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  • Saving Schemes

    When speaking of a life well lived, financial independence, as exhibited by money conscious living and good saving habits, is one of the fundamental expectations. We all want to save some monies for a rainy day and feel comfortable in the knowledge that no unforeseen financial contingency can deviate us from our chosen way of life. Modern banking is a big supporter of saving schemes and encourages patrons to open clever investment instruments that are intended to ‘horde’ sums of money for a specified duration, earn periodic interest and offer said investors the peace of mind through the unfailing realization that such ‘parked’ monies are working 24x7 for them, aggressively growing and completely protected.

    Advantages of Saving Schemes in India

    Saving anything (money mostly) can be considered part of the Indian tradition that attributes to responsible and cultured living. The point wherein an individual earns his/her first salary and opens up a small savings account, the person is considered to be all ‘grown-up’ and many shades better than his/her careless, spendthrift and antisocial self from the teenage and late adolscent years. Why must you subscribe to saving schemes in India? Read on…

    1. Readily Available- The Indian government, through both the public and private sector banking system, offers a multitude of saving schemes that are easy to enroll with and are perfectly suited for the strategic as well as casual investor. Their simplicity and abundance makes them a much preferred savings option.
    2. Long Term Planning- Quite opposite to the run and burn concept, long term savings are focussed on a time in the future when abundant monies will be required to comply with an expected requirement. Retirement, marriage of a son/daughter, long awaited foreign trip, etc. demand strategic, long term financial planning.
    3. Wide Ranges of Products- In India, saving schemes include a plethora of different products that are intended for a wide segment of potential customers. From the Public Provident Fund (employed- retirement fund) and Employee Provident Fund to Kissan Vikas Patra (Agriculturists) and Sukanya Samriddhi Yojana (exclusively for the girl child), the choices are many and super specialised.
    4. Simple to Enroll- Limited documentation, clearly defined procedures and the Indian Government’s backing ensures that these saving schemes are simple to opt for and safe to be locked onto.

    Types of Saving Schemes in India

    In terms of their popularity, the following Government of India saving schemes lead the pack,

    National Saving Certificate (NSC)

    National Saving Scheme(NSS)

    Consistently, two of the most well followed and popular saving schemes in India, NSC and NSS offer great security alongside robust reliability in terms of returns. The primary features and benefits of these schemes are as follows-

    Features of National Saving Certificate

    1. No maximum limit for investment with 0% tax deduction at source.
    2. Impressive interest rate at 8.50% (NSC-VIII issue) and 8.80% (NSC-IX issue).
    3. Tax savings per 80C of Income Tax Act for investments in excess of Rs.1,00,000 per annum.
    4. Very attractive returns, a nominal investment of Rs.100 will yield Rs.234.35 in 10 years.
    5. These certificates can be transferred from person to another once through the lifetime of the certificate.
    6. The tenure of an NSC portfolio is 5 and 10 years for the NSC VIII Issue and NSC IX Issue respectively.
    7. The interest accumulated annually is reinvested in line with the provisions of Section 80C of IT Act. Interest compounded on a half-yearly basis.
    8. Can be used as collateral when applying for a bank loan.

    Features of National Saving Scheme

    1. Income tax exemption on principal amount as well as earned interest upto Rs.9,000.
    2. Interest compounded annually.
    3. Cannot be pledged as security when applying for any bank loan.
    4. Impressive interest rate of 9% per annum.
    5. The tenure of an NSS portfolio is four years.

    Public Provident Fund (PPF)

    A potent financial instrument that is tuned at savings in general and tax savings in particular, the PPF concept was floated by the National Savings Institute, Finance Ministry of India, in 1968. The PPF scheme offers a plethora of features and benefits that make it a popular option in its class.

    1. Interest rate of 8.70% p.a is compounded annually.
    2. Minimum yearly investment of just Rs.500 to a maximum of Rs.1,50,000.
    3. The maturity period of a PPF account is 15 years. However, this can be extended for upto 5 additional years.
    4. A maximum of 12 deposits can be made in a financial year. Lump sum payments are also an option.
    5. Joint accounts aren’t possible, plus, PPF accounts cannot be closed before the maturity period.
    6. PPF accounts can be moved from one bank/post-office to another.
    7. Accumulated interest is completely tax free.
    8. PPF accounts save tax under Sec. 80C of the IT Act.
    9. Applicant can avail loan with the PPF account as collateral from the 3rd financial year.

