Saving Schemes in India - Investment Options Last Updated : 21 Sep 2019

Investing in savings schemes can also help fund the education and marriage of the individual’s children. Apart from it being a disciplined way of saving money, investing in such schemes can also provide additional income. There are also various small savings schemes, where the contribution is less, but the total contribution that has been accumulated over the long-run will be large.

The risks of investing in savings schemes are very minimal since they are mostly launched by the government. Apart from providing good returns, contributions made towards savings schemes are safe and secure. The interest rates of savings schemes are decided by the government and vary every 3 months to a year.

Advantages of Savings Schemes

The main advantages of investing in savings schemes are mentioned below:

  • Long-term benefits: Individuals can achieve their long-term goals such as retirement plans, children’s education, and children’s marriage by investing in savings schemes.
  • Various savings schemes: The number of savings scheme currently available is large. The benefits vary according to the scheme and the sector. For example, the Pradhan Mantri Jan Dhan Yojana is designed to help people who are below poverty line and the Sukanya Samriddhi Yojana helps a girl child financially.
  • Hassle-free: The maintenance and investment towards the schemes are very simple and most of the contributions made towards the schemes can be done online.
  • Security and safety: The contributions that are made towards the schemes are minimal on risk as well as safe and secure since the schemes are launched by the Indian Government.

Different types of Savings Schemes

Some of the various schemes that are available are mentioned below:

Public Provident Fund (PPF)

The Public Provident Fund (PPF) scheme is one of the most popular and safest investment options that is available in the country. Under Section 80C of the Income Tax Act, contributions made towards the scheme as well as the interest that is generated from the contributions are also tax exempt.

The scheme can be opened at post offices and banks, and the duration of the scheme is 15 years. Individuals are allowed to increase the duration of the scheme by a further 5 years. The rate of interest for the FY 2018-2019 is 8% p.a. and the interest is compounded on a yearly basis. Individuals must make a minimum contribution of Rs.500 and can make a maximum contribution of Rs.1.5 lakh on a yearly basis towards the scheme.

Employees’ Provident Fund (EPF)

The Employees’ Provident Fund Organisation (EPFO )launched the EPF scheme with the main aim of helping employees save money for their retirement. It is mandatory for organisations with more than 20 employees to contribute towards the EPF scheme. The employee and employer each contribute 12% of the employee’s Dearness Allowance (DA) and basic salary towards the scheme.

Employees can withdraw funds from the scheme in case of medical emergencies, construction of a house, buying a house or land, repayment of home loan, etc. The rate of interest of the scheme for FY 2018-2019 is 8.65% p.a. The rate of interest is decided by the EPFO on a yearly basis.

National Pension System (NPS)

The NPS was launched by the Central Government with the main aim of providing individuals a regular income after their retirement. Employees can avail the benefits of the scheme by paying a small amount of premium.

Employees will receive a lump sum amount at the time of their retirement as well as a certain percentage will be paid back as pension on a monthly basis after their retirement.

Sukanya Samriddhi Yojana Account (SSY)

The Sukanya Samriddhi Yojana (SSY) scheme was launched by Prime Minister Narendra Modi to help secure the future of a girl child. The current rate of interest offered by the scheme is 8.5% and an SSY account can be opened at post offices or banks.

The minimum and maximum deposit that can be made in a year towards the scheme is Rs.1,000 and Rs.1.5 lakh, respectively. The account holder must make contributions towards the scheme for a duration of 14 years and the maturity period of the scheme is 21 years. Individuals can transfer the SSY account from banks to post offices and vice versa.

Atal Pension Yojana (APY)

The main aim of the scheme is to help individuals who are below the poverty line. The scheme also benefits people who work in the unorganised sector and require financial support from the government. Individuals pay a very low premium towards the scheme and receive a pension after their retirement. However, it is mandatory that individuals have an active savings account in order to avail benefits from the scheme.

Citizens between the ages of 18 years and 40 years can apply for the Atal Pension Yojana scheme. Contributions towards the scheme must be made for a minimum duration of 20 years. Individuals must make very low contributions towards the scheme, however, if the contributions that are being made are high, the pension that is received will also be high. However, in case individuals opt for the Atal Pension Yojana scheme, they cannot opt for any other savings scheme.

Voluntary Provident Fund (VPF)

Employees can opt for the VPF scheme on a voluntary basis. Under the VPF scheme, employees are allowed to contribute their entire basic salary towards the scheme, unlike the EPF scheme, where only 12% of the basic salary can be contributed.

