canara HSBC Oriental Bank of Commerce Life Insurance. Here are some of the best saving plans offered by them:

5. Invest 4G Plan

You work very hard to make your dreams come true for various reasons such as having a comfortable future, providing a secure life for the family, setting up that café you have always wanted to, and more.

Thus, financial forethought and financial security for your near and dear ones have to be up to the mark. This plan does the required by providing life insurance cover to safeguard your hard-earned income and secure your family in case of your untimely passing. This plan is a Unit Linked Individual Life Insurance Savings that gives you the liberty to customize as per your objectives and differing obligations.

6. Grow Smart Plan

This money-saving plan comes under the whole life Unit Linked Insurance Plan and exclusively provides an insurance cover for you all through your life. Since life is all about making the best bet, you tend to worry and ponder over your choices.

This plan has been designed, keeping in mind the benefits you and your spouse should receive all through your retirement.

  • India multi-cap equity fund: Helps you receive capital gain in the long-term with the help of equity investments by investing in a varied portfolio of Small Cap, Mid Cap, and Large Cap companies.
  • Whole life protection: Get life insurance for your entire life.
  • Flexible-premium payment term: Depending on your payment capacity, you can choose a term of 10 years or more.
  • Choose life cover: Depending on your protection needs, you can choose the most suitable life cover.
  • Switching or premium redirection: According to your convenience, you can switch your money from different funds with the help of premium redirections.
  • Partial withdrawals: In case of emergency, you can withdraw your money through partial withdrawals but after 5 years.
  • Increase or decrease of sum assured: Based on your changing needs, you can change your sum assured depending on your protection needs, allowing you to increase or decrease the Sum Assured.

7. Group Term Edge Plan

It is because of the employees who work towards making an establishment successful, making them the most valuable assets of that establishment. To help them concentrate on the tasks at hand and protect their affairs, you must safeguard them from a variety of risks. This plan is a yearly continual group term insurance plan. Based on the selection of the coverage option, members will be covered for accidental events of terminal illness and/or critical illness.

This plan allows you to select any one from the following coverage options:

  • Option 1: Death Only
  • Option 2: Death and Terminal Illness (TI)
  • Option 3: Death, Terminal Illness (TI), and Critical Illness (CI)

These are some of the widely-preferred and best saving schemes in India. Start saving up early with the help of these schemes to have a comfortable life after.

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Frequently Asked Questions

What is saving plan?

A savings plan is likely to be different for everyone depending on the financial goal, risk profile, returns, and investment horizon. If you are young and want to save for your retirement, ULIPs like Invest 4G or Titanium Plus plan would be the best option. You are likely to create a large corpus by your retirement through market-linked returns if you invest in this savings plan. If capital protection is your aim, then traditional insurance plans such as Guaranteed Money Saving Plan should be suitable for you.

Who should invest in a Savings Plan?

If you are looking for a guaranteed income plan, then saving plans should be on your list of investments that you are planning to make. Savings plan require you to invest a pre-decided amount on a regular basis. People with a regular stream of income who require a lump-sum amount after a period should opt for a savings plan. Working professionals, self-employed people and businessmen should consider a savings plan to meet their long-term financial obligations. Saving plans are also ideal for people who are risk-averse and want to accumulate funds through relatively safer mediums. These saving plans inculcate financial discipline in policyholders which make them crucial for every portfolio.

How much money should you put in savings each month?

The amount that should be invested in a savings plan each month depends on the income, existing financial obligations and the long-term financial goal. If you have a steady income, you should save at least 20% of your monthly income. It is not necessary to invest your entire money into a savings scheme as investments should be diversified. Ideally, you should aim to have a financial buffer of over 10 times of your annual income. Choose an income plan based on your financial circumstances to stay afloat.

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What is the difference between saving and investing?

Saving is the money that you keep aside for emergencies or for buying any big-ticket item. Investing means growing or multiplying the wealth that you have by buying savings plan, or any other assets. Buying a savings plan will help you in achieving your investment goals such as retirement, your child’s higher education or marriage, or for buying a new house.

Which savings plan is best for retirement?

