Modern banking is a big supporter of saving schemes and encourages patrons to open clever investment instruments that are intended to ‘horde’ sums of money for a specified duration, earn periodic interest and offer said investors the peace of mind through the unfailing realization that such ‘parked’ monies are working 24×7 for them, aggressively growing and completely protected.
Advantages of Saving Schemes in India
Saving anything (money mostly) can be considered part of the Indian tradition that attributes to responsible and cultured living. The point wherein an individual earns his/her first salary and opens up a small savings account, the person is considered to be all ‘grown-up’ and many shades better than his/her careless, spendthrift and antisocial self from the teenage and late adolscent years. Why must you subscribe to saving schemes in India? Read on…
- Readily Available- The Indian government, through both the public and private sector banking system, offers a multitude of saving schemes that are easy to enroll with and are perfectly suited for the strategic as well as casual investor. Their simplicity and abundance makes them a much preferred savings option.
- Long Term Planning- Quite opposite to the run and burn concept, long term savings are focussed on a time in the future when abundant monies will be required to comply with an expected requirement. Retirement, marriage of a son/daughter, long awaited foreign trip, etc. demand strategic, long term financial planning.
- Wide Ranges of Products- In India, saving schemes include a plethora of different products that are intended for a wide segment of potential customers. From the Public Provident Fund (employed- retirement fund) and Employee Provident Fund to Kissan Vikas Patra (Agriculturists) and Sukanya Samriddhi Yojana (exclusively for the girl child), the choices are many and super specialised.
- Simple to Enroll- Limited documentation, clearly defined procedures and the Indian Government’s backing ensures that these saving schemes are simple to opt for and safe to be locked onto.
Types of Saving Schemes in India
In terms of their popularity, the following Government of India saving schemes lead the pack,
National Saving Certificate (NSC)
National Saving Scheme(NSS)
Consistently, two of the most well followed and popular saving schemes in India, NSC and NSS offer great security alongside robust reliability in terms of returns.
Features of National Saving Certificate
- No maximum limit for investment with 0% tax deduction at source.
- Impressive interest rate at 8.50% (NSC-VIII issue) and 8.80% (NSC-IX issue).
- Tax savings per 80C of Income Tax Act for investments in excess of Rs.1,00,000 per annum.
- Very attractive returns, a nominal investment of Rs.100 will yield Rs.234.35 in 10 years.
- These certificates can be transferred from person to another once through the lifetime of the certificate.
- The tenure of an NSC portfolio is 5 and 10 years for the NSC VIII Issue and NSC IX Issue respectively.
- The interest accumulated annually is reinvested in line with the provisions of Section 80C of IT Act. Interest compounded on a half-yearly basis.
- Can be used as collateral when applying for a bank loan.
Features of National Saving Scheme
- Income tax exemption on principal amount as well as earned interest upto Rs.9,000.
- Interest compounded annually.
- Cannot be pledged as security when applying for any bank loan.
- Impressive interest rate of 9% per annum.
- The tenure of an NSS portfolio is four years.
Public Provident Fund (PPF)
A potent financial instrument that is tuned at savings in general and tax savings in particular, the PPF concept was floated by the National Savings Institute, Finance Ministry of India, in 1968. The PPF scheme offers a plethora of features and benefits that make it a popular option in its class.
- Interest rate of 8.70% p.a is compounded annually.
- Minimum yearly investment of just Rs.500 to a maximum of Rs.1,50,000.
- The maturity period of a PPF account is 15 years. However, this can be extended for upto 5 additional years.
- A maximum of 12 deposits can be made in a financial year. Lump sum payments are also an option.
- Joint accounts aren’t possible, plus, PPF accounts cannot be closed before the maturity period.
- PPF accounts can be moved from one bank/post-office to another.
- Accumulated interest is completely tax free.
- PPF accounts save tax under Sec. 80C of the IT Act.
- Applicant can avail loan with the PPF account as collateral from the 3rd financial year.
