You cannot convince some traditional investors to put their money in market-related schemes. Despite all that the stock market has offered since its inception, many investors prefer the conventional way of growing their savings and earnings by putting them in government-backed schemes.
The government has introduced an array of programs tailored to address the distinct needs of diverse societal segments. These programs encompass various characteristics, encompassing aspects like duration, eligibility criteria, maximum deposit limits, and interest rates. Among the most widely embraced programs are:
National Savings Scheme
The National Savings (Monthly Income Account) Scheme, backed by the government, provides a stable interest rate and monthly interest payouts, making it an attractive choice for investors seeking a dependable income stream.
This scheme is accessible to all Indian citizens, including minors. The minimum deposit requirement is ₹1000, with a maximum limit of ₹9 lakh for an individual account and ₹15 lakh for a joint account.
The current interest rate for the period of July 1 to September 30, 2023, stands at 7.4 per cent, with monthly compounding. The scheme matures after five years, but it can be prematurely closed after one year with a penalty. This penalty amounts to two per cent of the deposit if the account is closed within one year but before three years, and one per cent if closed after three years.
One of the scheme’s key advantages is its safety and security, as the government guarantees the interest payments, eliminating default risk. Furthermore, it qualifies for tax deductions under Section 80C of the Income Tax Act.
Benefits of investing in the National Savings (Monthly Income Account) Scheme include:
- Fixed interest rate
- Monthly income
- Safe and secure investment
- Eligibility for tax deductions
- Tax deduction benefits under Section 80C of the Income Tax Act, 1961
National Savings Time Deposit Account
The National Savings Time Deposit Account (TD) is a government-backed savings scheme that guarantees a fixed interest rate. This scheme is accessible to all Indian citizens, including minors.
Here are the primary features of the National Savings Time Deposit Account:
Four account types are available: 1-year, 2-year, 3-year, and 5-year durations.
- The minimum deposit requirement is Rs. 1000, with a maximum deposit limit of Rs. 4.5 lakhs for individual accounts and Rs. 9 lakhs for joint accounts.
- The Time Deposit account offers varying interest rates: 6.9 per cent per annum for the 1-year account, 7.0 per cent per annum for the 2-year account, seven per cent per annum for the 3-year account, and 7.5 per cent per annum for the 5-year account.
- Interest accrues and is paid at the end of the maturity period.
- Premature account closure is possible after six months but incurs a penalty. This penalty amounts to 1 per cent of the deposit if the account is closed within six months but before one year. No penalty is imposed if the account is closed after one year.
- The Time Deposit account offers a secure investment option with government-backed interest payments, eliminating default risk.
- It qualifies for tax deductions under Section 80C of the Income Tax Act.
The benefits of investing in the National Savings Time Deposit Account include:
- Fixed interest rate
- Secure investment
- Eligibility for tax deductions
- A relatively short lock-in period of just six months
If you seek a secure investment option with a guaranteed interest rate, the National Savings Time Deposit Account is worth considering.
Here are some important considerations before investing in the Time Deposit scheme:
- The interest rate remains fixed throughout the entire maturity period, regardless of market fluctuations.
- The deposited amount is locked in until maturity, and early withdrawal may result in penalties.
- Returns from the TD scheme are subject to taxation, with interest income added to your taxable earnings.
- Overall, the National Savings Time Deposit Account is an attractive choice for those seeking a secure investment with a fixed interest rate.
Senior Citizens Savings Scheme
The Senior Citizens Savings Scheme (SCSS) is a government-backed savings plan tailored for senior citizens, offering a fixed interest rate and government-backed investment security.
Here are the primary features of the Senior Citizens Savings Scheme:
- Available to all Indian citizens aged 60 or above.
- A minimum deposit requirement is Rs. 1,000, with a maximum limit of ₹15 lakh.
- The scheme provides an attractive interest rate of 8.2 per cent per annum, with interest payments made quarterly.
- The scheme has a five-year maturity period, extendable for an additional 3 years post-maturity.
- Accounts in this scheme can be opened at authorized post offices or banks.
- This scheme is eligible for tax deductions under Section 80C of the Income Tax Act.
