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Best Saving Plans in India 2023

dateKnowledge Centre Team dateMay 18, 2021 views157 Views
Best Saving Plans in India 2023

Whether you are looking to buy the best saving plan for your new-born baby, or you want to leave a legacy for your grandchildren, putting away money in a saving and investment plan is a great way of boosting your wealth. A lot of experts may also recommend you diversify your investment portfolio. Remember that a balanced investment portfolio must contain a mix of equities, government and corporate bonds, property, and cash, saving plans that assure returns.

We can consider those savings plans the best when we get sky-high returns as quickly as possible without losing the capital investment. However, when it comes to “High-return and Low risk” saving and investment product, you are not likely to find any such product to invest in. So, rather than considering the best saving plan to be an investment option that gives high return with no risk, you must start searching for plans that guarantees returns.

You may find saving plans that have high risk but they can generate higher inflation-adjusted returns in the long term. To help you find the best saving plan for your investment needs in 2022, we have created this all-inclusive guide. Let us first understand, why do you need to save and invest?

Why Should you Buy the Best Saving Investment Plans?

We generally look forward to buy the best saving plan in India or any other form of investment in the hope of growing our capital. As an investor, you may want plans that help in generating income to support your financial needs. While some other investors may need a saving plan that helps them in building a retirement corpus for a happy and carefree retirement.

The main reason people decide to invest their money may vary according to their personal and financial goals and aspirations. However, the most common objectives when it comes to investments are:

1. Safety

One of the most fundamental reasons for investing money is to preserve capital. Some of the best saving and investment instruments act as a way to park funds and keep them safe. These include government bonds and fixed deposits; the returns may be lower here, but so is the risk.

2. Growth

A lot of investors also put their money to grow while aiming to earn more through it. This is achieved through investment options like mutual funds and commodities. The initial amount to be paid and the associated risk are higher with these options, but so are the returns.

3. Stability

Sometimes, investments are also made to ensure a permanent or long-term source of steady income. For example, you may consider investing in the stocks of a company that pays regular dividends to its investors.

4. Tax Benefits

The Income Tax Act of 1961 offers some tax benefits wherein deductions are made from the payable taxes when investments are made in Public Provident Fund (PPF), Equity Linked Services Scheme and also with savings cum insurance plans.

5. Future Planning

Generally, people prefer investing a part of their money during their active working years towards a retirement scheme or fund. So that once their working years are over, they can continue to be self-reliant. There are some saving plans that work best to build a retirement corpus by generating an additional stream of income.

6. Short-term Financial Goals

Sometimes, people have short-term financial goals that may include buying a car or the down payment of a home loan. To achieve these goals, people invest in short-term plans or acquire commodities that have a higher chance of value increment resulting in the generation of considerable returns in the short-term. For example, people invest money to buy precious metals like gold and silver.

As now we are clear of the objectives that may lead one to search for the best saving and investment plan, let us understand the types of saving and investment options that are available.

Best Saving Plans

Here is the list of 12 best saving plans in India to invest in 2022

  • National Savings Certificate.
  • Senior Citizen Savings Scheme.
  • Recurring Deposits.
  • Post Office Monthly Income Scheme (MIS)
  • Public Provident Fund (PPF)
  • KVP (Kisan Vikas Patra)
  • Sukanya Samriddhi Yojana (SSY)
  • Atal Pension Yojana
  • Employee Provident Fund (EPF)
  • Pradhan Mantri Jan Dhan Yojana
  • National Pension Scheme (NPS)
  • Bank Fixed Deposits

1. National Savings Certificate (NSC)

National Savings Certificate (NSC) is a government-backed and short-term savings scheme in India that can be purchased from any post office. Being a fixed return and low-risk investment, National Savings Certificate is a low-risk and fixed return investment which is generally used by people for small to medium investment sizes and to avail tax benefits. Tax benefits can be availed for an NSC under Section 80C of the Income Tax Act. That is, you can avail of a tax deduction of up to Rs 1.5 lakhs towards your investment with this savings plan.

If you are an adult or a minor above the age of 10 then you can open an NSC account under your name. Also, you can open a joint account with 2 more persons as well. That is, 3 people can open a joint NSC account. Currently, the NSC VIII issue is available for investment. NSCs come up with two fixed maturity years: 5 and 10 years. The current annual interest rate for five-year National Savings Certificate is 7.9% and it is 8.8% for a ten-year scheme. The interest is not paid till the certificate expires. You need to invest a minimum of Rs 1000 to keep your account active.

