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…
- 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.
- 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.
- 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.
- 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)and
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
- No maximum limit for investment with 0% tax deduction at source.
- Impressive interest rate at 8.50% (NSC-VIII issue) and 8.80% (NSC-IX issue).
- Tax savings per 80C of Income Tax Act for investments in excess of Rs.1,00,000 per annum.
- Very attractive returns, a nominal investment of Rs.100 will yield Rs.234.35 in 10 years.
- These certificates can be transferred from person to another once through the lifetime of the certificate.
- The tenure of an NSC portfolio is 5 and 10 years for the NSC VIII Issue and NSC IX Issue respectively.
- The interest accumulated annually is reinvested in line with the provisions of Section 80C of IT Act. Interest compounded on a half-yearly basis.
- Can be used as collateral when applying for a bank loan.
Features of National Saving Scheme
- Income tax exemption on principal amount as well as earned interest upto Rs.9,000.
- Interest compounded annually.
- Cannot be pledged as security when applying for any bank loan.
- Impressive interest rate of 9% per annum.
- 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.
- Interest rate of 8.70% p.a is compounded annually.
- Minimum yearly investment of just Rs.500 to a maximum of Rs.1,50,000.
- The maturity period of a PPF account is 15 years. However, this can be extended for upto 5 additional years.
- A maximum of 12 deposits can be made in a financial year. Lump sum payments are also an option.
- Joint accounts aren’t possible, plus, PPF accounts cannot be closed before the maturity period.
- PPF accounts can be moved from one bank/post-office to another.
- Accumulated interest is completely tax free.
- PPF accounts save tax under Sec. 80C of the IT Act.
- 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-
- Post Office Savings Account
- 5 Years Post Office Recurring Deposit Account
- Post Office Time Deposit Account
- Post Office Monthly Income Account Scheme
- Senior Citizens Saving Scheme
- 15 Years Public Provident Fund Account
- National Savings Certificates (NSC)- 5 Years NSC (VIII Issue) and 10 Years NSC (IX Issue)
- Kisan Vikas Patra (KVP)
- 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-
- 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.
- The tenure of a SCSS portfolio is 5 years.
- 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.
- The account can be transferred from one post office/bank to another.
- 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.
- 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.
- TDS is deducted at source on the accumulated interest if the latter exceeds Rs.10,000 p.a.
- 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-
- The grand USP- Money invested by the applicant doubles in 100 months (8 years, 4 months).
- KVPs are available in the following denominations- Rs.1000, Rs.5000, Rs.10,000 and Rs.50,000.
- The minimum purchase value for the KVP is Rs.1000. There is no maximum limit.
- KVPs are available at all departmental post offices across India.
- These certificates can be prematurely encashed after 2 ½ years from the point of issue.
- KVPs can be transferred from one individual to another and from one post office to another.
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-
- Attractive interest rate at 9.2% p.a. This is infact one of the highest rates of interest in its class.
- Account can be opened at any departmental post office or authorized banks in India.
- 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.
- 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.
- A SSY account can be transferred from one post office/bank to another, anywhere in India.
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-
- Citizens of India between the age groups of 18-40 years can apply.
- 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.
- The applicant must have an active savings bank account.
- The applicant must not have subscribed to any other statutory social security schemes.
- 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.
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
PM Modi’s Speech on Black Money
Prime Minister Narendra Modi, in a televised address to the nation, began his speech with a well-wish for the end of Diwali. He continued to talk about critical issues faced by the nation. He spoke well on the efforts for development and the different scheme implemented to drive economic progress. He then touched upon the “spectre of corruption and black money” and how its growth has hampered all efforts to eradicate poverty. The evil of corruption has been spread by selfish interests and it was time for a strong and decisive step. He spoke of beginning a battle against corruption, black money and terrorism. He declared all Rs.500 and Rs.1,000 notes in circulation to be no longer valid tender from midnight on 8th November. People holding such notes will be able to deposit the money in savings bank accounts or exchange it for other denominations within 50 days. The move is aimed at safeguarding the rights of the common man and fighting corruption.
14th November 2016
Foreign Portfolio Investors Pull Out Rs 2,837 crore
Securities and Exchange Board of India (SEBI) has recently provided data which indicates that FPIs or foreign portfolio investors have been net sellers in the Indian market to the extent of Rs 2,837 crore. This data was received shortly following RBI Governor’s announcement that he would not be continuing for the second term after the end of his 3-year tenure which ends on Sept 4.
