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Personal financial management is a crucial aspect. It helps individuals manage their routine expenses and secure finances for the future. The Government and other financial institutions introduced saving schemes to help individuals manage their finances, plan for their upcoming financial needs, and secure their family’s financial future.
There are different types of saving schemes in India. Here is a detail about what it means and how it can help individuals plan their financial investments.
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Saving schemes are financial instruments that help individuals accumulate funds for accomplishing their future financial goals based on the terms and conditions of the specific scheme.
The saving schemes in India are introduced by the Government, financial institutions, and public and private sector banks. The Government or the financial institution decides the interest rate for the saving schemes on a periodical basis.
Individuals can utilize these saving schemes to manage short-term emergencies and long-term financial goals, such as purchasing a new house, starting a new business, planning for their children's higher education, etc.,
Investing in saving schemes is considered a major financial objective for certain reasons:
The money-saving schemes are based on the compounding factor. It will help individuals earn interest on interest and accumulate the funds long-term. These maturity returns can aid in accomplishing future money goals.
As the interest rate is known during inception, individuals can plan their investment amount and the period to accomplish the goals based on their requirements. The investment period can range between 5 years and 60 years.
As against future financial goals, one of the most important reasons to invest in saving schemes in India is retirement planning. Retirement planning is necessary to lead a peaceful life after the employment phase without compromising the current living standards.
The majority of the saving schemes in India are not based on the financial market. Therefore, the returns are not affected by the inherent market risk and are considered safer for the investment.
Conservative investors seeking a safe investment platform and earning considerable interest on their funds deposited can choose the Government savings schemes.
Saving funds for the future and avoiding unnecessary expenses is important for personal financial management. Investing in financial products such as saving schemes in India is necessary for personal financial management to become easier.
Investors can plan their monthly budget considering their income and expenses, make a long-term financial plan to accommodate their financial goals, and choose the most affordable and best savings scheme based on their financial needs.
The Government has introduced various tax provisions to help the investors benefit from these saving schemes by providing various tax# deductions and exemption benefits. It encourages investors to save funds for the future for their financial needs while saving on tax.
The saving schemes in India are becoming increasingly accessible due to online services. Therefore, the investors can navigate across different products, compare, and choose the best savings scheme. In addition, some of the saving schemes are customisable, considering the investment period, withdrawal features, etc.,
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There are different types of saving schemes in India. It is important to understand the features and benefits of each of these to benefit from them maximally. Here is a detail explaining the different saving schemes.
The interest rates provided here are for FY 2022 - 23. It is subject to revision by the Government annually or every quarter.
Public Provident Fund (PPF)
PPF is a long-term small savings scheme introduced by the Government. Individuals can open a PPF account at the post office or the nearest bank. The investors have to deposit a certain amount regularly into the PPF account. The accumulated fund and the interests earned will be provided as the maturity benefit at the end of the policy tenure.
National Savings Certificate (NSC)
NSC is a government savings scheme that provides guaranteed returns. The interest is compounded annually and payable at the end of the policy tenure. It is a small savings scheme available at any of the post office branches for investment.
Senior Citizens Savings Scheme (SCSS)
Senior Citizens Savings Scheme is a financial instrument exclusively for senior citizens who want to invest their retirement funds. However, individuals between 55 and 60 years who opt for early retirement can also invest in these saving schemes within one month of receiving their retirement benefits. The interest earned from the SCSS will be credited to the investor's savings account maintained with the same post office.
Post Office Monthly Income Scheme (National Savings Monthly Income Account)
The Post Office Monthly Income Scheme is a money savings scheme that provides a regular income. The account holder will receive a regular income based on the interest credited to the savings account maintained with the post office. It applies to joint account holders of up to three members and a maximum of up to ₹9 Lakh investment.
