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Saving Scheme

Saving schemes are the best tools to grow your money and meet your financial goals. The best savings schemes will let you turn your savings into investments automatically and invest for a long period. Saving schemes in India help you channelize your income regularly towards investments, even if very small amounts.

The best saving schemes in India also help lower your annual tax liabilities. Saving schemes in India will include bank deposits, post office schemes, and investments like NSC, KVP and Sukanya Sammriddhi Yojana. You can invest money in equity-related or debt-related schemes, or you can invest in fixed deposits, traditional insurance plans and online savings and investment plans , etc.

What are Saving Schemes?

Saving schemes are financial instruments launched by the Government of India (or public/private banks) to help you achieve your financial goals over a particular period. Different saving schemes have different purposes, and they vary in their investment horizons, interest rates, and tax benefits. Choosing the best saving and investment scheme online means you have to assess your risk appetite and financial affordability.

The returns from the best saving and investment schemes in India are secured since most of them are backed by the Government of India. It is a low-risk investment option that provides you good returns. The interest rate of saving and investment schemes changes from time to time and is decided by the government. The government revises the rates every three to six months.

Types of Saving Schemes in India

When you decide to invest in saving schemes, there are several options you can choose from depending on your financial needs and your goal duration.

Sr No Saving Schemes Interest Rate offered
1 National Saving Certificate (NSC) 6.80%
2 Senior Citizen Saving Scheme (SCSS) 7.40%
3 Recurring Deposits (RD) 6 -7%
4 Post Office Monthly Income Scheme (POMIS) 6.60%
5 Public Provident Fund (PPF) 7.10%
6 Kisan Vikas Patra (KVP) 6.90%
7 Sukanya Samridhi Yojana (SSY) 7.60%
8 Atal Pension Yojana NA
9 Voluntary Provident Fund (VPF) 8.50%
10 Employees Provident fund (EPF) 8.50%
11 Pradhan Mantri Jan Dhan Yojana 2% above base rate not exceeding 12%
12 National Pension Scheme (NPS) 5-12% (Depends on the investment performance )

A. National Saving Certificate

It is a government-backed saving scheme designed to offer you guaranteed returns along with a tax-saving option. The scheme has a lock-in period of 5 years, you can invest accordingly in the NSC. Prominent features of National Saving Certificate include:

  1. Fixed Rate of Interest:

    If you purchase NSC at a certain rate of interest, the interest rate for you will remain the same during the tenure of your investment. The government reviews and fixes the interest rates once every quarter. At present, the NSC interest rate is 6.8 percent.
  2. Tax-Saving Under Section 80C:

    You can invest and claim tax deduction under Section 80C up to Rs 1.5 lakh. The interest is calculated annually and added to your investment, and the total amount is paid to you at maturity. The gain you receive on maturity is taxable and gets added to your total annual income. The interest rate will depend on your tax slab.
  3. Single or Joint Ownership:

    You can buy National Saving Certificate in your name or open a joint account with your family member. You can also buy NSC in the name of a minor (your children).
  4. Minimum & Maximum Investment:

    You can start an NSC investment with as much as Rs. 100, while there is no maximum limit for investment.
  5. Premature Withdrawal:

    NSC does not allow premature withdrawal but you can borrow money by using NSC as collateral.

National Saving Certificate

B. Senior Citizens Saving Scheme (SCSS)

Senior Citizen Savings Scheme | Benefits of SCSS

The SCSS is designed keeping in mind the unique needs of senior citizens of India (individuals above 60 years of age). Individuals who have retired early or have opted for Voluntary Retirement Scheme (VRS) and between 55 and 60 years are also eligible for this best saving and investment plan. Features of this scheme are:

  1. Investment:

    You can invest a minimum of Rs 1000 and the maximum limit of investment is Rs 15 lakh.
  2. Investment Period:

    The investment is for 5 years but there is an option to extend the tenure by 3 years if need be.
  3. Account Closure:

    If you want to close your account after one year, you have the option to do so without any penalty or deductions.
  4. Interest:

    You will receive interest on your investment on the last day of every quarter.
  5. Tax Deduction:

    The amount you invest in SCSS is eligible for a tax deduction, while the interest earned on the investment is taxable. If the interest amount you receive annually exceeds Rs 10,000, the accumulated interest will attract Tax Deducted at Source (TDS).

