PPF

Your first option should be the Public Provident Fund (PPF). There are 4 reasons for the same. The first is the interest is tax free. The second is that you get tax benefits under Sec 80C. The third is that you can build a retirement corpus for yourself.

The fourth is that it currently gives you an interest rate of 7.6 per cent, which is much higher than bank deposits.

SIPs

Open a mutual fund account and start investing in Systematic Investment Plans of mutual funds (SIPs). If you opt for equity funds, they could give you higher returns than bank Fds over the long term.

They are also more tax efficient than bank deposits. You can invest in small amounts as low as Rs 500 with no upper limit.

Company fixed deposits

AAA rated company fixed deposits can easily fetch you interest rates as high as 8.5-9%. This is much better than bank fixed deposits, which currently offer you only 7.5 per cent. See, the complete list of company Fds here.

However, it is important to note that these deposits are not safe. So, if you want to invest go for the AAA rated deposits only. The risk of losing money in these AAA rated deposits is near zero. 

Gold jeweller schemes Gold jeweller schemes

If you understand gold as an investment better, we suggest you apply for monthly schemes of gold jewellers.

Titan, GRT, Bhima etc., run gold jewellery schemes, where you can buy gold after 1-2 years. This will help you save money from your salary instead of spending it.

Chit Funds

Now, do not be surprised, if we have mentioned chit funds. We believe there are several chit funds that are very safe. Shriram Chits as an example.

Mysore Sales International Limited, (MSIL) a Government of Karnataka undertaking runs a chit fund.

Some of them have been running for decades and are backed by the state governments. They can offer you a lumpsum when you need for marriage, education, building a house and returns can be higher than deposits. We wish to emphasize again, that you have to go for very safe chit funds.

Shares

If you have the knowledge, you can invest small sums each month in shares. For example, stick to just the top Sensex companies, if you are not an expert. You will build a good corpus and get regular dividends.

However, it is important to note that you will definitely need advise, if you are a novice to investing. 

See expert advise, and invest only if you are willing to take a risk. Otherwise, it is best to avoid the same. 

Post Office Time Deposits

You can get 7.6% interest on post office time deposits, which is higher than banks. It is safe, though the interest is taxable. You can invest in small amounts as low as Rs 200 each month.

These deposits are exceedingly safe, which is one reason why investors do consider the same. However, the real problem is also the service, which may leave investors worried over time. 

Bank deposits

Bank deposits is our last option, because interest rates have fallen and we are currently getting only 7.5% in government owned banks. In addition the interest earned on bank deposits is taxable.