There is no maximum limit. NSC can also be used as a security to avail loans. Withdrawal and transfer of account are allowed on the death of the partner. If you are planning to buy the best saving plan, you must consider and compare all the available options.

2. Senior Citizens Saving Scheme (SCSS)

Senior citizen savings scheme (SCSS) is a safe savings plan that provides regular income tax saving options to its investors. Senior citizen savings scheme is the best savings plan for the retirees that want a less risky investment with tax benefits. SCSS is available through post offices and certified banks. You can invest a minimum of Rs 1,000 and the maximum of Rs 15 lakh in SCSS. The eligibility criteria for investors for this savings scheme is minimum sixty years old. Individuals between the age group of 55 to 60 years, who opted for the VRS, or Superannuation can also invest in SCSS.

This savings plan has an average tenure of five years, but this tenure can be extended for three more years if required. An investor is eligible to receive a tax benefit up to Rs. 1,50,000 under section 80C.

Under SCSS, you receive interest on your investment on the last day of every quarter. As it is sponsored by the Government of India, SCSS savings plan is very reliable and safe and reliable.

3. Recurring Deposits (RD)

A recurring deposit (RD) is a term deposit provided by banks. This type of saving plan, also known as RD, is the safest and one of the best saving schemes. The investors, in a recurring deposit, can make payments in the form of monthly instalments, contrary to fixed deposits wherein the lump sum is invested. RD is a low-risk savings plan for short-term saving and investment.

Recurring Deposit is flexible in terms of the duration of the account and the amount you want to invest. It helps build a savings habit amongst the individuals. You need to submit the details of your bank account, your ID proof, and the relevant application form to open your RD account.

You can open a recurring deposit account for as low as Rs 500. However, this amount depends on the banks. Post-Offices have a minimum limit of just Rs 100. The interest earned on bank RDs varies as per the bank and is subject to market fluctuations. Post Office Recurring Deposits has a fixed interest rate of 8.4%. Senior citizens are offered an additional rate of interest. The period can vary from 3 months to as long as 10 years. This savings plan provides specified guaranteed returns on the principal amount invested unlike investment in equities. You earn a relatively lower interest rate.

Must Read - FD VS RD

4. Post Office Monthly Income Scheme (MIS)

Post Office Monthly Income is one of the best savings schemes in India. This is a government-backed saving scheme with low risk and gives steady returns. POMIS is a savings plan where you will be paid an monthly interest for the invested amount.

In this scheme, you have to open an account with a post office and invest regularly. You will earn regular interest on your investments. Thus, this saving plan is perfect if you are in search of an investment that can give you stable but regular returns.

The duration of this scheme is of 5 years. The current rate of interest in POMIS is 6.6% per annum (last updated on 25th Jan 2022). You will receive interest every month. You can open an account if you are an Indian citizen and are above the age of 18 years. You can also be eligible to open an account if you are a minor aged above 10 but you will require a guardian for this.

The maximum investment is Rs 4.5 lakh in a year. It can be increased to 9 lakhs if it is a joint account.

To open an account under the POMIS scheme, you need to perform the following steps

a) Fill out the POMIS application form
b) Get signature from the nominee, attach your ID, address, and passport size photograph with the form
c) Make the initial deposit via check. You need to invest a minimum of Rs 1000
d) Wait for the verification

5. Public Provident Fund (PPF)

Public Provident Fund, also known as PPF, is one of the oldest and the most trusted investment and savings plans in India. This government-backed savings plan comes with a sovereign guarantee. Thus, this is one of best savings plan and offers you a surety of returns.

You can open a PPF account in any bank having a PPF facility as well as a post office. You must be an Indian citizen over the age of 18 to enrol in PPF. If you are a minor, you can open your account under the supervision of your guardian. It offers you an attractive interest of 7.6% per annum (last updated on 25th Jan 2022), the returns are compounded annually. The maximum time you can invest in PPF is 15 years. The Minimum you must invest in your PPF account is Rs 500. You cannot invest more than Rs 1.5 lakhs in a single year. You can even withdraw your money partially after 5 years. Investment under PPF is also eligible for tax benefits under section 80C of the Income Tax Act 1961

At the time of maturity, you can either take the amount in lump-sum and close the account or can extend it by another 5 years.

Also Read - Best Investment Plans for 5 Years

6. Kisan Vikas Patra (KVP)

Kisan Vikas Patra (KVP) is a safe savings plan that is backed by the government. Though at the start it was mainly for the farmers, now it is open to other sections of the society and is seen as a very attractive investment. If you are an adult Indian citizen, you can opt for this saving plan.