    Also Read - Form 15G & 15H

C. Recurring Deposits (RD)

Recurring deposits are simple saving schemes that let you save a fixed sum regularly. RDs are the best saving options for meeting your short and medium-term financial goals.

  1. Investment:

    Any individual of any age can open an RD account at a post office or bank. Minors below 10 years of age should provide proof of their name to open an RD account. Minors above 10 years of age only need a guardian’s assent to open an RD account.
  2. Withdrawals:

    Partial withdrawal or premature withdrawal from a recurring deposit is not allowed. However, you can break the FD for a penalty on the rate of interest before maturity.
  3. Tax Benefits:

    Recurring deposit interest is taxable in the financial year it accrues. The bank applies TDS to your interest if it exceeds Rs 10,000 in a financial year. Post office RDs enjoy zero TDS. However, you should show the interest as part of your taxable income if taxable income is more than the minimum exemption limit. The minimum exemption limit for individuals below 60 years of age is Rs 2.5 lakhs and Rs 3 lakhs for senior citizens up to the age of 79. For individuals above the age of 80, the limit is Rs 5 lakhs.

D. Post Office Monthly Income Scheme (POMIS)

Post Office Monthly Income Scheme | Eligibility of POMIS

You can think of this saving and investment plan as a regular savings bank account. The difference is that in this saving and investment scheme you will get higher interest on deposits. It is one of the best investment options for you if you have a low-risk appetite. The process of investment is very simple. Once you invest in POMIS, you start receiving fixed monthly income in your savings account. Below are important point related to the scheme:

  1. Account Opening:

    You can open an individual account and invest an amount between Rs 1500 and Rs 4.5 lakh in the scheme.
  2. Investment:

    You can also open a joint account with two or three individuals and invest up to Rs 9 lakh combined.
  3. Tax Benefits:

    The amount you invest and the interest you earn on your investment are not eligible for a tax deduction or exemption. You can also open a joint account with two or three individuals and invest up to Rs 9 lakh combined.

E. Public Provident Fund (PPF)

Public Provident Fund or PPF has been one of the best saving schemes in India and one of the first retirement saving schemes for the self-employed. PPF offered the same retirement saving benefits available to organised sector employees, to the self-employed and unorganized sector workforce.

  1. Investment Criteria:

    Any Indian citizen of any age can open a PPF account. You can open a PPF account for minors, or a person of unsound mind. However, as an individual investor, you can only hold one PPF account. HUFs and NRIs cannot open a PPF account.
  2. Withdrawals:

    A. Withdraw Full Amount

    • Upon completion of 15 years or a Five-year extension period after 15 years
    • To provide for medical expenses or education of child after five years

    B. Partial Withdrawal

    • Starting 6th year of account holding (counted as Financial Years)
    • Maximum partial withdrawal in one financial year is 50% of the available balance at the beginning of the FY
    • Only one partial withdrawal per FY

  3. Tax Savings:

    Invested money qualifies for deduction under section 80C. The accrued interest and partial withdrawals from PPF are exempt from tax. Maturity value from PPF is also tax-free.

F. Kisan Vikas Patra (KVP)

You can invest in Kisan Vikas Patra online or by visiting your nearest post office. This saving scheme is very popular since on maturity you receive an amount double of your investment. Features of this saving and investment scheme are:

  1. Investment Period:

    Your investment is doubled in 124 months, and the interest rate is 6.9% (subject to change). The maturity period may change if the interest rate changes. The minimum amount you can invest in this scheme is Rs 1000 and there is no upper limit.
  2. Investment Tenure:

    Though the investment tenure is 124 months, you have an option for the premature withdrawal but only after 30 months. The invested amount and interest you earn on that are not eligible for a tax deduction or exemption
  3. Tax Benefits:

    You can use your certificate as collateral to get a loan from banks for a tax deduction or exemption. You can use your certificate as collateral to get loan from banks.

Benefits of Kisan Vikas Patra

G. Sukanya Samriddhi Yojana (SSY)

The scheme was launched by the Prime Minister of India to secure the future of girl children in India. You can open an account for your girl child aged below 10 years. Important points related to the scheme are:

  1. Investment Period:

    Parents can invest a minimum of Rs 250 and a maximum of Rs 1.5 lakh per year for 15 years. The tenure of the policy is 21 years, and you have to make payment for 14 years. You can invest in a maximum of 2 girl children in Sukanya Samriddhi Yojana.
  2. Tax Benefits:

    The amount invested is applicable for tax deduction under Section 80C, up to Rs 1.5 lakh.
  3. Interest and Withdrawals:

    You can partially withdraw the money up to 50% after the child attains 18 years if you need money for her higher education. The interest rate of this scheme is 7.65 percent, effective 1 April 2020.