    Post Office Saving Scheme

    In the Indian context, the legendary Indian Postal system has always played a key role in helping inculcate the habit of financial savings amongst the Indian public. The local post office is seen as more approachable (especially amongst the semi-urban and rural folks) and more customer friendly in terms of higher returns and limited inherent procedures. The Post Office Saving Schemes include a plethora of products that offer the reliability associated with a government run savings portfolio, and the full-scale treatment that is characteristic of most high-end saving and investment schemes in India. A fair list of such products are as follows-

    1. Post Office Savings Account
    2. 5 Years Post Office Recurring Deposit Account
    3. Post Office Time Deposit Account
    4. Post Office Monthly Income Account Scheme
    5. Senior Citizens Saving Scheme
    6. 15 Years Public Provident Fund Account
    7. National Savings Certificates (NSC)- 5 Years NSC (VIII Issue) and 10 Years NSC (IX Issue)
    8. Kisan Vikas Patra (KVP)
    9. Sukanya Samriddhi Account

    Senior Citizen Saving Scheme (SCSS)

    This saving scheme option is exclusive to senior citizens in India. Ideally, the applicant must be 60 years or more but those between the ages of 55-60 years, are retired or have opted for VRS, can also apply, provided that the account is opened within one month of the receipt of their retirement benefits. The salient features of SCSS are as follows-

    1. Interest rate of 9.3% p.a, payable on any of the following dates in an year- 31st March, 30th June, 30th Sept and 31st December.
    2. The tenure of a SCSS portfolio is 5 years.
    3. The applicant can make only one deposit into the account. This amount should be in multiples of Rs.1,000 and must not exceed a maximum of Rs.15 lakhs.
    4. The account can be transferred from one post office/bank to another.
    5. The SCSS account can be closed prematurely, provided the applicant shells out 1.5% of the deposit amount in the first year and 1.0% of the deposit amount in the second year.
    6. Post the maturity of the account, the tenure can be extended for a further 3 years. After completing 1 year of this extension period, the account can be prematurely closed without any deductions.
    7. TDS is deducted at source on the accumulated interest if the latter exceeds Rs.10,000 p.a.
    8. SCSS accounts save tax as per the Section 80C of the Income Tax Act, 1961.

    Kisan Vikas Patra (KVP)

    First launched in 1988, the Kisan Vikas Patra (KVP) is one of the premier and popular saving scheme offering from the Indian Postal Department. This product has had a very chequered history- initially successful, deemed a product that could be misused and thus terminated in 2011, followed by a triumphant return to prominence and popular consumption in 2014. The salient features of KVP are as follows-

    1. The grand USP- Money invested by the applicant doubles in 100 months (8 years, 4 months).
    2. KVPs are available in the following denominations- Rs.1000, Rs.5000, Rs.10,000 and Rs.50,000.
    3. The minimum purchase value for the KVP is Rs.1000. There is no maximum limit.
    4. KVPs are available at all departmental post offices across India.
    5. These certificates can be prematurely encashed after 2 ½ years from the point of issue.
    6. KVPs can be transferred from one individual to another and from one post office to another.

    Sukanya Samriddhi Account

    A premier saving scheme offering from the Indian Ministry of Finance, the Sukanya Samriddhi Yojana (SSY) Accounts are aimed at ensuring a bright future for the girl children in India. This ambitious and resourceful scheme was launched by the honourable Prime Minister of India, Mr. Narendra Modi, and has quickly emerged as a popular savings scheme that aims to provide financial backing for a girl child’s varied, lifelong aspirations. The thoughtful features of this scheme are as follows-

    1. Attractive interest rate at 9.2% p.a. This is infact one of the highest rates of interest in its class.
    2. Account can be opened at any departmental post office or authorized banks in India.
    3. The opening amount for the SSY account is Rs.1000. Thereafter, deposits can be made in multiples of Rs.100. The minimum deposit into the account must amount to Rs.1000, the maximum limit is Rs.1,50,000 per year.
    4. The SSY account attains maturity in 21 years from the date of issue. However, the account holder is expected to pay into the account for a total duration of 14 years.
    5. A SSY account can be transferred from one post office/bank to another, anywhere in India.

    Atal Pension Yojana

    Named after one of India’s most popular erstwhile Prime Ministers, the Atal Pension Yojana is aimed squarely at the weaker sections of the society as well as those individuals who can benefit from a government sponsored welfare program. The central premise of this scheme is to provide the pension option to individuals who are working in the unorganized professional sectors and aren’t covered by any regular pension plans. Applicants pay a very low premium and enjoy the fruits of a robust and reliable pension plan. The salient features of the Atal Pension Yojana are as follows-

    1. Citizens of India between the age groups of 18-40 years can apply.
    2. The applicant is expected to regularly pay premiums for a minimum duration of 20 years. Since most individuals step into the pension years at the age of 60- the upper limit for application is set at 40 years.
    3. The applicant must have an active savings bank account.
    4. The applicant must not have subscribed to any other statutory social security schemes.
    5. Actual pension amount depends on the tenure of premium payment. The higher number of premiums paid, the higher will be the payable pension amount.