This is one of the best saving plans in India as it offers to double your money in a time frame of 124 months, i.e., in 10 years and 4 months. Thus, this savings scheme is suitable if your goal has a long-term horizon, and you are looking to park your excess funds in a safe place. This savings plan offers a rate of return of 6.9% per annum (last updated on 25th Jan 2022) and varies every year. The minimum amount you can invest in this savings plan is Rs 1000, and you can invest as much as you want, there is no maximum limit in KVP. You can withdraw prematurely after 2.5 years (30 months). You can use your KVP as a security when you opt for a loan

This plan is not eligible for tax benefits u/s 80C of the Income Tax Act. TDS is also not applicable to this saving scheme.

7. Sukanya Samriddhi Yojana (SSY)

Sukanya Samriddhi Yojana (SSY) was introduced by the government in the year 2015 specifically for the betterment of the girl child. This savings scheme was a part of the ‘Beti Bachao Beti Padhao’ initiative. Sukanya Samriddhi Yojana was introduced with the main objective of ensuring a financially secure future for the girl child.

Thus, if you are a parent of a girl child and want to save money with good returns, you must consider investing in SSY. If you want to open your account under Sukanya Samriddhi Yojana Scheme then you can do so with the help of a list of banks or any post office as well.

To open this Sukanya Samriddhi Account you will need to submit the birth certificate of the girl child along with the application form and your ID proof. Given below are some of the features of Sukanya Samriddhi Yojana-

a) The rate of interest of your SSY account currently stands at 7.6% per annum (as of 25th Jan 2022)
b) You can open an SSY account for up to two girls
c) It has a tenure of 21 years till the date of opening
d) The minimum amount you have to deposit is Rs 250

This account matures after your daughter turns 21. You have to deposit for at least 15 years before maturity.

8. Atal Pension Yojana

Atal Pension Yojana is a government backed savings scheme. This savings plan was introduced to protect the weaker section of the society. This savings plan is applicable specifically for any individuals that work in unorganized sectors and would require financial support from the government-sponsored saving schemes. Atal Pension Yojana is a good savings option in the form of a pension plan for the individuals post retirement. Atal Pension Yojana requires a relatively lower premium.

Individuals between the age group of 18 years- 40 years can apply for Atal Pension Yojana. The premiums payable of this saving scheme is very low and should be paid for a tenure of minimum 20 years. Higher pension amount will be paid to the investors if the premium amount is higher. In order to apply for Atal Pension Yojana, an individual needs to hold a savings account in a bank.

9. Employee Provident Fund (EPF)

Employee Provident Fund is a saving plan was introduced by the government to inculcate a habit of savings among the working class so that they can create a good corpus by the time of their retirement. This scheme is regulated by the EPFO.

If you are covered in the EPF scheme, you will be mandatorily contributing a part of your salary to this fund. Your employer will also contribute to your EPF account. Investing in EPF is very beneficial for long-term goals. It regularly helps build discipline in savings and will create a corpus that you can use to cater to your expenses after you retire.

Some of the features of Employee Provident Fund are-

a) The current rate of interest rate in EPF stands at 8.5% per annum (last updated on 25th Jan 2022)

b) The interest is credited yearly in this savings scheme

c) In this saving scheme, you and your employer both contribute in the range of 8-12% of your basic salary

d) If you are a woman, then you need to contribute only 8% for the first 3 years of employment

e) This savings scheme is eligible for deduction under section 80C of the Income Tax Act 1961.

10. Pradhan Mantri Jan Dhan Yojana

Pradhan Mantri Jan Dhan Yojana (PMJDY) is a government initiated saving scheme launched in the year 2014. PMJDY is a savings scheme that is targeted for individuals that do not hold a bank account. Objective of Pradhan Mantri Jan Dhan Yojana is to provide affordable access to financial services such as banking, remittances, credit, pension, insurance etc. As part of this saving scheme, account holders are eligible for an accidental insurance of Rs 1 lakh and a life cover of Rs 30,000.

11. National Pension Scheme (NPS)

NPS is a government-notified pension scheme for individual taxpayers. This retirement scheme is open to all individuals belonging to the age group of 18-60 years. However, an extension to 70 is possible for the maximum age. This is one of the best saving schemes that allow you to invest in different instruments like debt and equity or both.