Benefits of Sukanya Samriddhi Yojana

H. Atal Pension Yojana

Atal Pension Yojana is a saving scheme by GOI aimed at ensuring the financial safety of citizens in old age. The scheme is aimed at ensuring retirement security for the workers of the unorganised sectors and micro and small business owners. This retirement saving scheme has received more than 2 crore subscriptions by the end of FY 2019-20.

  1. Investment:

    If you are an Indian citizen between the age of 18 to 40, you can invest in Atal Pension Yojana. You should also have an operational bank or post office savings account in India. Alternatively, you can also use a Jandhan account for investment and receiving your benefits from APY. You should also provide Aadhaar Card for KYC and an active mobile number to receive the updates of your APY account.
  2. Withdrawals:

    Withdrawals from APY are allowed only under the following circumstances:

    • You have attained the age of 60, upon which you can withdraw 100% of the balance for converting to a pension
    • Upon the death or diagnosis of terminal illness of the account holder
  3. Tax Savings:

    Your investment into the APY qualifies for deduction under section 80C of the Income Tax Act. The maturity value you commute to the pension will also be tax-free.

I. Voluntary Provident Fund (VPF)

With this scheme, you can make an additional contribution of up to 100% of your basic salary and dearness allowance over and above your contribution to the EPF. You get an interest rate of 8.5% (at present) on your investment in this scheme.

  1. Investment:

    Only salaried employees are eligible for VPF contributions. This option is usually available to the employees of specific institutions or those who receive their salaries through a specified salary account.
  2. Tax Benefits:

    Tax-deduction up to Rs 1.5 lakhs of contribution and tax-free partial withdrawals permitted after 5 years of investment.
  3. Withdrawals Facilities:

    Loan facility is available from the account in case of emergency, or else you can withdraw the money from this account for:

    • Medical bills
    • Child’s higher education or marriage
    • Home purchase or construction

Voluntary Provident Fund

J. Employees Provident Fund (EPF)

EPF is a long-term saving scheme that offers you financial security post-retirement. The employer and employee contribute 12% of the monthly salary in the PF account. The interest rate in this scheme is 8.5%. Your contribution to this scheme is eligible for tax deduction under Section 80C.

Where does your Monthly EPF Contribution Go?

Your monthly EPF contribution is divided under the following heads towards different objectives:

  1. 3.67% to Employees Provident Fund (EPF)
  2. 8.33% to Employees Pension Scheme (EPS)
  3. 0.5% to Employees' Deposit Linked Insurance (EDLI)
  4. 1.1% & 0.01% towards the respective Admin Charges for EPF and EDLI

Benefits of Employee Provident Fund

K. Pradhan Mantri Jan Dhan Yojana

This is a saving scheme tailor-made for people below the poverty line. The account holder can make use of the scheme for reinvestment.PMJDY is highly suitable for people below the poverty line because they don't have to maintain any minimum balance in their accounts. As part of this saving and investment scheme, they receive accidental insurance of Rs 1 lakh and a life cover of Rs 30,000.

Benefits of PMJDY

  1. Zero balance savings account
  2. Debit card facility
  3. Interest on deposited money
  4. Accidental insurance of Rs. 2 lakhs
  5. Overdraft facility for eligible investors
  6. Receive the benefits into your account for central government’s social security schemes and subsidies

Pradhan Mantri Jan Dhan Yojana

L. National Pension Scheme (NPS)

NPS is an initiative by the Central government that aims to give a reliable and secure source of monthly income after retirement. National Pension Scheme is considered one of the best online saving and investment schemes in India. You can easily register online by visiting the portal and open an account using your AADHAR details. The amount of contribution in this saving and investment scheme is from your monthly salary. Your employer contributes an equal amount equal to your contribution.