Kisan Vikas Patra (KVP)
It is a small savings scheme with a fixed rate for conservative investors. Investors can approach investing in the scheme at the nearest post office. The KVP offers guaranteed returns and the premature encashment option after completing two and half years of investment. In addition, the investment certificate can be used as collateral to get loans from banks.
Sukanya Samriddhi Yojana (SSY)
The Sukanya Samriddhi Yojana is one of the best saving schemes in India to secure the life of girl children. It can be opened by parents with girl children less than 10 years of age. Parents can open up to two accounts, one for each girl child. Partial withdrawal of up to 50% of the balance is applicable for the child's higher education after she attains the age of 18.
National Pension Scheme (NPS)
The NPS is a government savings scheme for Central and State Government employees and employees in the organised and unorganised sectors. The contribution to this scheme has to be made by the employees and the employers equally. The contribution is 10% of the salary for other employees and 14% for Government employees. When the account holder retires, he can withdraw up to 60% of the accumulated fund. The remaining 40% of the fund should be invested in an annuity plan for a monthly income after retirement.
Atal Pension Yojana
It is a Government savings scheme introduced for the welfare of the weaker section of society. Individuals between 18 and 40 years of age can apply for this scheme. The contribution to this scheme is based on the monthly pension required. Therefore, subscribers must analyse their requirements and invest in this scheme. The minimum and maximum pension applicable are ₹1000 and ₹5000 upon attaining the age of 60 years.
The Government will contribute 50% of the annual premium paid by the subscribers or ₹1000 per annum, whichever is lower. The co-contribution is applicable for 5 years if the scheme is subscribed between 1st June 2015 and 31st December 2015. Furthermore, the Government contribution is applicable if the subscribers are not taxpayers and do not have a statutory savings scheme.
Employees Provident Fund (EPF)
EPF is a savings scheme in India operated based on the EPFO guidelines for long-term retirement benefits. It applies to salaried individuals. The employees and employers must contribute 12% of the employee's monthly basic salary and dearness allowance up to ₹15000 to the Provident Fund account. The contribution to the EPF is reduced to 10% for non-government organizations.
Voluntary Retirement Fund
Voluntary Retirement Fund refers to an increase in the employees' contribution to their provident fund account. The contribution is higher than the 12% contribution by an employee towards their EPF. The maximum contribution can be 100% of their basic salary and dearness allowance.
Post Office Savings Schemes
The Post Office Savings Schemes provide various options that provide guaranteed returns. Investors can choose the best savings schemes based on their financial needs, return on investment and investment tenure. The risks involved in the financial products offered by India Post are extremely less or negligible. Some of the popular savings’ schemes offered at the post offices are:
Non-Linked, Non-Participating, Individual Life Insurance Savings Plan (UIN: 110N158V07)
Comparison Of Savings Schemes in India
Savings Schemes |
Lock - in period/Investment tenure |
Interest rate |
Investment amount |
Taxation |
Public Provident Fund (PPF) |
15 years |
7.1% |
Min - ₹500 Max - ₹1.5 Lakh
|
Investment, interest earned, and maturity returns qualify for tax deduction and exemption benefits. |
National Savings Certificate (NSC) |
5 years |
6.8% |
Min - ₹100 Max - Not defined.
|
The investment and the interest reinvested qualify for the tax deduction under Section 80C. The interest earned is taxable based on the tax slab. |
Senior Citizens Savings Scheme (SCSS) |
5 years, investment period can be extended for 3 years. |
7.4% |
Min - ₹1000 Max - ₹15 Lakh
|
Investment qualifies for the deduction under Section 80C. Interest earned is taxable. However, senior citizens can claim a deduction of up to ₹50,000 under Section 80TTB.