The final pension amount you get is the returns from these investments. You also have the option of partially withdrawing funds from your account in case of emergencies. Some of the salient features of NPS are –

a) Since NPS is a saving scheme that is linked with the market, its return is not fixed and depend on the performance of your fund
b) The past returns of this scheme vary in the range of 8%-10%
c) Tax benefits are available under both section 80C and 80CCD
d) Once invested, you need to stay invested in the scheme till the age of 60

12. Bank Fixed Deposits

Fixed deposits are also considered to be a form of investment, wherein you deposit a fixed amount, i.e., in a lump sum with a bank for a fixed amount of time and in return get a set percentage of that amount as interest. Fixed Deposit is one of the safest savings plan in India.

Although the returns in this are quite low, so is the risk. In an FD, you are assured of the returns. Thus, you know how much you will be getting as interest. This is why this investment is very popular despite average to low returns.

Other Popular Savings Schemes in India

1. Mutual Funds

Mutual Funds are large investment funds that are made by pooling the money from thousands of investors. The money is invested in securities such as equity stocks, bonds, etc. The total amount of a mutual fund is divided into units and these units are assigned to you based on your contribution.

The mutual fund is managed by a professional fund manager. They decide where the money will be invested. With a mutual fund, you can achieve diversity and get the advantage of expert management.

Liquid Mutual Funds

Liquid funds or ultra-short-term debt funds invest a majority of their AUM into short-term debt securities or money market instruments. Short-term debt or money market securities are those fixed income instruments that are maturing within the next 365 days.

The maturity period of securities this mutual fund holds ranges from overnight to 364 days. Because of the ultra-short maturity of the debt securities, they are considered the least risky. Thus, allowing you a very short-investment period with almost stable returns.

Returns from liquid mutual funds average the savings bank rate of 5 to 7% p.a. However, if you can hold the investment for more than 36 months, you can avail of the indexation benefit on the capital gain.

Ideal Investment Tenure

Liquid mutual funds are best if you need to park a large corpus for a few months to less than three years. This is because these funds will offer better growth to your money than the savings account.

2. Debt Mutual Funds

Debt mutual funds are riskier than liquid funds in the short run and less risky than equity and balanced mutual funds. However, these funds also offer better long-term returns than liquid mutual funds. It predominantly invests in corporate or government bonds.

These are known to generate fixed returns. The risk involved is low, and returns can range from 7% to 10%, making it the ideal option for short-term investment.

Ideal Investment Tenure for Debt Funds

Debt funds are a perfect investment for you if you want to ensure the safety of your capital and can invest for at least 36 months. After this holding period, the capital gain will be eligible for indexation benefit, instead of being taxed at the normal tax slab rate.

3. Treasury Securities

Treasure Securities, commonly known as Treasure Bills are a safe short-term investment that is introduced by the government. A Treasury Bill is thus, a security backed by the government which offers high liquidity.

The risk is low and virtually non-existent due to govt trust and investment in the money market.

The returns are also decent. The tenure of Treasury Securities can be for as low as 91 days and are majorly issued for less than 1 year.

However, the amount received as returns will be in proportion with the tenure.

  i. These bills are generally issued at a discount and redeemed at par

  ii. The minimum amount you have to invest to own a treasury bill is Rs 25,000

  iii. The yield of a bill can be calculated through a formula

   Y= (100-P)/P * [(365/D)*100]

  P – The discounted price

  D – Tenure of treasury bill purchased

4. Post-Office Time Deposits

Post-Office Time Deposits (POTD) is savings and investment scheme by Indian Post. It is a popular short-term savings scheme in rural and remote areas, and its tenure can be chosen from options of one year, two years, three years, and five years. It is similar to a Bank Fixed Deposit in many ways.

The interest earned (subject to regular revisions. Presented rate as of 25th Jan 2022) as per the years are as follows:

a) After 1 Year: 5.5% p.a
b) After 2 Years: 5.5% p.a
c) After 3 Years: 5.5% p.a
d) After 5 Years: 6.7% p.a

Any number of accounts can be opened by you under the time deposit scheme.

i. The interest rates mentioned above are calculated yearly every quarter.
ii. The minimum amount you need to invest is Rs 1000
iii. This saving scheme is eligible for tax deductions u/s 80C of the Income Tax Act for the 5-year account

Withdrawal Rules

i. Withdrawal is not allowed for the 6 months following the deposit
ii. If you withdraw between 6 months to 1 year of deposit, you will face a deduction of interest and will be charged on the rate of savings account

Year Rule
0-6 months of deposit Withdrawal is not allowed for the 6 months following the deposit
Between 6 months to 1 year You will face a deduction of interest and will be charged on the rate of savings account
After 1 year (in case of 2 yr+ accounts) 2% deduction from the TD interest rate

5. Unit Linked Insurance Plans (ULIPs)

A ULIP is an integrated savings and investment plan which gives you the benefits of both investment and insurance plans. You can pay the premium on a monthly or annual basis. This is an ideal savings scheme option for an investor who is looking for a secure earning plan for the long term.