  1. Any Indian Citizen including NRIs can invest in NPS Tier-I (default) account, except for the defense personnel.
  2. You can invest any amount in the NPS Tier-I account. However, the tax benefit is available only up to the following limits:
    • If you are a central government employee, the contribution will be 14%
    • For other employees, the contribution is 10%
    • Self-employed investors can invest up to 20% of their annual income
    • Employer's contribution up to the limits given above is exempt from tax, anything more will be taxable as salary
    • Employees and self-employed investors can invest up to Rs. 50,000 more, above your respective limits, and claim additional tax-deduction.
    • Upon retirement, you can withdraw a maximum of 60% of your total corpus as a lump sum, and it will be tax-free. The remaining 40% must go to an annuity plan for a monthly pension income after retirement.

National Pension Scheme

Benefits of Investing in Saving Schemes in India

Saving schemes are an important vehicle to channelise your regular savings to build for your future. Various saving schemes in India resolve different challenges of your financial planning . For example, plans like ULIP, NPS, PPF, etc. help you build wealth over time. On the other hand saving schemes like SCSS, Post Office Monthly Income Scheme, pension plans, etc. help you turn your wealth into a stable stream of income.

You can also invest in saving schemes to reduce your income tax liability. However, you should always keep your financial goals in mind while selecting a savings scheme for investment.

  1. Safety:

    Most saving schemes are backed by the government of India. The returns are guaranteed and secured.
  2. Easy to Use:

    These schemes are designed and customized to offer you seamless and streamlined application and maintenance
  3. Wide Range of Services:

    There are different types of saving schemes for your different needs - tax savings, retirement, support education of a child, etc.
  4. Retirement Funds:

    Investing in the best saving scheme can prove to be beneficial for you during the retirement years. You can use such saving schemes to build your retirement corpus.
  5. Long-term Benefits:

    Saving schemes can help you achieve your long-term goals and milestones smoothly.
  6. Tax Savings:

    Saving schemes help in saving taxes as they are eligible for tax deductions under the Income Tax Act.

Comparison of Different Types of Saving Schemes

Saving Schemes Eligibility Investment Tenure Investment Amount Tax Savings
National Saving Certificate (NSC) Indian Citizen & Resident Min & Max: 5 Years Min: Rs 100 Max: No Limit Only investment is exempt
Senior Citizen Saving Scheme (SCSS) Indian Residents 60 years or above
55+ if on VRS
50+ for Defence Personnel
Min & Max: 5 years + 3 year extension Min: Rs 100 Max: No Limit Only investment is exempt
Recurring Deposits (RD) Any Indian Resident or NRI Min & Max: 12 months to 120 months Min: Rs 500 Max: No limit No exemption
Post Office Monthly Income Scheme (POMIS) Resident Indians only Min & Max: 5 years Min: Rs 1000 Max: Rs 4.5 lakhs (individual a/c) Rs 9 lakhs (joint account) No exemption
Public Provident Fund (PPF) Resident Indians Only Min & Max: 15 years + 5 years ext. (no limit) Min: Rs 500 p.a. Max: Rs 1.5 lakhs p.a. Investment, accrued interest & maturity all are exempt
Kisan Vikas Patra (KVP) 18 years+ Indian Residents Min & Max: 124 months Min: Rs 1000 Max: No Limit Only investment is exempt
Sukanya Sammriddhi Yojana (SSY) Parents/ Guardians of a girl child below 10 years of age Min & Max: Until the girl child attains majority, up to 21 years Min: Rs 500 p.a. Max: Rs 1.5 lakh p.a. Investment, accrued interest & maturity all are exempt
Atal Pension Yojana Indian Citizens between 18 to 40 years of age Min & Max: 60 – entry age Min: Rs 42 p.m. Max: Rs 1318 p.m. Investment, accrued interest & maturity all are exempt
Voluntary Provident Fund (VPF) Salaried Employees in India Min & Max: Age at retirement – entry age Min: Voluntary Max: 100% of salary Investment, accrued interest & maturity all are exempt for notified VPF scheme
Employees Provident fund (EPF) Salaried Employees in India Min & Max: Age at retirement – entry age Min: 12% of Salary Max: 100% of salary Investment, accrued interest & maturity all are exempt
Pradhan Mantri Jan Dhan Yojana Indian Residents without another Bank Account Min & Max: No limit Min: Zero balance Max: up to Rs 1 lakh No tax benefits, but no TDS as well
National Pension Scheme (NPS) Indian Citizens between 18 – 70 years Min & Max: 60 – entry age, can continue till 70 years of age Min: Rs 500 p.a. Max: No Limit Investment exempt, maturity value exempt up to 60% of fund value

Difference Between Saving and Investment Schemes & Saving Plans

The best saving and investment schemes in India, as we have seen, are financial instruments that help you achieve your financial goals by investing in instruments that give fixed and guaranteed returns. On the other hand, saving plans are a life insurance plan that also helps achieve your short and long-term goals and provides insurance coverage.