    Employee Provident Fund (EPF)

    Administered by the Employees' Provident Fund Organisation (EPFO), the Employee Provident Fund (EPF) targets Indian workers through a system of compulsory monetary contribution into a specified ‘provident fund’ account that will act at a later date as their retirement fund, or could also be treated as emergency funds for unforeseen or planned financial requirements. In essence, the employer and employee each contribute 12% of the latter’s salary amount into this provident fund account on a monthly basis. EPF is one of the shining success stories when it comes to government sponsored saving schemes in India with massive popularity and vast implementation.

    The interest rate applicable on the amount accumulated in the EPF account is decided by the government and has traditionally ranged between 8-12% of the funds maintained in the account. The interest is credited to the concerned account on the 1st April each year. The EPFO office sends annual reports through the employer that the concerned employee can use to get clear bearings on the amount accumulated in his/her account. Also, EPF related information can be sourced from the EPFO’s official website.

    National Pension System (NPS)

    The retirement years are always fraught with great change and slowing down of the usual pace of life. This is the time when sources of income may be limited due to the individual’s advancing age and/or the unavailability of income options that suit said individual’s capabilities. The National Pension System aims to negate such scenarios- offering retired individuals the security of a regular income (pension) thanks to small investments made to this pension fund while they were gainfully employed. The subscriber enjoys the lump sum amount, broken down through an annuity plan, and served on a monthly basis as the regular income.

    The NPS scheme is available to employees of state and central government organizations, employees of corporate and MNC entities, individuals as well as workers from the various unorganized sectors. The contribution to the NPS account, when speaking of employees from the central/state government organizations, is 10% deduction from said employee’s monthly salary appended with an equal contribution from the government. In other cases, the applicant must treat the NPS as any other long term savings instrument and action the requisite, timely investments. Naturally, the National Pension System is one of the enduring favorites when it comes to long term saving schemes in India.

    Voluntary Provident Fund (VPF)

    The term ‘voluntary’ signifies willingly or doing something when guided by their own free will. The concept of Voluntary Provident Fund (VPF) draws on this, wherein the subscriber willingly contributes upto 100% of their basic salary and dearness allowance into their respective Employee Provident Fund (EPF), instead of the usual 12%. The reservoir for such funds is the concerned employee’s EPF account, meaning, any activity concerning the employee’s VPF will impact the EPF portfolio too, and vice versa. For the financial year 2014-15, the VPF account doles out an interest rate of 8.75% on the accumulated funds.

    Deposit Scheme for Retiring Govt Employees

    This scheme is particularly targeted to benefit retiring public sector employees. A simple savings scheme that draws on its ease of registration, documentation and terms to draw a massive following. An account of this nature can be opened with a locally payable cheque, DD, etc, alongside a certificate from the employer that indicates the nature of retirement benefits that are applicable to the prospective applicant. The interest accrued will be paid from the date of deposit to 30th June/31st December of said year, followed by half-yearly payments as of 30th June or 31st December. The depositor cannot make any withdrawals during the first year of the account’s existence- the same can be accomplished anytime after completing the first year from the point of account creation.

    BankBazaar.com for the Best Information About Saving Schemes in India

    The leading online banking products aggregator, BankBazaar.com, is also an inexhaustible reservoir of information when it comes to the various saving schemes currently circulating in India. The information pertains to products that are targeted at both public and private sector employees, those who are employed as well as retired, from the popular evergreen products to the lesser known impact options. BankBazaar.com draws in from its years of experience as an online informational behemoth when it comes to banking products and offers comprehensive information that is accurate, up-to-date and inclusive of almost all the major and minor players competing in this niche segment.

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    • India, Brazil in Talks for EPFO Social Security Cover

      According to an EPFO or Employees' Provident Fund Organisation senior official, the Indian government is in discussion with Brazil to get EPFO social security cover available for workers from India going to work there. The talks are in their final stage, and a proposal of approval for bilateral agreement between India-Brazil which was pending approval from Union Cabinet, was most likely to be passed soon. Once the bilateral agreement is signed, Brazil will become the nineteenth country where Indians will be able to opt out of social security schemes run in those countries and choose to use the service provided by EPFO.

