How Helpful Are Small Saving Schemes In India?

There are several small savings schemes offered by the government for investment. The schemes are designed to provide a sense of safe security while investing by the public and at the same time mobilising resources for development. Some of the benefits of investing in small savings schemes in India include:

1. Guaranteed returns: The interest rates on small savings schemes are fixed by the government, so you can rest assured of getting a guaranteed return on your investment.

2. Liquidity: Small savings schemes are highly liquid, which means that you can easily access your money if you need it.

3. Tax benefits: Some small savings schemes like the PPF, and NSC, offer tax benefits, which can help you reduce your tax outgo and save more.

4. Risk-free: As the small savings schemes are backed by the government, your investment is risk-free, secure, and safe

5. Flexibility of choice: Depending upon what suits your requirements, you can choose the most suitable option available in small savings schemes as it does offer multiple options.

So, when it comes to investing, always remember to consider your individual goals and needs before you commit to any form of investment along with your risk-taking ability. Since most of the small saving schemes are government proposed, the risk angle is less but ensures that choosing the suitable matters.

Here are some of the most popular small savings schemes in India:

Public Provident Fund (PPF)

The PPF is a long-term savings scheme that offers a guaranteed return of 7.1% per annum. It has a lock-in period of 15 years, but you can withdraw your money after 5 years if you need. The interest rate on the PPF balance is reset every quarter. For investing in a PPF, you need to open a PPF account at the post office or designated branches of public and private sector banks to start with.

Investments made in the PPF enjoy an 'EEE' status, i.e. exempt, exempt and exempt. This means that the contribution made towards the PPF account, the interest earned and maturity proceeds are all tax exempted. Since it is a government-backed product, it is considered to be one of the best tax-saving investment products. Even though the interest rate on PPF keeps on changing, the risk factor remains stable.

Senior Citizen Savings Scheme (SCSS)

The SCSS is a savings scheme for senior citizens that offers a guaranteed return of 7.4% per annum. The SCSS has a lock-in period of 5 years, but you can withdraw your money after 3 years if you need.

National Savings Certificate (NSC)

The NSC is a fixed-income investment that offers a guaranteed return of 6.8% per annum. The NSC has a maturity period of 5 years, but you can encash it after 3 years if you need. As it is launched by the government, the scheme may appeal to conservative investors who hail from low-income tax slabs and do not want long-term commitments.

NSCs are a savings bond scheme that encourages primarily to invest while saving on income tax under Section 80C of the Income Tax Act. One can claim a tax deduction of up to Rs 1.5 lakh under this Section. Only residents of India are eligible to invest in this scheme. The interest rate of NSC changes every year.

Post Office Monthly Income Scheme (MIS)

The MIS is a scheme that offers a guaranteed return of 6.6% per annum with the interest amount given to the customer on a monthly basis in equated installments. The MIS has a lock-in period of 3 years, but you can withdraw your money after 6 months if you need it.

Sukanya Samriddhi Yojana (SSY)

Sukanya Samriddhi Yojana is also a government savings scheme launched to benefit girl children as part of the "Beti Bachao-Beti Padhao" initiative. It offers an interest rate of 7.6% and provides several tax advantages.

The investments made in SSY are eligible for tax exemption up to the maximum limit of Rs 1.5 lakh under Section 80C. The annually compounded accrued interest is also eligible for tax exemption and the maturity proceeds and withdrawal amount are also tax exempted.

These are just a few of the many small savings schemes available in India. If you are looking for a safe and secure investment option, small savings schemes may be a good option for you.

Conclusion

Although it is helpful to invest in small saving schemes, it is equally important to note that small savings schemes offer low returns. If you are looking for an investment that will help you grow your wealth over time, you may also consider other options, such as investing in stocks or mutual funds with professional guidance.

FAQs

What are small saving schemes?

Small savings schemes are investments offered by the government for investment with guaranteed returns and risk-free. Some of them even help save taxes.

Which small saving scheme has the highest interest rate?

Sukanya Samriddhi Yojana offers the highest interest rate of 7.6%, followed by the Senior Citizen Savings Scheme and Public Provident Fund offering rates at 7.4% and 7.1% respectively.