Benefits of investing in the Senior Citizens Savings Scheme include:
- Fixed interest rate
- Government-backed security
- Eligibility for tax deductions
- Option to extend for an additional three years
If you are a senior citizen seeking a secure investment with a guaranteed interest rate, the Senior Citizens Savings Scheme is a wise choice. Consider the following factors before investing in the SCSS scheme:
- The interest rate remains constant for the entire 5-year tenure, unaffected by market rate fluctuations.
- Funds are locked in for five years, with early withdrawals incurring penalties.
- The returns from the SCSS scheme are subject to taxation, with interest earnings added to your taxable income.
Overall, the Senior Citizens Savings Scheme provides a reliable investment avenue for senior citizens in search of a secure and fixed-interest option.
Public Provident Fund Scheme
The Public Provident Fund (PPF) stands as a long-term savings scheme firmly supported by the Government of India. It remains a favored investment avenue for numerous Indians due to its fixed interest rate, tax advantages, and lock-in period.
Here are the primary features of the PPF scheme:
- Accessible to all Indian citizens.
- The minimum deposit requirement is Rs. 500, with a maximum limit of Rs. 1.5 lakhs per financial year.
- PPF offers a competitive interest rate of 7.1 per cent per annum, with interest compounded yearly.
- The scheme matures after 15 years, extendable for an additional 5 years post-maturity.
- PPF accounts can be opened at authorized post offices or banks.
- Qualifies for tax deductions under Section 80C of the Income Tax Act.
The benefits of investing in the Public Provident Fund include:
- Fixed interest rate
- Eligibility for tax deductions
- A 15-year lock-in period
- Government-backed security
For those seeking a secure and tax-efficient investment option, the Public Provident Fund is a strong consideration.
Consider the following factors before investing in the PPF scheme:
- The interest rate remains constant for the entire 15-year tenure, regardless of market interest rate fluctuations.
- The funds are locked in for 15 years, with early withdrawals incurring penalties.
- Returns from the PPF scheme are taxable, with interest earnings added to your taxable income.
In conclusion, the Public Provident Fund represents an appealing investment choice for individuals seeking a secure, tax-advantaged option.
Sukanya Samriddhi Account
The Sukanya Samriddhi Account (SSA) stands as a government-backed savings plan expressly designed to ensure financial security for girls. This scheme guarantees a fixed interest rate, and the government secures the invested amount.
Here are the primary features of the Sukanya Samriddhi Account:
- Accessible to all Indian citizens.
- An SSA can be opened in the name of a girl child below 10 years of age.
- The minimum monthly deposit requirement is Rs. 250, with a maximum annual deposit limit of Rs. 1.5 lakhs.
- The SSA offers an attractive interest rate of eight per cent per annum, with yearly compounding.
- The maturity period for an SSA is 21 years.
- The SSA accounts can be established at authorized post offices or banks.
- This scheme qualifies for tax deductions under Section 80C of the Income Tax Act.
Mahila Samman Saving Certificate
The Mahila Samman Saving Certificate (MSSC) scheme, introduced in the 2023 Union Budget, is a novel small savings plan accessible to all Indian women and girls.
Key features of the MSSC scheme include:
- A maximum deposit limit of ₹2 lakh
- A competitive interest rate of 7.5 per cent per annum.
- A two-year tenure.
- Allowance for partial withdrawals after one year.
- Eligibility for tax deductions under Section 80C of the Income Tax Act.
To open an MSSC account, simply visit any authorized post office or bank, and provide your PAN card, Aadhaar card, and bank account details. Interest in the MSSC scheme is compounded quarterly, ensuring that interest earned is periodically added to the principal, and subsequent interest is calculated on the new amount. Interest accrued in the MSSC scheme is disbursed at the end of the tenure, offering the choice of receiving it in cash or having it credited to your bank account.
The MSSC scheme is an excellent option for women and girls seeking a secure investment with a fixed interest rate. Additionally, the flexibility of partial withdrawals can be invaluable in emergencies.
The benefits of investing in this scheme include:
- Fixed interest rate
- Eligibility for tax deductions
- Allowance for partial withdrawals
- Government-backed security
For women and girls in search of a secure and reliable investment, the Mahila Samman Saving Certificate scheme is a commendable choice.
Kisan Vikas Patra
Kisan Vikas Patra (KVP) is a certificate scheme offered by the Indian post office, designed to double your one-time investment in approximately 9.5 years (115 months). For example, a Rs. 5,000 Kisan Vikas Patra will mature into ₹10,000. In this article, we will delve into the scheme’s features and potential benefits.
