1. National Savings Certificate (NSC)
1National Savings Certificate (NSC)
The National Savings Certificate (NSC) is a fixed-income savings plan that you can open with any post office in India. The government introduced it to encourage small investors, mainly those who fall under the small or mid-income categories, to invest while saving on income tax. It is primarily used for making small to medium investments and tax-saving purposes.
NSCs are available with two fixed maturity years: five and ten. Also, there is no limit on the maximum number of NSCs you can purchase. However, investments up to ₹1.5 lakh annually can earn a tax break, according to Section 80C of the Income Tax Act.
To begin with this scheme, you must buy a National Savings Certificate. The amount you choose will be considered your investment. After the investment is made, according to rates associated with the type of certificate bought, an interest rate is earned. As mentioned earlier, the maturity for these certificates is set to five or ten years from the date of purchase. The interest of 7.7%, on the other hand, is calculated on a yearly basis.
The minimum age to invest in this scheme is 18 years, but you can buy an NSC for a minor, as a joint account.
Learn more about National Savings Certificate (NSC) Scheme.
2. Senior Citizen Savings Scheme
2Senior Citizen Savings Scheme
The SCSS savings plan is a safe and reliable investment option for Indians. It was developed by the Indian government and is supported by the finance ministry. The maximum amount you can invest in this scheme is ₹15 lakh through a single or joint account. Moreover, the amount invested in this scheme should not be more than the money received at retirement.
You are eligible for investing in this scheme if you are over 55 and are getting the benefits of a pension from the government, or have chosen to retire early. If you are depositing an amount less than Rs. 1 lakh, you need to deposit it in cash, while anything above should be invested with a cheque.
The average tenure of this savings plan is five years but can be extended for three more years. You can claim tax deductions up to ₹1,50,000 per Section 80C of the Indian Income Tax Act.
If the account is closed after two years, but before the term of three years, 1% of the invested amount will be subject to deductions as charges for pre-mature withdrawal. Only one extension will be allowed per investor; these extended accounts can be closed after a year of extension without any penalty.
Learn more about Senior Citizen Saving Scheme.
3. Recurring Deposits
3Recurring Deposits
Recurring deposits are recurring payments made to your account regularly. These are usually in the form of fixed deposits. They allow you to save money for a longer period. You can set aside a fixed amount of money, which will be automatically withdrawn from your account at intervals, freeing you from the worry of wasting your money when there's no cash in your bank account.
It helps you stay disciplined and save regularly without worrying about tracking the balance or doing anything else with the money other than saving it. The minimum amount to start a Recurring Deposit is ₹500 for a bank, whereas you can start it from as low as ₹10 at your local post office.
The interest rate on these recurring deposits differs for every bank; however, post offices across India offer an interest rate between 2.5% - 8.5%.
4. Post Office Monthly Income Scheme
4Post Office Monthly Income Scheme
The Post Office Monthly Income Scheme (MPI) is a savings and investment programme under which you can save money at the post office. The scheme allows you to deposit money into your account monthly and earn interest on it. It's a low-risk income scheme that helps you generate monthly money. This savings scheme is available to all Indians living in the country; even minors above the age of 10 can get started with this.
The MPI has many benefits:
- Offers an interest rate of 7.4%.
- It's free. You need to pay no charges or fees for the MPI.
- It's convenient. You can make cash, cheque, or RTGS transfer deposits at any post office across India.
- You can withdraw money from your MPI account any time you want without incurring fees.
Learn more about Post Office Monthly Income Scheme.
5. KVP (Kisan Vikas Patra)
5KVP (Kisan Vikas Patra)
Kisan Vikas Patra is a safe savings plan backed by the government. Though it was mainly for farmers initially, it is now open to other sections of society and is seen as an attractive investment. This scheme offers a 7.2% per annum return rate (last updated on 3rd Jan 2024.)
The minimum amount you can invest is ₹ 1000. There are no maximum limits on how much you can put into this plan. The KVP offers a higher return than some banks, and it can double your money in a time frame of approximately 123 months – 10 years and 3 months.
6. Public Provident Fund (PPF)
6Public Provident Fund (PPF)
PPF is the safest and most popular option for saving in India. Contributions to your PPF account can be claimed as tax deductions under section 80C of the Income Tax Act if one invests up to Rs. 1.5 lakhs per financial year. The annual interest rate on deposits is 7.1%, compounded annually, but you can make a minimum contribution of ₹500 per year to your account and invest up to ₹1.5 lakhs during a single financial year.
The benefits of PPF are payable as lump-sum payments or quarterly deposits over 12 months, depending on when you take out your money from the scheme. You’ll have to pay income tax on any gains made from early withdrawals from your account before age 59½.
PPF allows you to transfer funds from one bank branch or post office branch to another. Withdrawals made at any other branch will attract transaction charges, though there are no restrictions on how often you can switch between banks or post offices before deciding whether or not you wish to continue with your investments in PPF.