On Monday, the overall net outflow of FPIs stood at Rs 2,837 crore, which remains to be the highest on a single day basis, since March 29. Also, this was the maximum net equity outflow of FPIs in the span of a month since May 25.
According to this data released by SEBI, shares worth Rs 1.462 crore were alone bought by mutual funds and were sold at Rs 1,003 crore which resulted net purchase of Rs 459 crore. FPIs remained to be the net buyers in the debt market with the purchase of shares worth Rs 1,215 crore.
According to the data provided by the various stock exchanges, the net equity inflow of all domestic institutions collectively amounted to Rs 724.06 crore. this figure is higher than the net outflow by FPIs which can be attributed to sell-offs, which has in turn helped the stock markets to rise.
21st July 2016
The Central Government might increase the minimum monthly salary for daily wage workers.
Union Minister, Bandaru Dattatreya stated that the Centre was planning to increment the minimum monthly salary for daily wage workers from Rs. 16,000 to Rs. 18,000. This is as per the demand raised by labour unions. The Minister also said that the Centre was keen on providing social security to the unorganised sector. To start off, construction workers would be given ESI, PF benefits, etc. The second phase will cover rickshaw pullers, auto drivers and the final phase would cover cine workers and individuals under the Mid-Day Meal scheme. The Union Labour Ministry is also considering to bring all the 4 labour laws under 4 Labour Codes, namely, Code on Industry working, Code on Wages, Code on Wages, Safety Conditions and Health and Code on Social Security.
23rd June 2016
TDS Certificates Issued
TDS Certificates have been finalized and issued by all deductors (banks, employers, etc.). It is mandatory that the taxpayers should receive this certificate upon request. If the TDS Certificate is not provided, the deductors will have to pay a penalty fee. The penalty would be Rs. 100 for each day of delay in providing the certificate. However, this amount will not exceed the tax amount that is deducted. TDS Certificates have to be provided in Form 16 and Form 16A.
6th June 2016
Postal payments bank to receive Rs. 800 crore
Ravi Shankar Prasad, Union Minister for Communications and Information Technology, claims that the Centre will invest Rs.800 crore in the proposed India Post payments bank. The bank should become operational by next March. According to Prasad, half of the bank would be equity and the rest from the Department of Posts/Centre. Also, an additional Rs.400 crore would be invested as equity for the payments bank. The Reserve Bank of India has given clearance for this move. The payments bank will be offering third-party services of about 50 overseas and Indian financial institutions including mutual funds, insurance products, banking instruments and debt-equity.
26th May 2016
Haryana Govt. announces annual credit plan for FY 2016-17
The Haryana Government has announced its new credit plan for the financial year 2016-17, stating that it is higher than last year’s credit plan due to the target of 192 rural banks that have to be opened this year.
The new credit plan has been set at Rs.1,03,953 crore. This is 17.1% higher than last year’s Rs.88,786 crore.
Banks have been instructed to open as many rural branches as possible to cater to the needs of an entire demographic that previously had no access to credit facilities or social security pensions.
Aadhaar seeding, disbursal of pensions, activating Rupay cards, disbursing MSME loans, etc. are to be the primary functions of these banks in rural areas.
19th May 2016
Post Offices Witness Last Minute Rush through Small Savings Schemes
The month of March was a busy one for the Indian Post Offices as the government announces a reduction in interest rates of small savings schemes to the tune of 130 basis points. This reduction saw throngs of people flocking to post offices across India with Post offices registering close to 50 Lakh people visiting this March this year as opposed to the average of 20 to 30 lakh people visiting in the month of March in other years
Unlike Banks, Post Offices offer saving schemes with interest rates prevailing at the time of making the transaction and nearly 13 lakh new accounts were opened in the last 15 days alone of March
19th April 2016
MAIT Launches Device with Aadhaar authentication feature
MAIT a hardware industry body in association with Datamini and Intel has launched a mobile tablet to support Digital India and Make in India programme by including a feature which allows to enter fingerprint with the help of a scanner for Aadhaar authentication.
The tablet is expected to be purchasable at approximately Rs 13,000 and may be used for initiatives such as direct benefits transfer (DBT) via Aadhaar-linked savings bank accounts.
Amitabh Kant, Niti Aayog CEO, on the occasion of the tablet, said, “ We must understand that a machine like this”.
4th April 2016