Some of the best online saving and investment plans in India are offered by life insurance companies including Canara HSBC Life Insurance.

Following are the differences between the two:

Feature Saving Schemes Saving Plans
Purpose Secured returns Good returns with life cover
GOI Backing Yes No
Risk Level Low Depends on the type of product
Investment Tenure Short to long term Long term
Returns Low to medium Medium. Depends on the product
Fixed Returns Yes Not always
Life Insurance No Yes

How to Find the Best Saving Scheme for Investment?

Below are three easy and quick steps you can follow to find the best online saving and investment scheme in India:

  1. Understand your purpose: The first step is to understand the purpose of your investment and define it in these terms:
    • How much you are investing?
    • When do you want to receive the returns?
    • Do you need tax benefits on the saved money?
  2. Shortlist the saving schemes in line with your purpose: Based on the amount of investment and time you have before you need the money for a goal, you can short-list different saving schemes. The purpose should be to invest once and continue with the same saving scheme until you need the money back.
  3. Aim for Maximum Growth: Depending on the time you have and your risk appetite, you can choose to invest in either equity or fixed income (debt) schemes. If your purpose is tax-saving as well, you can only choose out of those schemes which offer tax benefit on the invested amount. E.g., NSC, PPF, ELSS, etc. but not KVP or POMIS.

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Saving Schemes in India – FAQs

Small saving schemes are investment plans launched by GOI to promote savings and provide a venue for small savers to grow their money. These schemes are commonly offered by all Post Office branches and scheduled nationalized banks. These schemes usually do not deduct TDS on invested money.

Senior Citizen Savings Scheme (SCSS) and PPF are two of the best saving schemes for 60+ investors. SCSS allows lump sum investment of retirement benefits up to Rs. 15 lakhs for retirees aged 55 years. Both schemes offer a safe return on investments and tax savings on invested money.

Any Indian resident over 18 years of age can open a PPF account. There is no maximum age limit to open a PPF account which means even senior citizens can invest in PPF.

Yes, most savings schemes are transferable including NSC. You can transfer your NSC account from the current bank to any other bank (or post office) across India. Only when your NSC account has reached maturity, you are not allowed to transfer your account.

Yes, the interest you receive on NSC is taxable. Your investment in NSC is deductible under Section 80C of the Income Tax Act. The interest you receive every year is re-invested, and it comes under Income from Other Sources and hence taxable.

Employees saving plans are offered by an employer to their employees in which they can invest a part of their income for their short and long-term goals.

Ministry of Finance announces PPF interest rates every quarter. For the quarter of April-June 2021, the PPF account has an interest rate of 7.1% per year.

No, the interest rate may change from time to time for these schemes. Usually, the government updates the interest rate every 3 to 6 months.

There is a wide variety of saving schemes and you can choose one depending on your financial situation. Assess your financial milestones and how well you have been aligned to the goals, choose a scheme accordingly. You can also consider best saving plans to fulfil your financial and protection needs. Given below are some of the best saving schemes for investment in India-

  • National Saving Certificate (NSC)
  • Senior Citizen Saving Scheme (SCSS)
  • Recurring Deposits (RD)
  • Post Office Monthly Income Scheme (POMIS)
  • Public Provident Fund (PPF)
  • Kisan Vikas Patra (KVP)
  • Sukanya Samridhi Yojana (SSY)
  • Atal Pension Yojana
  • Voluntary Provident Fund (VPF)
  • Employees Provident fund (EPF)
  • Pradhan Mantri Jan Dhan Yojana (PMJDY)
  • National Pension Scheme (NPS)

There are a few saving schemes that offer tax exemption to the investors and they are:

  • Public Provident Fund
  • Equity Linked Savings Scheme
  • National Saving Certificate
  • Employee Provident Fund

Here are the top 5 popular small saving schemes available in India:

  • Sukanya Samriddhi Yojana
  • Public Provident Fund
  • Post-Office Monthly Income Scheme
  • Senior Citizen Savings Scheme
  • National Savings Certificate

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