A Savings Scheme is an efficient way to save & invest your money. Here are some great Savings Scheme options for you.
When it comes to saving money, all you need is consistency. While some prefer the good old Savings Account way to set aside a certain sum every month, some others would consider investing in Mutual Funds. To each his own.
But, we want to let you know that if you’re considering saving money, then the options are not limited to just Mutual Funds and Fixed Deposits. Yes! You heard us. Today we will take you through some great saving options in the form of savings schemes.
Buckle up and keep reading.
While there are many Saving Schemes options, we will enlighten you about some of the very popular ones in this article.
Additional Reading: Benefits Of Investing In A Savings Scheme
What Is A Savings Scheme?
In our country, every adult is encouraged to open a savings bank account as soon as they begin earning or they turn 18. It is one of those age-old habits that our ancestors practised with a new-age twist to it. Sure, our ancestors may have buried their gold coins in the earth for a rainy day. But, on the other hand, we deposit whatever we save into a bank account these days.
Stretching this same logic a little bit more is when people start looking at Savings Scheme. A Savings Scheme is nothing but a savings option that has a cap on the amount invested and the tenure. It is usually a fixed sum that is set aside consistently and at maturity, a calculated sum is given to the investor.
Most Savings Schemes are regulated by the government but readily available with most public and private sector banks and other financial institutions. They are long-term and cannot be withdrawn before their due date. And if you do, you lose out on the compounded interest earned. Some schemes also have great tax benefits.
So, let’s cut to the chase and go through the different types of savings schemes that are available for you today!
Additional Reading: Must Have Saving Schemes For Savers Great And Small
Types Of Savings Schemes Available
In terms of popularity, the NSC is the most popular savings scheme available in India. There is no maximum limit for investing in the NSC and there is 0% tax deduction at source (TDS). So, it’s a win-win.
You can get an NSC at impressive interest rates starting from 8.50% onwards. This investment is transferrable from one person to another through its lifetime. The usual tenure for an NSC is anywhere from 5 to 10 years.
Moreover, an NSC can also be used as collateral while applying for a loan with a bank. How cool is that?
Here are the list of documents that need to be submitted while purchasing an NSC. You can get an NSC at your nearest Post Office.
National Savings Scheme (NSS)
Slightly different from the NSC, the NSS has an Income Tax exemption on the principal amount invested as well as interest earned up to Rs. 9,000. The interest is compounded annually and the interest rates are rather competitive at 9% per annum.
The tenure for an NSS is set at four years and this cannot be pledged with the bank while applying for a loan.
The PPF is a tax-free savings avenue and interest earned on deposits in the PPF account is not taxable. The government has started this scheme to encourage people to save up for their retirement corpus.
You can open a PPF account at any nationalised bank or post office. The investment period is slightly longer and is set up at 15 years. You are permitted to withdraw from the seventh year onwards. The minimum investment amount is set at Rs. 100 while opening the account, but you need to have invested Rs. 500 at least during the financial year to keep the account open.
You need to make a deposit in the account on a yearly basis in order to keep the account active.
Psst…Learn all about the PPF tax benefits over here!
Additional Reading: The Shocking Truth: PPF vs NSC – Which One’s The Better Bet?
Getting a Post Office Savings Scheme is pretty much like getting a Savings Account opened. This is the least risky investment that is most suited to senior citizens and people who are looking for guaranteed returns.
You can open a Post Office savings account with an investment as little as Rs. 20. The maximum investment amount in a single account is capped at Rs. 1 lakh, whereas, in a joint account you can hold an investment of up to Rs. 2 lakhs.
The interest rates on this account are only up to 4% and you can withdraw your investment whenever you feel like. However, the account can be transferred from one branch to another, and so can the nomination.
Additional Reading: Should You Invest In Post Office Schemes Or Mutual Funds?
This is a saving option exclusively for senior citizens in India. The applicant needs to be 60 years old or more. However, if you are within the age bracket of 55 – 60 years, then you can choose this account in case you wish to opt for the VRS (Voluntary Retirement Scheme). In such a case, your SCSS will be opened one month post your retirement.