ULIPs use a part of your annual premium to provide the life cover while the other goes to the funds of your choice.

ULIPs are considered to be one of the best saving plans that offer life cover with an option to grow your wealth:

i. ULIPs have a lock-in period of 5 years
ii. Partial withdrawals are allowed after this lock-in period
iii. You have the freedom to decide in which fund your money will be invested

You can choose from

  • Equity
  • Debt
  • Hybrid funds

iv. ULIPs are eligible for tax benefits u/s 80C as well as section 10(10)D of the Income Tax Act 1961

In Canara HSBC Life Insurance’s Invest 4G, not only do you get all these benefits but other exciting features as well.

You get to choose from 4 automatic portfolio management strategies, free fund switches, tax-free partial withdrawal. You also have an option to get covered till the age of 99. Also, there is a premium funding benefit option that ensures your policy continues even after your death.

Learn about these 5 reasons you should invest in ULIPs.

6. Equity Mutual Funds

Equity mutual funds invest up to 95% of their AUM in equity stocks and related securities. Thus, depending on their portfolio investment their risk varies from high to very high. Similarly, the returns from these funds also vary a lot.

While investing in equity funds, you should always use proven methods to mitigate your risk. Two such methods are:

  • Invest a fixed amount regularly
  • Stay invested for a longer period

Mitigating risk automatically improves your chances of growth and enjoy better returns from these funds in the long run.

7. Guaranteed Savings Schemes

If you do not possess a high-risk tolerance and would rather be happy if you are assured of the returns, then you should take note of the guaranteed saving schemes.

Considered by many a more secure alternative to ULIP, Canara HSBC Life Insurance Guaranteed Saving Plans offer fixed and guaranteed returns with low risk. That is, you are assured of the returns on maturity.

In this savings plan, you are given full freedom to choose the duration and the payment method. The period for the maturity of these schemes varies from 10 to 20 years. You can also claim tax benefits for investments in Guaranteed Saving Plans under Section 80C. You are also given facilities such as premium booster.

Saving plans that offer guaranteed returns are often considered to be the best by investors. Like ULIP, Invest 4G, this plan also includes premium funding benefits.

FAQs on Best Savings Plan

Saving schemes are a type of investment option that helps you to save regularly and create a corpus to meet your future needs and goals. There are many saving schemes available in India and are offered by banks, post offices as well as other financial institutions. Each of the saving plans differs in terms of return, duration, and investment options. You can choose the best saving plan according to your preference and risk-taking abilities.

There is no single best-saving scheme available in the market. All of these saving plans have their own set of features and can fulfil different purposes. Look for a plan that suits your budget, matches your needs and risk-taking abilities.

Some of the best saving plans in India are:

1. National Savings Certificate.
2. Senior Citizen Savings Scheme.
3. Recurring Deposits.
4. Post Office Monthly Income Scheme (MIS)
5. Public Provident Fund (PPF)
6. KVP (Kisan Vikas Patra)
7. Sukanya Samriddhi Yojana (SSY)
8. Atal Pension Yojana
9. Employee Provident Fund (EPF)
10. Pradhan Mantri Jan Dhan Yojana

Some of the best saving schemes where you can invest in India are:

  • Post Office Saving Scheme.
  • Senior Citizen Savings Scheme (SCSS)
  • Kisan Vikas Patra (KVP)
  • Sukanya Samriddhi Yojana(SSY)
  • Atal Pension Yojana.
  • Employee Provident Fund (EPF)
  • National Pension System (NPS)
  • Pradhan Mantri Jan Dhan Yojana

Whether your saving plan is eligible for tax-benefit or not depends on the type of savings scheme you have invested in.

Some of the saving schemes that are also eligible for tax deductions under section 80C of the Income Tax Act 1961 are-

a) Public Provident Fund (PPF)

b) Mutual Funds (only ELSS)

c) Employee Provident Fund (EPF)

d) Sukanya Sammriddhi Yojana (SSY)

e) National Savings Certificates (NSC)

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