Any contributions made towards the VPF scheme will impact the EPF scheme and vice versa. The rate of interest that is generated from contributions made towards the scheme for the FY 2018-2019 is 8.65% p.a.

Kisan Vikas Patra (KVP)

The Kisan Vikas Patra certificate scheme is offered by post offices in India. The rate of interest that is offered by the scheme at the moment is 7.7% and it is compounded on an annual basis. The minimum contribution that must be towards the scheme is Rs.1,000 and there is no maximum limit. Over the course of 112 months, the amount invested towards the scheme doubles.

Individuals are allowed to add nominees to the scheme and the certificate can be transferred from one individual to another and from one post office to another. Individuals are also allowed to encash the certificate after 30 months from when the certificate was issued.

Senior Citizens Savings Scheme (SCSS)

The SCSS was launched with the aim of helping individuals who are 60 years and above. Individuals who are between the ages of 55 years and 60 years and have chosen for Voluntary Retirement Scheme (VRS) can also avail the benefits of the SCSS.

The duration of the SCSS is 5 years and the rate of interest under the scheme is 8.7% p.a. Individuals must invest a minimum of Rs.1,000 towards the scheme and the maximum investment that can be made is Rs.15 lakh. Individuals can also transfer their SCSS accounts from a post office to a bank and vice versa. Under Section 80C of the Income Tax Act, tax deductions are available for investments made towards the scheme.

National Savings Certificate (NSC)

The NSC scheme is one of the most popular schemes in India. Since the scheme is backed by the Indian Government, guaranteed returns and tax benefits are provided. The duration of the scheme is 5 years and individuals can invest in the scheme at post offices. The Indian Government decides the interest rates of the scheme on a quarterly basis.

The rate of interest of the scheme for FY 2018-2019 is 8.0%. The interest that is generated is compounded on an annual basis. The minimum contribution that must be made towards the scheme is Rs.100 and there is no limit to the amount of contribution that can be made. Under Section 80C of the Income Tax Act, individuals are eligible for tax benefits on the contribution they make towards the scheme. Individuals are also allowed to transfer the certificate to another person’s name. However, this can be done only once.

Post Office Savings Scheme

The various savings schemes that are offered by India Post are very popular as the risks are very minimal and most of the schemes provide guaranteed returns. The process to open any saving schemes accounts at the post office is simple and quick. The many good features offered by the schemes also make them popular.

The savings schemes that are offered by India Post are mentioned below:

  • Post Office Savings Account
  • National Savings Time Deposit Account
  • Senior Citizens Savings Scheme Account
  • National Savings Certificate Account
  • Sukanya Samriddhi Account
  • National Savings Recurring Deposit Account
  • National Savings Monthly Income Account
  • Public Provident Fund Account
  • Kisan Vikas Patra Account

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  • Interest rates of small savings schemes hiked

    On 19 September 2018, the Finance Ministry announced new interest rates for small savings schemes. From 01 October 2018, interest rates for the third quarter of October 1 to December 31 has been hiked by 40 basis points (bps). The schemes which will undergo this revision in interest rates are the National Savings Certificate (NSC), Public Provident Fund (PPF), post office time deposits, and Sukanya Samriddhi Yojana (SSY). The hike for one, two, and three-year term deposits is 30 bps. After the hike, interest rates will be 8% hike for NSC and PPF, 8.5% for the Sukanya Samriddhi Scheme, and 8.7% for the Senior Citizens Savings Scheme. There will be a hike from 7.3% to 7.7% for the Kisan Vikas Patra scheme which will now mature or be doubled in 112 months instead of 118 months.

    11 October 2018

  • Small Savings Rates Increased: NSC and PPF to offer 8%, Senior Citizens to Receive 8.7%

    The interest rates of a number of small savings schemes have been increased for Q3 of FY 2018-19. The schemes which will see an increase in interest rates include National Savings Certificate, Sukanya Samriddhi Yojana, and Public Provident Fund. Even post office time deposits will see an increase in interest rates. Investors in fixed income instruments will find this as a welcome relief considering the fact that rates have been unchanged for the first two quarters of the financial year. Moreover, the interest rates applicable to these schemes were lowered by the government in the quarter between January and March 2018. The Finance Ministry issue a circular on the 19th of September, according to which, the rates of a number of savings schemes were increased by 30 to 40 basis points.

    24 September 2018

  • Revamp of Social Security is Top Priority

    The Economic Times recently published a report according to which the government is aiming to finalize a social security measure that is worth about 10 crore employees, which accounts for about 22% of India’s workforce. The scheme will not cover only industrial workers. Even workers in sectors such as agriculture will be covered under the plan. The National Pension Scheme has a little more than one crore people who have subscribed to it, and according to CRISIL, around 3.6 crore more people have subscribed to other pension plans like EPFO. If news regarding the new social security scheme is true, then it will be a great move for the entire country as a whole as there will be a larger number of people who have some sort of security.