7. Sukanya Samriddhi Yojana (SSY)
7Sukanya Samriddhi Yojana (SSY)
The Sukanya Samriddhi Yojana is a government savings scheme that allows parents or legal guardians to open an account for a girl child who is 10 years old or younger. The account matures after 21 years of opening it or in the event of the child's marriage, post the age of 18. A premature withdrawal from the account of up to 50% of what was initially invested is allowed after she reaches 18 years old, even if she is not getting married.
Duration of Investment in this Savings Scheme: 21 Years
Interest Rate: 8.2%
Investment Amount: Minimum Rs. 1,000 per annum, Maximum: Rs. 1.5 Lakh Per Annum
Interest received will not be taxed
Tax Deduction on Principal up to Rs 1.5 lakhs.
Learn more about Sukanya Samriddhi Yojana.
8. Atal Pension Yojana
8Atal Pension Yojana
The Atal Pension Yojana (APY) is a government-initiated savings scheme that provides regular income to the weaker section of society. It's for people who work in the unorganised sector and need financial support from the government-sponsored welfare program. The APY serves as a lucrative pension plan for post-retirement years.
To apply for this scheme, you must be 18–45 years old and have an active savings account. The premium rate on Atal Pension Yojana is low and needs to be paid for a minimum tenure of 20 years. However, higher premium-paying individuals are offered the highest pension coverage.
9. Employee Provident Fund (EPF)
9Employee Provident Fund (EPF)
The Employee Provident Fund Organisation (EPF) is a government-run retirement savings scheme where salaried individuals make an equal financial contribution towards their Provident Fund (PF) account. EPF helps individuals plan their retirement in advance so they can spend their golden days of retirement in peace and serenity. Moreover, the EPF scheme also helps individuals fulfil their financial objectives and deal with any type of emergency.
In this scheme, the employer and employee contribute 12% of the employee's monthly salary to their PF accounts.
The interest rate on these contributions is 8.25%. You receive this interest rate as soon as the 1st of April comes around every year.
10. Pradhan Mantri Jan Dhan Yojana
10Pradhan Mantri Jan Dhan Yojana
Pradhan Mantri Jan Dhan Yojana (PMJDY) is an ambitious scheme of the Government of India that provides basic banking services such as cash access, insurance benefits, and pension to every household in the country. Under this scheme, all homes are entitled to receive a bank account with zero balance, a debit card, access to overdraft facilities, and a life insurance cover.
The scheme will also help reduce corruption, promote transparency and accountability, enhance tax compliance, enable citizen engagement, and improve governance. People who join this scheme can earn interest on the money they deposit in their banks. The beneficiary of this scheme is also eligible for direct benefit transfer. In addition, the overdraft facility of up to Rs. ₹5000 is offered to the account holder, which isn't applicable to more than one account per person.
Moreover, account holders are eligible for life cover of ₹30,000 and accidental insurance cover of ₹1 lakh in case of any eventuality.
11. Equity Linked Saving schemes
11Equity Linked Saving schemes
Equity Linked Saving Schemes, also known as ELSS Mutual Funds, is a type of mutual fund that invests in stocks and bonds. The terms "equity-linked" and "equity" are used interchangeably to refer to these funds. They invest in stocks, but they also have the option to invest in debt instruments like government bonds or corporate bonds.
The primary advantage of ELSS is that you can avoid paying a management fee for the fund manager, who collects money from you every year to manage it. You will not be charged anything from your investment, even if you do not make any withdrawals, meaning you only have to pay taxes on capital gains made from your investments when you sell them off. After three years, you will get back all the principal amount plus interest earned on the funds invested.
Another advantage of ELSS is tax benefits since this is considered a long-term saving scheme compared to a regular savings account where interest is taxable if it exceeds Rs. 10,000 per year.
12. Fixed Deposits
12Fixed Deposits
A fixed deposit is a type of bank account that allows you to lock in your money for a fixed period. The amount you deposit will be held in the bank's savings account and unavailable for withdrawal until the maturity date. Fixed deposits offer a great deal of security and peace of mind since they are linked to your bank account, so if you lose your job, or get sick and can't work, you still have access to your FDs. They are a perfect option for people looking to grow their money without taking much risk.
Locking your money in a fixed deposit earns you impressive interest rates while keeping it safe. There are several types of fixed deposits, each with different features and risks. Before you choose one, it is important to understand how they work to decide which one suits your needs best.
13. National Pension Scheme
13National Pension Scheme
The National Pension Scheme (NPS) is a unique retirement savings product that aims to provide a steady income in your old age. The NPS is an employee-owned and managed scheme, which means that employees contribute to it as a part of their salary. The contributions are deducted from your salary as per the rules laid down by the central government.
The main aim of these schemes is to provide a secure retirement for workers and their families. However, employees who participate in this scheme can receive many other benefits. For example, you can earn interest on your contributions and access social security benefits like medical insurance or provident funds.
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