Last Updated on Jul 4, 2022 by
Being good with money is more than just meeting your instant requirements. The essential thing in money handling is investing it wisely so that your hard-earned money can work for you. Saving schemes are one such investment method offered by the government of India, banks, or financial institutions to support you in handling your money. This article will give you an overview of various saving schemes available for Indian citizens and their importance.
Table of Contents
What are saving schemes?
Saving schemes help individuals save a part of their income for future use. The government, financial institutions, or banks decide on the interest rates for these schemes, which are periodically updated. The returns from these schemes can be used to meet financial requirements during emergencies, higher education, marriage, job loss, debt repayment, down payment for loans, retirement and more. Saving schemes come with a lock-in period; hence they are considered ideal for long-term investment options. These are one of the safest investment options as they are not impacted by market volatility.
Saving schemes in India
There are plenty of saving schemes available in India. A few of these are offered by the government of India, while RBI and SEBI regulate a few. Some of these schemes provide income tax exemptions/deductions as well. Read about each saving scheme in detail below.
1. Employees Provident Fund (EPF)
The EPF was launched by the Employees Provident Fund Organisation (EPFO) to help the employees save money for retirement. An organisation with over 20 employees must contribute to the EPF scheme. The employer and employee contribute 12% of the employee’s basic salary and Dearness Allowance (DA) towards the scheme. The contributions are added to the Provident Fund (PF) account, which can be transferred from one employer to another. The employees’ contribution to the EPF is eligible for tax deduction under Section 80C.
Employees are allowed to withdraw funds at the time of need. The EPFO decides the annual interest rate on EPF, which is 8.1% for FY 2022-23.
2. National Pension System (NPS)
The Central Government of India launched NPS to provide a regular income to individuals after retirement. This is open to government (central and state) and private employees. Indian citizens in the age group of 18 – 60 yrs are eligible. The interest rate offered on NPS is 9% – 12%.
Employees and employers need to pay a small premium from their salary to this scheme. The contribution is 14% from government employees and 10% from other employees. The employee’s and employer’s contribution to NPS is eligible for a tax deduction under Section 80C. At the time of retirement, the employees can withdraw a maximum of 60% of the amount tax-free. The remaining 40% will be provided every month as a pension.
3. Voluntary Provident Fund (VPF)
This scheme is for employees who can opt for it voluntarily. In VPF, you need to contribute more than 12% of the salary to the PF account and the maximum contribution can be 100% of the salary. The contributions made to the VPF scheme will impact EPF and vice versa. Also, your employer will not make any contribution to this scheme. The interest rate on VPF is 8.1% per annum.
4. Atal Pension Yojana (APY)
The scheme is for individuals working in the unorganised sector who require financial assistance from the government. Individuals need to contribute a small premium and get a pension after retirement. Applicants should be of age group 18 – 40 yrs and have an active savings account.
In the APY, the premium must be paid for a minimum of 20 yrs. Firstly, the applicants must set a target monthly pension they want, which will help to determine the monthly contribution they need to make for the scheme. The government will contribute only if you have no other savings scheme and are not a taxpayer. It will contribute 50% of your yearly contribution or Rs. 1,000 (whichever is lower).
5. Sukanya Samriddhi Yojana (SSY)
This was launched by the Prime Minister of India, Narendra Modi, to secure the future of a girl child below 10 yrs. The SSY account can be opened at any bank or post office by the girl’s parents or guardians. Per household, only two accounts can be opened, one for each girl child.
The interest rate offered in the FY 2022-23 is 7.6% per annum. A minimum deposit of Rs. 250 and a maximum of Rs. 1.5 lakh per year is needed. The tenure of the SSY scheme is 21 yrs from the date of opening or until the girl child is getting married (aged above 18 yrs). This scheme allows up to 50% withdrawal of the account balance to meet the higher education expenses of the girl child (account holder).
The account holders can get a tax deduction under Section 80C of up to Rs. 1.5 lakh per year.
6. Senior Citizens Savings Scheme (SCSS)
The scheme was designed for senior citizens aged 60 yrs or older. Even individuals who chose the Voluntary Retirement Scheme (VRS) and are between the age of 55-60 yrs can opt for SCSS.