    18 July 2018

  • Interest Rates for Small Savings Schemes to Remain Unchanged

    According to an official report, the government has decided to keep the interest rates of small savings schemes the same as the previous quarter. Despite the 25 point increase in the repo rate, the government has retained the interest rate for the July-September quarter for the current fiscal year.

    The January-March 2017-2018 quarter was the last time a change was made to the interest rate, where the interest rate was reduced by 20 basis points for PPF, Sukanya Samriddhi Scheme and Kisan Vikas Patra.

    The trend of declining interest rates has been observed over the last two years for most savings schemes. The decline has been largely due to the falling interest rate environment. However, a reversal in the cycle had led to anticipation of an increase in interest rates as well.

    17 July 2018

  • Small savings schemes interest rate for September Quarter remains unchanged

    Every year the interest rates of the small saving schemes including NSC, PPF etc. are decided by the government on the basis of the benchmark 10-year bond yield. But this year, even though the bond yields have raised to historical levels of more than 8%, the rates have been kept unchanged by the centre for the July-September quarter. According to the recent release by the Finance Ministry, the interest rates on various small savings schemes for the second quarter of FY18-19 starting from 1 July 2018, and ending on 30 September 2018 will remain the same from those which are notified for the first quarter of 18-19. As a matter of fact, currently, the bond yield is increasing due to the, depreciation of rupee, inflation, increase in the prices of crude oil, and several other minor economic issues.

    03 July 2018

  • Investors of Small Savings Schemes Dejected at Zero Hike in NSC and PPF Interest Rates

    Fixed income earners had high hopes towards small savings schemes (SSS) like PPF and NSC. The Government recently dashed these hopes by keeping the interest rates of schemes like NSC and PPF same as the previous quarter.

    Because interest rates of the economy have undergone a major hike, investors were expecting the rates for SSS also to go up. Amongst fixed income earners, small savings schemes such as NCS and PPF have gained immense popularity.

    The reason why investors anticipated a hike in the interest rates is because the Government has benchmarked these small savings schemes to the Government bonds yields with the same maturity.

    03 July 2018

  • Rules for Small Savings Schemes likely to change

    The Finance Ministry is likely to change the beneficiary ownership rules for small savings schemes. The changes would apply to all the government-run savings schemes. The proposed change, if implemented, would require subscribers to fill out an extra form to give a detailed account of the nominee to their account. The rule is likely to come into effect by September 2018 at the very latest.

    According to a statement from the Supreme Court, the nominee to an account is merely entrusted with collecting the amount for the benefit of the legal heirs. Previously, the amount would be given directly to the nominee regardless of whether or not the nominee is the legal heir. The rule change is likely to reduce the amount of litigation with regards to beneficiary ownership.

    26 June 2018

  • North East States gets special scheme designed by the Government

    While the people of Andhra Pradesh are stealing the headlines with their demand for a special category which the Central Government is yet to give a clear answer on, North East states have a reason to rejoice following the latest special scheme rolled out by the Government of India. As per a source, the Government of India has set aside Rs.3,000 crore for the North East states and aid them with this special scheme. The scheme will particularly help the MSME as they are the core of industrialization in the North East and are the ones creating the most employment opportunities in this part of the country. The scheme will offer this section of the population transport subsidy, railway subsidy, reimbursement for income tax and will also contribute towards the PF contribution of the individuals from the MSME.

    30 March 2018

  • Subscription of 8% savings bonds to close from Jan 2

    Following the set back following the drop in interest rates for most savings schemes, the Government of India has now decided to close the subscription of 8% savings bonds on January 2, 2018. According to a source, the bond opened for subscription on 21 April 2003, and had a fixed tenure of 6 years, and there was no upper limit for investment, luring retail investors across the country to invest in the scheme. However, the curtains of this scheme have come to a close on January 2, 2018, following an announcement from the Ministry of Finance. According to them, the Government of India (GoI) announced here today that 8% GOI Savings (Taxable) Bonds, 2003 shall cease for subscription with effect from the close of banking business on January 2, 2018.

    3 January 2018

  • 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.

    29 November 2017

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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.

    6 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.

    17 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.

    6 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.

    18 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.

    14 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.

    6 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.

    29 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.

    22 August 2017

  • Government cuts interest rate on saving schemes by 10 bps

    On June 30, 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.

    6 July 2017

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