Top 5 Small Savings Schemes by Government of India

Saving is income not spent, or deferred consumption.

Methods of saving include putting money aside in, for example, a deposit account, a pension account, an investment fund, or as cash.

In terms of personal finance, saving generally specifies low-risk preservation of money, as in a deposit account, versus investment, wherein risk is a lot higher; in economics more broadly, it refers to any income not used for immediate consumption.

Saving does not automatically include interest.

While there are several different types of savings accounts, the three most common are the deposit account, the money market account, and the certificate of deposit.

Saving Schemes are launched by the Government of India or public sector financial institutions or Banks.

They vary in their interest rates, investment horizons and tax treatments.

A saving schemes financially prepares us for unforeseen personal and medical emergencies.

It helps you meet your personal aspirations and that of your family’s like – additional educational course to supplement your existing qualifications, child’s higher education and marriage, etc.

For some, income from saving schemes also serves as an additional source of income.

The advantage of saving schemes is that they are government backed, thereby, offering complete safety and security of your invested capital.

Further, they are low on risk, but at the same time, provide good returns.

Types of saving schemes in India can be broadly categorised into 2 types based on their popularity, financial security and returns:

  • National Savings Certificate (NSC)
  • National Savings Scheme (NSS)

 

Saving Schemes:

  1. Senior Citizen Savings Scheme (SCSS)
  • Senior Citizens Savings Scheme (SCSS) is a government-backed savings instrument offered to Indian residents aged over 60 years.
  • The deposit matures after 5 years from the date of account opening but can be extended once by an additional 3 years.
  • The SCSS interest rate for April to June 2020 has been set at 7.4%.
  • This is the highest interest rate among the various small savings schemes in India.
  • SCSS is available through Public / Private sector banks and India Post Offices.
  • Being a government-backed savings instrument, the terms and conditions applicable to the SCSS are the same, regardless of the bank/ post office you invest through.
  • As of April 2020, the interest rate available on the SCSS account is 7.4% per annum for the first quarter (April to June) of the financial year 2020-2021.
  • This rate of interest is reviewed quarterly by the Ministry of Finance and subject to periodic change.
  • Interest on SCSS account deposits is calculated and credited quarterly.

 

  1. Sukanya Samriddhi Account Scheme
  • Sukanya Samriddhi Account (Girl Child Prosperity Account) is a Government of India backed saving scheme targeted at the parents of girl children.
  • The scheme encourages parents to build a fund for the future education and marriage expenses for their female child.
  • The scheme was launched by Prime Minister Narendra Modi on 22 January 2015 as a part of the Beti Bachao, Beti Padhao campaign.
  • The scheme currently provides an interest rate of 7.6%(for Apr-July 2020 quarter) and tax benefits.
  • The account can be opened at any India Post office or branch of authorised commercial banks.
  • The Sukanya Samriddhi Account Rules, 2016 was rescinded on 12 December 2019 and the new Sukanya Samriddhi Account Scheme, 2019 was introduced.
  • The scheme was launched by Prime Minister Narendra Modi on 22 January 2015 in Panipat, Haryana.
  • The accounts can be opened at any India Post office or a branch of some authorised commercial banks.
  • Initially, the interest rate was set at 9.1% but later revised to 9.2% in late March 2015 for FY2015-16.

 

  1. Kisan Vikas Patra
  • Kisan Vikas Patra is a saving certificate scheme which was first launched in 1988 by India Post.
  • It was successful in the early months but afterwards the Government of India set up a committee under supervision of Shyamala Gopinath which gave its recommendation to the Government that KVP could be misused.
  • Hence the Government of India decided to close this scheme and KVP was closed in 2011 and the new government re-launched it in 2014.
  • Kisan Vikas Patra can be purchased by :
  1. An adult in his own name, or on behalf of a minor
  2. A Trust
  3. Two adults jointly
  • KVP certificates are available in the denominations of Rs 1000, Rs 5000, Rs 10000 and Rs 50000.
  • The minimum amount that can be invested is Rs 1000.
  • However, there is no upper limit on the purchase of KVPs.

 

  1. Public Provident Fund
  • The Public Provident Fund is a savings-cum-tax-saving instrument in India, introduced by the National Savings Institute of the Ministry of Finance in 1968.
  • The aim of the scheme is to mobilize small savings by offering an investment with reasonable returns combined with income tax benefits.
  • The scheme is fully guaranteed by the Central Government.
  • Balance in PPF account is not subject to attachment under any order or decree of court.
  • However, Income Tax & other Government authorities can attach the account for recovering tax dues.
  • Public Provident Fund Scheme, 2019 introduced by the Government on 12.12.2019 and with the new scheme the earlier Public Provident Fund Scheme, 1968 as amended from time to time is rescinded.
  • Individuals who are residents of India are eligible to open their account under the Public Provident Fund, and are entitled to tax-free returns.
  • As of August 2018, as per the Indian Ministry of finance (Department of Economic Affairs), NRIs (Non resident Indians) are not allowed to open new PPF accounts.
  • However, they are allowed to continue their existing PPF accounts up to its 15 years maturity period.

 

  1. National Savings Certificates
  • National Savings Certificates, popularly known as NSC, is an Indian Government savings bond, primarily used for small savings and income tax saving investments in India.
  • It is part of the postal savings system of India Post.
  • These can be purchased from any Post Office in India by an adult (either in his/her own name or on behalf of a minor), a minor, a trust, and two adults jointly.
  • These are issued for five and ten year maturity and can be pledged to banks as collateral for availing loans.
  • The holder gets the tax benefit under Section 80C of Income Tax Act, 1961.
  • Other similar government savings schemes in India include: Public Provident Fund (PPF), Post Office Fixed Deposit, Post Office Recurring Deposit, etc.
  • The certificates were heavily promoted by the Indian government in the 1950s after India’s independence, to collect funds for nation-building.
  • The existing system of physical pre-printed certificates for NSC shall stand discontinued w.e.f. 1.4.2016 and shall be replaced by ‘National Savings Certificate’ Certificate on electronic mode (e-mode).

Till the CBS system transits to that e-mode, banks and post offices may choose to issue a physical certificate recorded on a passbook.