The tenure of this scheme is 5 yrs, where the investment can range from Rs. 1,000 to Rs. 15 lakh. The interest rate on SCSS is 7.4% per annum. The contributions made to this scheme are eligible for income tax deduction under Section 80C. But according to Section 80TTB, senior citizens can claim a deduction of up to Rs. 50,000.
7. Public Provident Fund (PPF)
This scheme can be opened at banks or post offices. Though the tenure of PPF is 15 yrs, individuals can extend it to 5 yrs more. It is one of the long-term tax savings schemes in India. A minimum deposit of Rs. 500 and a maximum of Rs. 1.5 lakh in a year is needed.
The interest rate offered on PPF for FY 2022-23 is 7.10% per annum. The interest earned and the maturity proceeds are exempt from tax, and the deposited amount is eligible for tax deduction under Section 80C.
8. National Savings Certificate (NSC)
This government-backed scheme offers individuals guaranteed returns and tax benefits. NSC can be applied at post offices, and the duration is 5 yrs. The minimum investment in this scheme is Rs. 100 while there is no maximum investment limit. This scheme allows you to transfer the certificate to another person.
The interest rate on NSC is 6.8% per annum, which the government decides quarterly. The contribution to NSC is eligible for tax deduction under Section 80C of the Income Tax Act.
9. Post Office Monthly Income Scheme (POMIS)
This is another saving scheme from the Indian post office. It offers a fixed income every month from the lump sum deposit made by the investor. Even minors aged 10 yrs or more are eligible for POMIS. The maximum investment limit for a single account is Rs. 4.5 lakh, and the joint account is Rs. 9 lakh. This monthly scheme offers a 6.6% interest rate per annum and the maturity period is 5 yrs.
The investors are not allowed to withdraw the funds before 1 yr from the date of opening. If the account is closed from 1 – 3 yrs, then 2% of the investment amount is deducted as a penalty, and if the account is closed from 3 – 5 yrs, then 1% of the investment amount is deducted. Both the deposit amount and the interest are tax exempted.
10. Post Office Savings Account
This can be similar to your regular savings account but can offer a slightly better interest rate. Post office savings account is known for guaranteed returns and is ideal for investors with a less risky appetite. The interest rate offered on this account is 4% per annum for both individual and joint accounts. An initial deposit of Rs. 500 is needed. The interest gained on this account of up to Rs. 10,000 is allowed for tax exemption.
11. Post Office Recurring Deposit
This is designed for investors with small investible amounts. The post office recurring deposit scheme starts at Rs. 100 per month or multiples of Rs. 10, and there is no maximum investment amount. The maturity date is 5 yrs from the date of opening. It offers several benefits like maintaining joint accounts and transferring from one post office to another. The interest rate offered on this deposit account is 5.8% per annum compounded quarterly.
12.Post Office Time Deposit
This scheme from the Indian Post is famous amongst the rural population. It offers different tenures like 1 yr, 2 yrs, 3 yrs and 5 yrs. You can open multiple deposit accounts. The interest rate on the Post Office Time Deposit scheme is revised periodically. The current rate is 5.5% – 6.7% per annum. If the deposit duration is 5 yrs, you can claim a tax deduction.
13. Kisan Vikas Patra (KVP)
This is a small savings certificate scheme launched in 1988 by Indian Post. As the name suggests, this scheme is particularly designed for farmers. Kisan Vikas Patra is one of the safest wealth creation options for investors with less risk appetite. The minimum deposit of Rs. 1,000 is needed, while there is no maximum deposit limit.
The interest rate offered on Kisan Vikas Patra is 6.9% per annum (compounded quarterly), and the tenure is 124 months.
