Saving Schemes

ELSSs are investment plans that allow investors to invest in stocks and provide tax benefits. Investments are primarily made in equity and equity-linked financial components, which allow for high returns.
 

Key features
 

• An equity-linked savings scheme (ELSS) invests most of your investment amount in market-linked instruments such as equity and equity-related securities.

• The Income Tax Act 1961 allows you to claim up to 1.5 lakh tax2 deductions under Section 80C.

• As per your choice and financial situation, you can choose either a lump sum or a Systematic Investment Plan (SIP).

• During the three-year lock-in period, no premature withdrawals are permitted. You can reinvest your funds after your investment matures.

• You are required to pay long-term capital gains tax, which is 12.50% of the gain, when the investment matures. You do not have to pay this tax if the income from your investment is less than Rs. 1.25 lakh.

• ELSS schemes provide tax2 benefits. In comparison to other savings schemes such as PPF, NPS, RD, endowment policies, etc., it provides better returns.

In accordance with Section 80C of the Income Tax Act of 1961, tax-saving fixed deposits such as Post Office Time Deposits, Fixed Term Deposits, etc., are eligible for tax² deductions. You can claim up to ₹1.5 lakh per year as a deduction if you invest in this scheme. If you wish to get tax² benefits along with returns on your investment, you can choose these deposits.
 

Key features
 

• The first account holder can claim tax² deductions for investments made in this scheme. As per Section 80C of the Income Tax Act, 1961, you can claim a deduction of up to 1.5 lakh each year.

• It offers a fixed rate of interest and zero risk. You can also get better interest rates if you are a senior citizen.

• Each fiscal year, the maximum investment amount is 1.5 lakh. The minimum investment amount is Rs. 100.

• There is a five-year lock-in period. Premature withdrawals, loans, and overdrafts are not permitted during the lock-in period.

NSC is a well-known government saving scheme. By visiting your nearest post office, anyone can open this scheme, which is a good option for investors with low and middle incomes.
 

Key features
 

• Government-backed investment schemes such as National Savings Certificates (NSC) are low-risk investments.

• Investing in this scheme can lead to tax² deductions of up to 1.5 lakh a year under Section 80C of the Income Tax Act of 1961.

• In order to start investing, the minimum amount is only 1,000 or a multiple of 100.

• Interest rates change every quarter, giving you compounded returns every year on your investment. However, it is only payable at maturity.

• Using NSC, you can obtain secured loans with collateral for up to five years.

A ULIP combines investment and life insurance into one financial product. With this scheme, you can get both insurance coverage and investment benefits. A ULIP calculator can assist you in calculating the potential returns based on your investment amount and fund choices.
 

Key features
 

• Unit Linked Insurance Plan (ULIP) offers life insurance coverage for the policyholder. If the policyholder dies, the nominee will receive the sum assured as per the policy terms.

• It allows you to invest your amount in various asset classes such as debt, equity, etc. Your fund preference can be changed at any time during the investment period.

• ULIPs vary in risk and return based on asset classes and market conditions.

• It has a lock-in period of five years. If you withdraw your investment during this period, you will have to pay the exit fee.

• A variety of charges are associated with it, including fund management charges, premium allocation charges, mortality charges, and administration charges.

• You can get tax² benefits from ULIPs under 80C, 80CCC, 80D, and Section 10 (10D) of the Income Tax Act 1961.

Senior citizens (over 60) can invest in SCSS in India. You can invest in this scheme by contacting your local bank or post office. It offers a fixed interest rate.
 

Key features:
 

• Senior Citizen Saving Scheme (SCSS) offers a fixed interest rate that changes quarterly. The rate for Q1 FY 2024-25 is 8.2%.

• There is a minimum investment amount of 1000 and a maximum investment amount of 30 lakhs. 

• The savings scheme has a five-year tenure, and it can be extended in three-year blocks.