|
Post Office Monthly Income Scheme (POMIS) |
5 years |
6.6% |
Min - ₹1500 Max - ₹4.5 Lakh |
No tax benefits. |
Kisan Vikas Patra (KVP) |
124 months |
6.9% |
Min - ₹1000 Max - Not defined |
No tax benefits |
Sukanya Samriddhi Yojana (SSY) |
Contribution - 15 years 21 years from the date of opening the account or until when the girl child gets married after 18 years of age. |
7.6% |
Min - ₹250 Max - ₹1.5 Lakh |
Investment made and interests earned qualify the tax deduction and exemption benefits. |
National Pension Scheme (NPS) |
Until 60 years of age |
9% - 12% |
Min - ₹1000 Max - Not defined
|
Amount invested qualifies for a tax deduction of up to ₹2 Lakh. 60% of funds withdrawn at maturity is tax-exempt, and the income earned is taxed based on the applicable income tax slab post-retirement. |
Atal Pension Yojana |
20 years |
|
Investment is based on the pension required. Min - ₹1000 Max - ₹5000 |
Investment and returns are not taxable. |
Employees Provident Fund |
5 years |
8.1% |
12% of the basic salary each by the employee and employer. |
Employee’s contribution qualifies for tax deduction under Section 80C, and the employer’s contribution is taxable if the total contribution to NPS, EPF or superannuation fund exceeds ₹7.5 Lakh. The interest credited on employee contributions made above ₹2.5 Lakh is taxable. |
Voluntary Retirement Fund |
5 years |
8.1% |
Min - Above 12% of the EPF contribution Max - Up to 100% of the basic salary and dearness allowance |
The contribution, interest earned, and maturity returns qualify for the tax deduction and exemption benefit.
|
Finding the best saving scheme for individual financial needs is an important step in financial planning. It helps achieve financial goals timely without affecting the current lifestyle and routine expenses. Here are a few steps to help find the best savings scheme.
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TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in.
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What is a small savings scheme?
Small savings schemes are financial instruments that help individuals achieve their financial goals over a certain period. It helps accumulate funds based on a regular investment and the interests earned. The interest rates are revised by the Government every quarter or annually. Some of the common small savings’ schemes are Public Provident Fund, Senior Citizen Savings Scheme, Sukanya Samriddhi Yojana, National Savings Certificate, etc.,
What are the best saving schemes for senior citizens?
Senior citizens prefer investing in savings schemes that provide guaranteed returns and receive a regular income after retirement. Some of the popular saving schemes for senior citizens are:
Are the interest rates fixed for saving schemes?
The interest rates are not fixed for the savings schemes. The Government will revise it timely, either every quarter or annually, based on the type of savings scheme.
How to create a savings plan?
A savings plan can be created based on the following steps:
What is a Fixed Deposit Double Scheme?
The Fixed Deposit Double Scheme offered by banking financial institutions is a savings scheme that doubles the money invested based on the interests earned. It requires the investors to deposit a particular sum for a fixed period.
What is an Employee Savings Plan?
An employee savings plan is a savings scheme wherein the employees contribute to a fund for future financial or retirement needs managed by the employer.
What are monthly income savings schemes?
Monthly income savings schemes allow accumulating funds over the long term and investing the returns in an annuity plan to receive a regular income or investing a lump sum or retirement benefits for immediate regular income.
What are the post office savings schemes?
Some of the most common post office savings schemes are:
Which saving schemes provide a higher interest rate?
Some of the saving schemes that provide a higher interest rate are:
Why are saving schemes considered safe investment options?
Savings schemes are considered safe investment options because the Government majorly regulates them. Therefore, the chances of default are negligible.
Is the interest earned on NSC taxable?
The interest earned and reinvested qualifies for the tax deduction up to the Section 80C limit. Upon maturity, the returns are taxable based on the income tax slab.
Which is a better investment, PPF or ELSS?
PPF helps investors accumulate a certain amount periodically over the long term and earn interest during the investment period. It is a safe investment option for retirement needs. On the other hand, the ELSS is a mutual fund scheme that provides market-linked returns based on the amount invested. However, there exists a risk factor considering the volatile market conditions. The better investment for an individual among the two will be based on the investment objectives, affordability, and risk profile.
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