Savings is something everyone aspires for and loves, particularly when there’s a rainy day (metaphorically) or an emergency or even retirement. Sounds familiar right? Well, you’ve got to harness this particularly positive sentiment en route towards building your savings and creating wealth. But as they say, you cannot park all your eggs in a single basket. As a result, you should never be investing solely in buying a property or in equity and mutual funds or other market instruments which are more volatile.
There should be some Government savings schemes in your investment portfolio which will ensure good returns and wealth creation while giving you certain tax benefits as well. On that note, here’s taking a look at some of the best Government savings schemes that you would do well to consider.
- NSC- National Savings Certificate or NSC is a Government savings scheme that is popular with mid-income and even low-income citizens and it is quite natural since it is absolutely safe and can be easily bought from your nearest post office. You can invest personally or on behalf of your children or even as a joint account with your spouse or parent. An interest rate of 8% is presently compounded on these investments annually and the rates are revised on a quarterly basis. NSC offers returns which are guaranteed. You can always start investing small and gradually scale up the deposits. The maturity period is 5 years. Investments are tax-free in NSC up to Rs. 1.5 lakh annually under Section 80C.
- Post Office- There are quite a few Post Office savings schemes available. You can open your savings account at the post office or a recurring/fixed deposit account. You can get an interest rate of 4% on your deposit and you can open accounts on behalf of minor children or even jointly with someone. A 5-year recurring deposit offers 7.3% as interest which is compounded on a quarterly basis. There are FD deposits as well with durations of 1, 2, 3 and 5 years. Investments usually draw the interest of 7% annually except the 5th year when 7.8% is the rate of interest. Interest is calculated on a quarterly basis and paid out annually. There is the Monthly Income Scheme which has a 5-year maturity period and interest of 7.3% annually. The interest rate is revised on a quarterly basis. The interest earned is paid every month. The principal amount is returned after 5 years.
- NPS- The National Pension Scheme (NPS) is available not just for Government personnel but all Indian citizens. This is a long-term savings plan. You can open your pension account and make deposits accordingly. Post-retirement, one portion can be withdrawn while the remainder will be paid out in the form of monthly pension. This is one of the safest savings schemes offered by the Government. The deposits are invested in a combination of investment funds, government securities, equity and corporate debt so there are market risks. Up to 50% of the contribution can be invested likewise. Active and Auto Choice options are there for investors. NPS accounts usually offer interest between 8-10% annually. You can get tax deductions up to Rs. 2 lakh, i.e. Rs. 1.5 lakh under Section 80C and up to Rs. 50,000 as NPS tax benefit (additional).
- PPF- Another low-risk investment avenue, PPF (Public Provident Fund) accounts can be opened across your bank or post office. You have to contribute a minimum amount of Rs. 500. You can contribute annually or on a monthly basis. The principal and interest are guaranteed by the Government and you will get the full maturity amount after 15 years. The tenor can be increased by 5 years at the time of maturity. The interest rate is revised on a quarterly basis and hovers around 8%. Contributions up to Rs. 1.5 lakh is exempt from taxes under Section 80C.
- SSY- Sukanya Samriddhi Yojana (SSY) accounts can be opened by parents of female children. These accounts help in saving money for the education of girl children and up to two accounts can be opened. These accounts mature post 21 years or when the girl gets married after the age of 18 years.
- Atal Pension Yojana- This scheme helps those with blue-collar jobs in unorganized sectors. Beneficiaries can apply within 18-40 years of age. Accounts can be created in any public sector bank and one can choose a fixed monthly income of Rs. 1,000/2,000/3,000/4,000/5,000 once the person attains 60 years of age. Monthly contributions have to be made of at least 20 years to get the pension post-retirement. The premium can be increased and defaulting on the same means a penalty of one rupee for every hundred rupees on the account. The interest rate hovers around 8% and is revised on a quarterly basis.
- Kisan Vikas Patra- Kisan Vikas Patra has a tenor of 118 months and the minimum deposit has to be Rs. 1,000. There is no limit on investments. It is now open to all for investments and the maturity amount earns interest of 7.7% with annual compounding. The interest rate is revised on a quarterly basis. You can buy certificates for a minimum value of Rs. 100 from your nationalized bank or post office.
- VPF- Voluntary Provident Fund (VPF) caters to salaried professionals. You can increase your contribution under VPF to even 100% of your salary. Investing in this scheme means getting 8.65% interest annually. You can invest for at least 5 years and the rate is revised by the Government annually. You can always ask the company HR/accounts division for adding the VPF contribution. This account will be attached to the EPF account that you already possess. Contributing up to Rs. 1.5 lakh annually and the interest earned are both tax-free under Section 80C. The returns are higher than even PPF and this is a good way to save up for the future. The account should be a minimum of 5 years old in order to withdraw the full amount in it.