      India has such agreements operational with Portugal, Japan, Australia, Canada, Austria, Norway, Czech Republic, Sweden, Finland, Hungary, the Netherlands, Grand Duchy of Luxembourg, Republic of Korea, Denmark, France, Switzerland, Germany, and Belgium. Indian workers at any of these 18 countries can choose to avoid the host country's schemes for social security. They just need to visit the EPFO web portal and get a CoC (certificate of coverage). This scheme will be of great help to workers going abroad for a short span. Opting for the CoC also ensures money doesn’t get blocked in their host country for long.

      6th November 2017

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    • Deadline to link Aadhaar card to small savings schemes like PPF and NSC could be extended

      In what looks like the Modi Government has softened its stance towards the Aadhaar card linking debacle, sources claim that the Government has now extended the deadline to March 31, 2018. According to a source, the current deadline for linking Aadhaar card with bank accounts, PAN, insurance policies, small savings schemes like PPF and NSC, mutual fund investments and social security schemes is December 31, 2017. And the deadline for Aadhaar-Mobile SIM linking is February 6 next year. On October 25, the centre had told the apex court that it was willing to extend the deadline for linking Aadhaar to various schemes to March 31, 2018, but only for those who were "willing to enrol for Aadhaar", not those who had already signed up.

      29th November 2017

    • Centre Planning on Rs.1.2 Lakh Crore Social Security Scheme

      The centre has drawn up a plan of Rs.1.2 lakh crore to provide all-inclusive social security cover for the poorest one-fifth of Indian population, as a part of an ambitious welfare scheme which is being envisaged for all citizens. This programme divides the population in 3 categories - 20% of the poorest who will get government payouts; those subscribing on their own, and workers in the formal sector who will have to ascribe a fixed percentage of their income toward this scheme.

      The Ministry of Labour has drafted the proposal and will soon be sending it to the Ministry of Finance for funding and vetting, with the intention of rolling the scheme out in 2018. This scheme will be compulsory for all. The scheme will consist of 2 parts. The first of these comprises mandatory pension, insurance (disability and death both) and maternity cover, and the optional second comprises of unemployment and medical coverage. The new scheme will be a part of one of the 4 codes that the Ministry of Labour is finalising, the code of social security. It will comprise of 17 existing legislation items governing coverage of social security in India.

      17th October 2017

    • 4.5 Crore EPFO Subscribers May Get to Increase Equity Investments

      Higher returns on equity investments has led EPFO to consider giving its subscribers option to assign higher proportion of their PF money for this class of asset.

      If the proposal is passed, 4.5 crore EPFO subscribers will get higher returns on their PF funds in the present regime of declining rate of interest as seen in all schemes. However, this proposal would require major alterations in the EPFO investment pattern.

      Finance ministry directed EPFO in 2015 to invest 5% to 15% of its progressive income in equities. EPFO began the first year by investing 5% into ETFs. It was raised to 10% and 15% respectively in subsequent years. Currently, the remaining 85% corpus is invested in debt instruments such as government securities.

      The total return on EPFO’s investment in ETFs was 13.72% till May in the 2 years since it started. EPFO announced interest payouts of 8.75%, 8.8%, 8.65% in FY15, FY16 and FY17 respectively. Investment in ETFs in FY16 was Rs.6,577 crore, raised to Rs.14,982 crore in FY17. In FY18, the investment amount in ETFs has been increased to almost Rs.20,000 crore.

      6th October 2017

    • Government has saved Rs.65,000 crore till date with direct benefit transfer

      Ever since the Government decided to directly transfer money for subsidies of many saving schemes to the people, the Government has managed to save Rs.65,000 crore with the direct benefit transfer. Union Human Resource Minister Prakash Javadekar today said that with one third achievement in DBT, the government has been able to save Rs 65,000 crore, imagine how much money government will save when we will achieve DBT completely. He added by saying that even in my ministry, fake scholarship applications siphoned off money meant for the needy students. Now, such leakages are fixed. The Centre is also linking Aadhar card with licence numbers to make the system more effective and dynamic. He ended on a light note saying that, we have successfully implemented some 3,000 corrective measures, but another 5,000 are still pending. We are going to implement it in coming days.