The Invest 4G plan with its multiple investment options and various portfolio management strategies for capital protection is an ideal saving plan for retirement. Also, Guaranteed Income4Life is also another savings plan that you can consider for building your retirement corpus as it acts as a guaranteed income plan that will provide you maturity benefits to manage your post-retirement expenses.

Which savings plan is best for long-term goals?

Smart Goals Plan is a savings plan with its unique features such as modification of the sum assured partial withdrawal and fund switch can help you plan for your long-term financial goals. Canara HSBC Oriental Bank of Commerce Life Insurance offers a wide variety of saving plans that you can invest in as per your risk appetite and investment goal.

Which savings plan is suitable for girl child?

The Future Smart unit-linked plan from Canara HSBC Oriental Bank of Commerce Life Insurance is the ideal savings plan for the girl child. Monthly Income Advantage Plans are also a good option if you are planning to invest in a savings plan for your girl child.

Where should I invest my money?

You should spread your investments across financial instruments. However, having the best savings cum guaranteed income plan in your portfolio is extremely important. Savings plan ensures financial stability and also helps in fulfilling short, medium and long-term monetary goals.

What is a monthly income advantage plan?

A monthly income advantage plan ensures that you lead a stress-free life with your loved ones as it provides a life cover along with giving you guaranteed monthly income. In short, it is a life insurance and income plan that will financially secure commitments made to your loved ones. Canara HSBC Oriental Bank of Commerce Life Insurance Guaranteed Income Advantage Plan is a monthly income advantage plan that provides life cover for the entire term while you pay premium only for a limited period.

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What is a good age to start saving money?

When you plan to invest in a financial product, it always pays well to start early. The earlier you start saving and investing, the better. When you start investing early, the capital gets adequate time multiply. Even a small amount invested for a long time can give substantial returns due to compounding in a savings plan. Invest in an income plan as early as possible to build a significant corpus that will later help you in life. Ensure that you buy the best saving plan in India that can be aligned with your investment goals.

Should you use a savings plan for retirement planning?

Yes. Retirement planning is one of the most important financial decisions of our lives. The best saving plan offers a host of features that may help you build your retirement corpus. Some of the saving plans like Guaranteed Income4Life offer guaranteed returns at policy maturity. Such returns can act as a regular income stream even after your retirement to help you stay financially stable.

Are saving plans beneficial for managing unexpected expenses?

Yes. Best saving plans in India offer partial withdrawal system that can be utilized during your rainy days. Being financially prepared to tackle such odds will help you manage any unforeseen expenses in a smooth manner. Buy a monthly income advantage plan that will generate a steady source of income for you to take care of both long-term and short-term financial goals.

How to save tax by using savings plan?

Saving plans are known for helping us achieve our financial goals. Best saving plans allow you to grow your wealth while providing life cover. Saving and investment plans are also beneficial for tax planning. Premiums of savings cum protection plans come with tax benefit under Section 80C of the Income Tax Act. Moreover, proceeds received upon the death of the policyholder or upon the maturity of the policy are tax free under Section 10 10(D).

What is the right age to start saving money?

When you plan to invest in an income plan, it always pays well to start early. The earlier you start investing in a savings plan, the better. When you start investing early, the appreciation in capital is significant. Even a small amount invested in the best saving scheme for a long time can give substantial returns due to compounding. Buy the best savings plan as soon as you start earning to achieve all your milestones on time.

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How a savings plan can help in building your child’s education fund?

Saving plans help in building wealth over time against the investments that you make. Buy the best savings plan to build an education fund for your child. The best saving plan for kids offered by Canara HSBC Oriental Bank of Commerce Life Insurance eases the stress of planning your child's future by providing a lump-sum payout on the investment. Consider investing in a monthly income advantage plan to assist you in fulfilling your financial goals.

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How Savings Plans by Canara HSBC Oriental Bank of Commerce Life Insurance can help you?

Every person has a unique reason to save and invest. With ULIP savings schemes, the company caters to people seeking wealth creation through capital appreciation. Contrarily, the traditional plans can help you save for important life goals without worrying about the fluctuation in fund value. All major savings plan offers partial withdrawal facility that can help you take care of unplanned contingencies. With savings plans from Canara HSBC Oriental Bank of Commerce Life Insurance, you get adequate flexibility while investing and receiving the savings benefits, which makes them a good investment choice for investors looking for income plans.

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