The interest rates for an SCSS start from 9.3% per annum and is payable on any of the following dates in a year – 31st March, 30th June, 30th September and 31st December. Only one deposit is allowed in the account and the amount needs to be deposited in multiples of Rs. 1,000 and should not exceed a maximum of Rs. 15 lakhs.
The tenure on this account is 5 years and this account tenure can be extended by another 3 years at maturity. The account is also transferable from one post office/bank to another. TDS is deducted at source on the accumulated interest if the latter exceeds Rs. 10,000 per annum.
This saving scheme is mainly aimed at getting people in semi-urban or rural areas to invest their money. This scheme has an interest rate of 8.7% and has assured returns. Due to this low-risk feature of the scheme, it is quite popular among people living in semi-urban and rural locations.
You can open a Kisan Vikas Patra by visiting your nearest post office. This scheme can be opened by any adult resident Indian. An applicant can open this scheme on behalf of a minor too. However, Hindu Undivided Family (HUF) and Non-Resident Indians (NRIs) are not eligible to open this account.
There are three types of KVP:
- Single holder type certificate – this type of certificate is issued to an adult as an individual or to a minor, or to an adult on behalf of a minor
- Joint A type certificate – This is issued to two adults jointly and is payable to both the owners or to the survivor
- Joint B type certificate – This Type B Kisan Vikas Patra is issued jointly to two adults and is payable to either of KVP holders jointly or to the survivor.
This saving scheme is one of the most popular schemes that have been started by our Prime Minister Sri Narendra Modi. This scheme targets the empowerment of the girl child and thus offers a means to save for her. The best part about this scheme is that the money invested in this scheme can only be withdrawn by the girl child upon maturity.
The rate of interest on this scheme stands at 8.1% per annum and is usually revised every year. The minimum amount that needs to be deposited is Rs. 1,000 and the maximum is Rs. 1,50,000 per year.
The SSY attains maturity in 21 years from the date of issue, and the account holder is expected to pay for the account deposit for a total duration of 14 years. This account is transferable across any region in India.
Additional Reading: Changes In The Sukanya Samriddhi Yojana Scheme
This scheme has been named after the late Prime Minister of India Sri. Atal Bihari Vajpayee and is aimed at providing a savings platform for the weaker section of the society. This scheme is specifically a pension option for individuals who are working in the unorganised professional sectors and aren’t covered under any structured pension plans.
The applicants can pay a very low premium yet enjoy robust earnings from this saving scheme. Applicants must be between the ages of 18-40 years. The applicant is expected to pay premiums for a minimum duration of 20 years.
This scheme requires the applicant to have an active Savings Account.
Employee Provident Fund (EPF)
This saving scheme was started in the year 1952 and its administration is carried out by the Central Board Of Trustees which comprises of representatives from the Government, employers and employees. Employees Provident Fund Organisation (EPFO) assists the Board which falls under the purview of the Government through the Ministry of Labour and Employment.
The aim of this scheme is to provide a retirement savings plan for employees across the country. The EPF is a corpus of funds built through regular monthly contributions made by an employee and their employer. The amount contributed is based on a fixed rate.
Both the interest earned and the total amount withdrawn upon maturity is tax-free.
Additional Reading: The EPF Withdrawal Rules Just Got Cooler
National Pension System (NPS)
The National Pension Scheme is a contribution scheme launched by the Indian Government which offers an investment option to employees. This is specifically aimed at employees with the Central Government but excluding the ones in the Armed Forces. However, since 2009 NPS is now open to every Indian citizen.
The NPS subscribers are issued a Permanent Retirement Account Number (PRAN) which remains unchanged throughout the length of the scheme. Here are some of the features of this scheme.
- NPS subscribers are required to make a minimum contribution of Rs. 500 at the time of opening the account.
- The NPS is open to all Indian citizens between the age of 18 – 65.
- The account matures only when the subscriber reaches retirement (age).
- 60% of the corpus can be withdrawn on maturity and the remaining 40% is used to purchase annuities.
- Contributions made to the NPS are eligible for tax deductions under Section 80C of the Income Tax Act.
Additional Reading: Is Investing In NPS Worth It?
Investing in a savings scheme is a smart move. But if you’re looking for higher returns then we suggest something a little savvier. Ever heard of Mutual Funds? Go ahead, check them out.