The minimum investment starts at ₹1,000, with no upper limit. A lump sum investment today will grow to double the amount at the end of the 115th month. Originally intended for farmers to facilitate long-term savings, hence its name, it is now available to all.
To prevent potential money laundering, the government made it mandatory to provide PAN card proof for investments exceeding Rs. 50,000. For deposits of Rs. 10 lakh and above, income proofs (such as salary slips, bank statements, and ITR documents) must be submitted.
Kisan Vikas Patra serves as a low-risk savings platform, providing a secure avenue to invest funds for a specified duration. Additionally, it is mandatory to furnish the Aadhaar number as proof of the account holder’s identity.
The types of certificates available include:
Single Holder Type Certificate: Issued to an adult, either for themselves, on behalf of a minor, or to a minor.
Joint ‘A’ Type Certificate: Issued jointly to two adults, with payment either to both holders jointly or to the survivor.
Joint ‘B’ Type Certificate: Issued jointly to two adults, with payment either to either of the holders or to the survivor.
Eligibility for KVP investment includes:
- The applicant must be an Indian citizen.
- The applicant must be above 18 years of age.
- An adult can apply on behalf of a minor or a person of unsound mind.
- Hindu Undivided Family (HUF) and Non-Resident Indians (NRIs) are not eligible to invest in KVP.
Recurring Deposit Account Scheme
A recurring deposit (RD) account is a savings instrument where you regularly deposit a predetermined sum of money each month for a fixed period. Recurring Deposit accounts typically offer higher interest rates compared to regular savings accounts, and the deposited funds remain locked in for the entire duration. This makes RD accounts an attractive choice for individuals with specific financial goals, such as accumulating funds for a down payment on a home or a child's education.
Here are the key features of a recurring deposit account:
- Monthly fixed deposits.
- Typically, higher interest rates compared to regular savings accounts.
- Funds are locked in for the entire tenure.
- Withdrawals can only be made after the maturity period.
- RD accounts can be opened at any bank or post office.
To open an RD account, you'll need to provide your PAN card, Aadhaar card, and bank account details. You also select the tenure and the monthly deposit amount.
Interest on an RD account is calculated daily and compounded monthly. This means that each month, the interest earned is added to the principal amount, and subsequent interest is calculated based on this new total.
The interest accrued in an RD account is disbursed at the end of the tenure, with the option to receive it in cash or have it credited to your bank account.
The benefits of investing in a recurring deposit account include:
- Fixed interest rate
- Guaranteed returns
- Lock-in period, which prevents impulsive withdrawals
- Potential tax benefits
For those seeking a secure and reliable investment with assured returns, an RD account is a prudent choice. The lock-in period also promotes disciplined savings toward specific financial goals.
Consider the following factors before investing in an RD account:
- The interest rate remains constant throughout the entire tenure, regardless of fluctuations in market interest rates.
- Funds are locked in for the entire tenure, and early withdrawals may incur penalties.
- Returns from an RD account are subject to taxation, with interest earnings added to your taxable income.
Post Office Saving Account
A Post Office Savings Account (POSA) is a secure savings account accessible at any post office in India. It provides a reliable investment avenue with a fixed interest rate.
Here are the primary features of a Post Office Savings Account:
- Minimum deposit requirement of ₹20.
- No fixed maximum deposit limit.
- Offers a four per cent per annum interest rate.
- Interest is credited quarterly.
- Open to all Indian citizens.
- Can be opened in the name of a minor.
- Operable by single or joint account holders.
To open a Post Office Savings Account, you'll need to furnish your PAN Card, Aadhaar card, and address proof. Online account opening is also available through the India Post website. The interest in a Post Office Savings Account is credited quarterly and is calculated based on the minimum account balance during each quarter.
The interest earned in a Post Office Savings Account is subject to taxation, with the interest income being added to your taxable income and consequently liable to taxation. The benefits of investing in a Post Office Savings Account include:
- Security and reliability
- Fixed interest rate
- Eligibility for tax deductions
- Easy account opening and management
- No minimum balance requirement
For those seeking a secure investment with fixed interest rates, investing in government-backed schemes can help, especially, for individuals looking for safe ways to create wealth in the long run.