• In this scheme, you can deduct up to 1.5 lakh under Section 80C of the Income Tax Act 1961.

• Interest will be paid quarterly on your investment amount. As a result, you will see the reflection on April 1st, July 1st, October 1st, and January 1st.

• Savings schemes like this are low risk and beneficial for senior citizens. You cannot open this account if your age does not meet the eligibility criteria.

Recurring Deposits (RDs) is another best monthly saving scheme offered by post offices and banks. By investing a fixed amount every month, you can earn interest on your investment.
 

Key features
 

• With Recurring Deposits (RD), you can start your monthly deposit as low as Rs. 10.

• Ten years is the maximum investment tenure, and six months is the minimum.

• Banks usually charge between 6% and 9% interest on recurring deposits.

• Your RD account will receive compounded interest quarterly along with your principal.

• This savings scheme does not allow premature or partial withdrawals. It is important to close your RD account before maturity in order to receive your money back. If you close it before maturity, a penalty amount will be deducted.

• Senior citizens (age over 60 years) will receive a higher interest rate on their investments.

• You can get tax² benefits by investing in a recurring deposit if you are 60 years old or older. Fill out form 15G/15H to prevent TDS from being deducted from your interest payments.

The POMIS scheme is a small savings program backed by the Indian government. Investing in this account offers risk-free returns, and you receive interest every month.
 

Key features
 

• POMIS is a low-risk investment option that offers a fixed interest rate. The current interest rate is 7.4%.

• From the date of account opening, the maturity period is 60 months (five years). Due to the lock-in period, you cannot withdraw your funds at this time.

• Minimum investment is Rs 1000; maximum investment is Rs.3 lakhs (for minor accounts), Rs.9 lakhs (for single accounts), and Rs.15 lakhs (for joint accounts).

• In the event you change your residential address, your POMIS investment is transferable. As a result, your investment amount and interest will be transferred to a new post office.

PPFs is one of the most popular long-term investment and savings options. Those who want high but stable returns can consider this savings scheme.
 

Key features
 

• The Public Provident Fund (PPF) offers risk-free returns and an interest rate of 7.1% per year.

• In every fiscal year, a minimum deposit amount of 500 is required, and the maximum deposit amount is 1.5 lakh.

• With this savings scheme, you can claim up to Rs 1.5 lakh as a tax² deduction under section 80C.

• You can't withdraw the whole amount during the lock-in period of 15 years. Upon expiration of the lock-in period, you can extend it by five years.

• A loan facility is available for between three and six years. PPF accounts cannot be used for loans before or after this period.

• From the seventh year onwards, partial withdrawals are permitted under certain conditions.

All Indian salaried workers are eligible to participate in the Employee Provident Fund (EPF) retirement savings plan. It was introduced by the Employees Provident Fund (EPFO), which is part of the Labour Ministry.
 

Key features
 

• Twelve percent of the base pay and Dearness Allowance (DA) are contributed to the Employees Provident Fund by the employer and employee. 

• In addition to insurance and pension benefits, it offers a lump sum return upon retirement and an interest rate of 8.15%. 

• Section 80C of the Income Tax Act of 1961 allows individuals to claim a tax² deduction for investments made in the Employees Provident Fund. 

• Every month, EPF deductions are deducted from your pay. As a result, manual payments and one-time payments are no longer necessary.

In India, NPS is a pension program scheme launched by the central government. This scheme is open to private, public, and unorganized sector employees. However, this savings plan is not available to military personnel.
 

Key features
 

• The National Pension Scheme (NPS) is open to all Indian citizens. It was formerly limited to government workers.

• It cannot provide guaranteed returns as it is a market-linked investment scheme. Compared to PPF, it offers much higher returns.

• The return on this savings scheme typically ranges from 9% to 12% annually. If you want to know the actual returns, you can use a savings calculator.

• Your equity investments account for between 50 and 75 percent of your total investment amount. 