Comparison of various saving schemes in India
Here’s a quick comparison of the saving schemes in India by their interest rate, minimum investment required and tax benefits offered.
| Saving Scheme | Interest Rate (in %) | Minimum Investment | Tax Benefits |
| Employees Provident Fund (EPF) | 8.1 | 12% of the basic salary | Employee’s contribution is allowed for tax deduction |
| National Pension System (NPS) | 9 – 12 | 10% – 14% of the salary | Allowed for tax deduction |
| Voluntary Provident Fund (VPF) | 8.1 | Entire basic salary | Not taxable after the completion of the lock-in period |
| Atal Pension Yojana (APY) | – | – | Not taxable |
| Sukanya Samriddhi Yojana (SSY) | 7.6 | Rs. 250 | Allowed for tax deduction |
| Senior Citizens Savings Scheme (SCSS) | 7.4 | Rs. 1,000 | Allowed for tax deduction |
| Public Provident Fund (PPF) | 7.10 | Rs. 500 | Allowed for tax deduction |
| National Savings Certificate (NSC) | 6.8 | Rs. 100 | Allowed for tax deduction |
| Post Office Monthly Income Scheme ( POMIS) | 6.6 | Rs. 1,000 | Tax exempted |
| Post Office Savings Account | 4 | Rs. 500 | Interest gains up to Rs. 10,000 is allowed for tax exemption |
| Post Office Recurring Deposit | 5.8 | Rs. 100 | Interest is taxable |
| Post Office Time Deposit | 5.5 – 6.7 | Rs. 1,000 | Deducted if the deposit is 5 yrs |
| Kisan Vikas Patra | 6.9 | Rs. 1,000 | Returns are taxable |
Important points to note about of saving schemes
The importance of saving schemes is as follows:
- These schemes come with minimal risk, which can be ideal for conservative investors, especially the ones close to the retirement age.
- Saving scheme returns can fulfil long-term goals like a child’s higher education, marriage, new house down payment, retirement and more.
- Most of these saving schemes offer tax exemption, deduction or no-tax benefits.
FAQs
1. Which is the best saving scheme in India?
All the above-listed saving schemes offer different interest rates and tax benefits. They cater to different sets of individuals. You can choose the one you are eligible for and offer good benefits according to your financial goals.
2. Which is the best monthly saving scheme?
Various monthly saving schemes are offered in India like Employees Provident Fund, Voluntary Provident Fund, National Pension Scheme, Atal Pension Yojana, Sukanya Samriddhi Yojana and more. You can check the monthly investment amount and pick the one that fits your financial goals.
3. What are post office saving schemes?
Saving schemes offered by the Indian Post are post office saving schemes. Post Office Savings Account, Post Office Time Deposit, Post Office Recurring Deposit and Post Office Monthly Income Scheme are a few post office saving schemes.
4. What are the senior citizen saving schemes?
The senior citizen saving schemes are particularly designed for senior citizens. Senior Citizens Savings Scheme (SCSS) is one of those.
5. What are the saving schemes for ladies?
All the above schemes are for every gender. Sukanya Samriddhi Yojana is a scheme specially developed for the welfare of girl children in India.
6. What is a mutual fund equity-linked savings scheme?
The Equity-Linked Savings Scheme (ELSS) is a mutual fund type that invests in a company’s equities (stocks). These are one of the best tax-saving schemes available.
7. What are the government saving schemes in India?
The government saving schemes of the schemes as mentioned earlier are National Pension System (NPS), Voluntary Provident Fund (VPF), Atal Pension Yojana (APY), Sukanya Samriddhi Yojana (SSY), Senior Citizens Savings Scheme (SCSS), Public Provident Fund (PPF) and National Savings Certificate (NSC), Post Office Monthly Income Scheme (POMIS), Post Office Savings Account, Post Office Recurring Deposit and Post Office Time Deposit.
8. How to invest in a mutual fund equity-linked savings scheme?
You can invest in ELSS mutual funds by following the steps below.
1. Login to the Tickertape website
2. Filter funds using Tickertape Mutual Fund Screener
3. Select the category “Equity”
4. Analyse each mutual fund in detail on the basis of their financials, historical performance, returns and more
5. Click on “Place order” to complete the purchase of fund
As an insatiable reader and learner, I’ve spent the last two years exploring the world of finance. With my creative mind and curious spirit, I love making complex finance topics easy and fun for everyone to understand. Join me on my journey as we navigate the world of finance together!
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