Post Office Saving Scheme
The Post Office Saving Schemes include a plethora of products that offer the reliability associated with a government run savings portfolio, and the full-scale treatment that is characteristic of most high-end saving and investment schemes in India. A fair list of such products are as follows-
- Post Office Savings Account
- 5 Years Post Office Recurring Deposit Account
- Post Office Time Deposit Account
- Post Office Monthly Income Account Scheme
- Senior Citizens Saving Scheme
- 15 Years Public Provident Fund Account
- National Savings Certificates (NSC)- 5 Years NSC (VIII Issue) and 10 Years NSC (IX Issue)
- Kisan Vikas Patra (KVP)
- Sukanya Samriddhi Account
Senior Citizen Saving Scheme (SCSS)
This saving scheme option is exclusive to senior citizens in India. Ideally, the applicant must be 60 years or more but those between the ages of 55-60 years, are retired or have opted for VRS, can also apply, provided that the account is opened within one month of the receipt of their retirement benefits. The salient features of SCSS are as follows-
- Interest rate of 9.3% p.a, payable on any of the following dates in an year- 31st March, 30th June, 30th Sept and 31st December.
- The tenure of a SCSS portfolio is 5 years.
- The applicant can make only one deposit into the account. This amount should be in multiples of Rs.1,000 and must not exceed a maximum of Rs.15 lakhs.
- The account can be transferred from one post office/bank to another.
- The SCSS account can be closed prematurely, provided the applicant shells out 1.5% of the deposit amount in the first year and 1.0% of the deposit amount in the second year.
- Post the maturity of the account, the tenure can be extended for a further 3 years. After completing 1 year of this extension period, the account can be prematurely closed without any deductions.
- TDS is deducted at source on the accumulated interest if the latter exceeds Rs.10,000 p.a.
- SCSS accounts save tax as per the Section 80C of the Income Tax Act, 1961.
Kisan Vikas Patra (KVP)
First launched in 1988, the Kisan Vikas Patra (KVP) is one of the premier and popular saving scheme offering from the Indian Postal Department. This product has had a very chequered history- initially successful, deemed a product that could be misused and thus terminated in 2011, followed by a triumphant return to prominence and popular consumption in 2014. The salient features of KVP are as follows-
- The grand USP- Money invested by the applicant doubles in 100 months (8 years, 4 months).
- KVPs are available in the following denominations- Rs.1000, Rs.5000, Rs.10,000 and Rs.50,000.
- The minimum purchase value for the KVP is Rs.1000. There is no maximum limit.
- KVPs are available at all departmental post offices across India.
- These certificates can be prematurely encashed after 2 ½ years from the point of issue.
- KVPs can be transferred from one individual to another and from one post office to another.
Sukanya Samriddhi Account
A premier saving scheme offering from the Indian Ministry of Finance, the Sukanya Samriddhi Yojana (SSY) Accounts are aimed at ensuring a bright future for the girl children in India. This ambitious and resourceful scheme was launched by the honourable Prime Minister of India, Mr. Narendra Modi, and has quickly emerged as a popular savings scheme that aims to provide financial backing for a girl child’s varied, lifelong aspirations. The thoughtful features of this scheme are as follows-
- Attractive interest rate at 9.2% p.a. This is infact one of the highest rates of interest in its class.
- Account can be opened at any departmental post office or authorized banks in India.
- The opening amount for the SSY account is Rs.1000. Thereafter, deposits can be made in multiples of Rs.100. The minimum deposit into the account must amount to Rs.1000, the maximum limit is Rs.1,50,000 per year.
- The SSY account attains maturity in 21 years from the date of issue. However, the account holder is expected to pay into the account for a total duration of 14 years.
- A SSY account can be transferred from one post office/bank to another, anywhere in India.
Atal Pension Yojana
The central premise of this scheme is to provide the pension option to individuals who are working in the unorganized professional sectors and aren’t covered by any regular pension plans. Applicants pay a very low premium and enjoy the fruits of a robust and reliable pension plan. The salient features of the Atal Pension Yojana are as follows-
- Citizens of India between the age groups of 18-40 years can apply.
- The applicant is expected to regularly pay premiums for a minimum duration of 20 years. Since most individuals step into the pension years at the age of 60- the upper limit for application is set at 40 years.
- The applicant must have an active savings bank account.
- The applicant must not have subscribed to any other statutory social security schemes.
- Actual pension amount depends on the tenure of premium payment. The higher number of premiums paid, the higher will be the payable pension amount.