• Under Sections 80C and 80CCD of the Income Tax Act of 1961, investments in this are eligible for tax² benefits.

• NPS issues every investor a Permanent Retirement Account Number (PRAN). Through it, jobs and locations are seamlessly portable.

• The NPS is one of the most affordable pension plans, which helps to build a solid retirement fund and provides tax² benefits.

PMVVY is a pension scheme introduced by the Indian government for senior citizens aged 60 and over. A pension plan provides fixed payouts, whether monthly, quarterly, half-yearly, or annually, for a period of ten years, making retirement financially stable and independent.
 

Key features
 

• An annual return of approximately 7.4%, paid as a regular pension.

• Senior citizens can invest up to 15 lakhs.

• Ten-year policy with flexible payouts.

• At maturity, you get your money back.

• Investments in the scheme aren't eligible for Section 80C tax² deductions, but GST is exempt.

It is a government-related savings program designed specifically to benefit girl children under an initiative called "Beti Bachao, Beti Padhao".
 

Key features
 

• In comparison with other government schemes, this scheme offers high interest rates.

• You can save money for your girl child through SSY. SSY accounts require a minimum balance of Rs. 250.

• Upon maturity, your child can receive high returns from this savings scheme.

• Section 80C allows account holders of this scheme to claim tax² deductions. The interest earned from this scheme is also tax-free².

The KVP is a small savings certificate scheme backed by the Government of India and available through post offices. It was originally launched to encourage farmers to save money.  All Indians who meet the eligibility requirements can now participate in the scheme. For conservative investors looking for long-term, risk-free returns, this product is ideal.
 

Key features
 

• Over the notified tenure (currently 115 months), the invested amount will be guaranteed to double.

• Investments begin at Rs. 1,000 and have no upper limit.

• Certificates can be purchased individually, jointly, or by a guardian on behalf of a minor.

• Post 2.5 years from the investment date, premature withdrawal is permitted.

• As per Section 80C, returns are fully taxable and do not qualify for deductions².

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 interest earned. Some common small savings schemes are Public Provident Fund, Senior Citizen Savings Scheme, Sukanya Samriddhi Yojana, National Savings Certificate, etc.

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: 

• Senior Citizens Savings Scheme

• Bank Fixed Deposits

• Post Office Monthly Income Scheme

• Equity Linked Savings Scheme (for growth if risks can be affordable to a certain extent)

• National Pension Scheme

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.

A savings plan can be created based on the following steps:

• Make a monthly budget accommodating routine expenses such as groceries, travel, clothing, etc.

• Set aside a portion of your income to manage emergencies and invest in savings schemes.

• Identify the short-term and long-term financial goals.

• Compare and find the best savings schemes to help accomplish your future financial goals.

• Create a savings plan by allocating a portion of your income to the chosen savings schemes for the long term.

• Revise the income invested timely based on the increase in the income.

The Fixed Deposit Double Scheme offered by banking financial institutions is a savings scheme that doubles the money invested based on the interest earned. It requires the investors to deposit a particular sum for a fixed period.

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.

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.

Some of the most common post office savings schemes are:

• Senior Citizens Savings Scheme

• Public Provident Fund

• National Savings Certificate

• Kisan Vikas Patra

• Sukanya Samriddhi Yojana

Some of the saving schemes that provide a higher interest rate are:

• Senior citizens savings scheme

• Employee Provident Fund

• National Pension Scheme

• Sukanya Samriddhi Yojana

• Public Provident Fund

Savings schemes are considered safe investment options because the government majorly regulates them. Therefore, the chances of default are negligible.

The interest earned and reinvested qualifies for the tax² deduction up to the Section 80C limit. Upon maturity, the returns are taxable based on the income tax slab.

PPF helps accumulate funds over the long term and earn interest, helping meet your retirement needs. Whereas, ELSS funds provide market-linked returns and are subject to market conditions. The better option depends on the investment objectives, affordability, and risk profile.