      18th September 2017

    • Government approves double tax-free gratuity upto Rs.20 lakh

      A sigh of relief for all employees across the country, the Government of India has now passed a bill enabling gratuity upto Rs.20 lakh to be completely tax-free. In a statement, an executive said that The Union Cabinet chaired by Prime Minister Narendra Modi has given its approval to introduction of the Payment of Gratuity (Amendment) Bill, 2017, in Parliament. They also said that the amendment will put the maximum limit of gratuity of employees of the private sector as well as public undertakings and autonomous organisations under the government who are not covered under Central Civil Services (Pension) Rules, at par with central government employees, which is Rs 20 lakh. As per sources, the current upper ceiling on gratuity under the Act is Rs 10 lakh. The provisions for central government employees under Central Civil Services (Pension) Rules, 1972, with regard to gratuity are also similar.

      14th September 2017

    • Government Plan to Boost Social Pension Amidst GST Concerns

      The government has drafted a proposal to increase the amount of pension in 3 key social pension schemes - old-age pension, widow pension and disability pension. However, the implementation of this proposal will only be possible if the Centre gains enough revenue post GST regime. Estimates on restructuring National Social Assistance Programme show that the government will incur an additional expense between Rs.10,000 crore and Rs.12,000 crore over the current Rs.9,500 crore annual budget. The ministry will also try to restructure the funding pattern by asking the states to chip in at least 40% of the cost. Currently,  the Centre bears the entire cost.

      The changes proposed to the 3 pension schemes are as follows: The ministry seeks to raise old-age pension from the current Rs.200 to Rs.500, with the Centre paying Rs.300 and the states paying Rs.200. The ministry would like to institute widow pension for women aged between 18 to 39 years, while also awarding a one-time remarriage grant. The ministry would like to change disability pension eligibility criteria from 18 years to 0 years, and from people with 80% disability to those with 40% disability. The amount will be increased to Rs.500 from the current Rs.300.

      6th September 2017

    • Prime Minister Narendra Modi overjoyed with the success of Jan Dhan accounts

      On it’s third year anniversary, the Prime Minister of India, Narendra Modi, said he was overwhelmed with the success of Jan Dhan accounts and how it has inspired inspirational stories. According to the PM, at least 30 crore new families have got Jan Dhan accounts in which almost Rs.65,000 crore have been deposited. Banks have conducted surveys about how the common man has benefitted from Jan Dhan Yojna as also from insurance schemes like Pradhan Mantri Jeevan Jyoti Bima Yojana and Pradhan Mantri Suraksha Bima Yojana, from RuPay Card and Pradhan Mantri Mudra Yojna and these surveys have thrown up "inspiring stories". The Prime Minister added by saying that in a way, this is a saving for the poor, this is his empowerment for the future. And those who opened their accounts under the Pradhan Mantri Jan Dhan Yojana, have received the benefit of insurance as well.

      29th August 2017

    • PFRDA hopes that the Atal Pension Yojana subscriber base will cross 1 crore

      Now standing at a subscriber base of 60 lakh, the PFRDA hopes that the Atal Pension Yojana will gain a subscriber base of 1 crore by March 2018. In a statement, the PFRDA said that We hope that the APY subscriber base will cross the 1-crore-mark from around 60 lakh now. We expect both the subscriber base as well as the investment corpus of NPS to go up this year building on the growth they had registered last fiscal year. According to a study, the subscriber base of the National Pension Scheme (NPS) is likely to rise around 27 percent whereas its investment corpus may grow 47 percent this year. The scheme has already registered a 100 percent growth in terms of subscribers in the past fiscal year and its assets under management stands at Rs.3,000 crore now.

      22nd August 2017

    • Government cuts interest rate on saving schemes by 10 bps

      On June 30th, 2017, the government cut interest rates on savings schemes, PPF, and NSC by 10 bps. According to a report released by the Department of Economic Affairs, the interest rate on savings account will remain 4% whereas the interest rate on Fixed Deposits with a minimum 5 year tenure will be lowered by 0.1% compounded on a quarterly basis. The same is applicable for PPF and NSC. Interest rates on Sukanya Samriddhi Account Scheme and Kisan Vikas Patra scheme are also cut by 10 bps. The revised rates will be applicable in the second quarter of FY 2017-18.

      6th July 2017

    • Central Schemes have help build more than two lac houses in two years

      Rao Inderjit Singh, the minister of state for urban poverty alleviation and housing revealed in the Lok Sabha earlier this week that more than two lac houses have been built for urban poor under the old and new housing programmes over the past two years. According to the minister, the construction of these houses has materialised under the Pradhan Mantri Awas Yojana (Urban) that released in June 2016, and before that, Rajiv Awas Yojana and the Jawaharlal Nehru Urban Renewable Mission, which still continue. Housing schemes under Rajiv Awas Yojana and Jawaharlal Nehru Urban Renewable Mission will be supported by the central government at least until March next year.

      21st November 2016

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