What are saving schemes?
Saving schemes are financial vehicles that help people achieve their financial goals over a pre-decided period. These small savings schemes are rolled out by the public/private sector banks, the government of India, and financial institutions. The interest rate for these schemes are decided by the banks or the government and it is updated periodically. The amount of money you save through these small saving schemes can be used for any purpose you deem fit. Most people use the saved money for financial emergencies, higher education, marriage, during job loss, retirement, to reduce debt and more.
List of Top Performing Small Saving Schemes in India
Some of the Performing Small Saving Schemes in India are:
- Post Office Monthly Income Scheme (MIS)
- National Savings Certificate (NSC)
- Public Provident Fund (PPF)
- Post Office Time Deposit Scheme
- Senior Citizen’s Savings Scheme
- Post Office Savings Account
- Sukanya Samriddhi Yojana Scheme (SSYS)
- Kisan Vikas Patra (KVP)
- Chit Fund
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Post Office Monthly Income Scheme (MIS)
In Post Office Monthly Income Scheme (POMIS), you can invest a certain amount and receive a fixed amount of interest every month. You can invest in this scheme from any post office.- Tenure: 5 years
- Interest rate: 6.6%
- Maximum Investment: ₹ 4.5 lakh
- Minimum Investment: ₹ 1,500
- Tax on interest: Yes
- Deduction on Principal: No
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National Savings Certificate (NSC)
This tax saving investment can be purchased from any post office. It is a low risk investment that guarantees fixed return. Backed by the Indian government, this investment scheme is preferred by risk-averse investors or those wanting to diversify their portfolio.- Tenure: 5 years
- Interest rate: 6.8%
- Maximum Investment: None
- Minimum Investment: ₹100
- Tax on interest: No (Interest is tax-deductible)
- Deduction on Principal: Yes
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Public Provident Fund (PPF)
PPF is a popular long-term saving and investment product because it offers tax savings, safety, and returns. In 1968, PPF was first offered to the public by the Finance Ministry’s National Savings Institute.- Tenure: 15 years
- Interest rate: 7.1%
- Maximum Investment: ₹ 1.5 Lakh per year
- Minimum Investment: ₹ 500 per year
- Tax on interest: Not taxable
- Deduction on Principal: Yes
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Post Office Time Deposit Scheme
Post Office Time Deposit Account, an investment scheme offered by the India post is popular in rural and remote areas of the country where a relatively large segment of people are under-banked.- Tenure: 1-5 years
- Interest rate: 6.9% to 7.7% (Time deposits can be opened for 1 year, 2 year, 3 year and 5 years. Below is the interest payable annually but compounded quarterly)
Period Rate of interest (from 1st July to 31st September) One year 6.9% Two year 6.9% Three year 6.9% Five year 7.7% - Maximum Investment: None
- Minimum Investment: ₹ 200 per year
- Tax on interest: Yes
- Deduction on Principal: No (except tax-saver deposit with post office)
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Senior Citizen’s Savings Scheme
The Senior Citizens Savings Scheme (SCSS) is aimed at providing regular income to senior citizens after they reach age 60.- Tenure: 5 years
- Interest rate: 7.4%
- Maximum Investment: ₹ 15 Lakh
- Minimum Investment: ₹ 1,000
- Tax on interest: Yes
- Deduction on Principal: Yes
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Post Office Savings Account
Post Office Savings Account is similar to a regular savings account. It offers the option of full or partial liquidation of funds at very short notice in case of emergencies.- Tenure: None
- Interest rate: 4%
- Maximum Investment: None
- Minimum Investment: ₹ 500
- Tax on interest: Yes
- Deduction on Principal: No
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Sukanya Samriddhi Yojana Scheme (SSYS)
The SSYS is a government-backed deposit scheme for a girl child. Launched as a part of the ‘Beti Bachao Beti Padhao’ campaign, this scheme helps meet the financial needs of a girl child and comes with income-tax benefits under section 80C.- Tenure: 21Years
- Interest rate: 7.6%
- Maximum Investment: ₹ 1.5 Lakh
- Minimum Investment: ₹ 1000
- Tax on interest: No
- Deduction on Principal: Yes
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Kisan Vikas Patra (KVP)
Introduced by India Post in 1988, KVP is a small savings instrument that allows people to save for a long-term.- Tenure: 5 Years
- Interest rate: 6.9%
- Maximum Investment: None
- Minimum Investment: ₹ 1000
- Tax on interest: Yes
- Deduction on Principal: No
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Chit Fund
A chit fund is both a savings and credit product that has a predetermined value and is for a fixed period of time. A specific number of members contributes monthly until the end of the term.- Predetermined value and duration
- Credits and savings combined in a single scheme
- Lower interest rate than most money lenders
- Higher returns than saving accounts and bank FDs
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Small Saving Schemes Features At a Glance
| Small Saving Schemes | Interest Rates (p.a.) (FY 2020-21) | Minimum Deposit | Investment Period | Tax Deduction on Principal | Interest Taxable |
|---|---|---|---|---|---|
| Post Office Monthly Income Scheme (MIS) | 6.6% | ₹ 1,500 | 5 Yrs | No | Yes |
| National Savings Certificate (NSC) | 6.8% | ₹ 100 | 5 Yrs | Yes | No |
| Public Provident Fund (PPF) | 7.1% | ₹ 500 | 15 Yrs | Yes | No |
| Post Office Time Deposit Scheme | 6.9% – 7.7% | ₹ 200 | 1-5 yrs | No | Yes |
| Senior Citizen’s Savings Scheme | 7.4% | ₹ 1,000 | 5 yrs | Yes | Yes |
| Post Office Savings Account | 4% | ₹ 500 | None | No | Yes |
| Sukanya Samriddhi Yojana Scheme (SSYS) | 7.6% | ₹ 1000 | 21 Yrs | Yes | No |
| Kisan Vikas Patra (KVP) | 6.9% | ₹ 1000 | 5 Yrs | No | Yes |
| Chit Fund | Variable for each auction and depends on the number of members | Determined by the members by reaching a mutual consensus among each other | Duration depends on the number of the members | No | Yes |
Top Benefits of Small Saving Schemes
- Hassle-Free: The small saving schemes are easy to apply for and are best for urban as well as rural people. They are simple and easy to access, and hence they are highly preferred savings & investment options.
- Simple Procedure and Documentation:These saving schemes have streamlined processes and limited documentation. Moreover, they are backed by the government of India and hence are safe.
- Lucrative Investments:Some of these savings schemes are ideal for a long-term. Therefore, they can be excellent options for pension planning and retirement.
- Tax Benefits: While most of the small saving schemes are eligible for tax rebates under Section 80C, others have the interest earned exempt from the amount of taxation.
