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At 18, we wished to get a job to get financial independence. By the time, we reached the age of 30, we realized financial independence comes with a lot of responsibilities. We are not only responsible for our own expenses, but also for our family members who depend on us financially.
This is when we all realized the importance of savings, didn’t we? But just so you know, simply cutting down your expenses is not the best way of building a savings corpus. Investing in the best saving scheme in India is the sure-shot way to do it.
Here’s why.
Importance of a Savings Scheme
Most individuals refrain from investing in the best saving scheme in India because they think they can do well without it. But here’s why investing in the best saving scheme in India is important:
1. You Get Returns
Investing in a saving scheme in India doesn’t mean simply putting your money and getting the same amount back on maturity. Several saving schemes in India offer returns in form of interest. These saving schemes has a defined rate of interest, according to which returns are calculated. These returns further grow through the power of compound interest.
2. You can Generate a Corpus Faster
What do you think is the ideal amount for a savings fund that is adequate for your financial needs? Whatever the number you have in mind, how long do you think it will take for you to reach your investment target? Perhaps many years?
Guess what, investing in these saving schemes in India might help you reach that desired investment goal much faster. It’s not a good idea to simply depend on your paychecks or save rigorously. Combine the habit of saving with making investments in the best saving scheme in India and you’ll reach your investment goals in no time.
3. Investment Safety
Investment safety is a concern for most investors – especially those who prefer minimal risk but require a dependable savings corpus. Much to their relief, the best saving schemes in India are government-backed, making them a safe investment option. Additionally, as these schemes that pay a fixed rate of interest, there’s no market risk either.
4. Ensures Retirement Savings
You have a job to support your finances right now but have you wondered what will happen when you retire? We’re sure you have your retirement plans, and it’s a no brainer that you would require money to fund these plans. Investing in the best saving scheme in India can save the day by offering you a sizeable amount at maturity that you can use as your retirement fund.
5. Helps to Save Tax
Under Section 80C of the Income Tax Act, you can claim a tax deduction of up to INR 1.50 lakh by investing in various long-term savings schemes in India. Therefore, apart from helping you build a sizeable savings fund, these investments can also help you reduce your income tax liability.
You have a job to support your finances right now but have you wondered what will happen when you retire? We’re sure you have your retirement plans, and it’s a no brainer that you would require money to fund these plans. Investing in the best saving scheme in India can save the day by offering you a sizeable amount at maturity that you can use as your retirement fund.
5. Helps to Save Tax
Under Section 80C of the Income Tax Act, you can claim a tax deduction of up to INR 1.50 lakh by investing in various long-term savings schemes in India. Therefore, apart from helping you build a sizeable savings fund, these investments can also help you reduce your income tax liability.
Schemes that might be considered the Best Savings Schemes in India
Now that you know why investing in the best saving scheme in India is necessary, you might should also know about the best saving schemes in India that you can invest in:
1. Public Provident Fund:
Public Provident Fund is a government-backed long-term saving scheme in India introduced with the primary objective to help individuals generate retirement savings.
It requires a minimum deposit of INR 500, and a maximum deposit of INR 1.50 lakh is allowed in a financial year. Furthermore, the saving scheme matures after 15 years, which can be increased in blocks of 5 years post-maturity.
Additionally, the interest earned from and the maturity amount received from this best saving scheme in India is also tax-free under Section 10 of the Income Tax Act.
2. Senior Citizen Savings Scheme
As the name suggests, the Senior Citizen Savings Scheme (SCSS) is ideal for senior citizens who look for investment security and regular income to meet the financial needs of their retirement life. The low-risk and high interest rate offered by SCSS makes it one of the best savings schemes in India.
Individuals who are at least 60 years old are eligible to invest in the Senior Citizen Saving Scheme. Alternatively, individuals who have subscribed to the Voluntary Retirement Scheme, or Superannuation and are aged 55 years or more, can also subscribe in the scheme.
2. Senior Citizen Savings Scheme
As the name suggests, the Senior Citizen Savings Scheme (SCSS) is ideal for senior citizens who look for investment security and regular income to meet the financial needs of their retirement life. The low-risk and high interest rate offered by SCSS makes it one of the best savings schemes in India.
Individuals who are at least 60 years old are eligible to invest in the Senior Citizen Saving Scheme. Alternatively, individuals who have subscribed to the Voluntary Retirement Scheme, or Superannuation and are aged 55 years or more, can also subscribe in the scheme.
The Senior Citizen Savings Scheme requires a minimum deposit of INR 1000 at the time of account opening, and a maximum deposit of Rs. 15 lakhs is allowed in this account. The scheme has a maturity period of 5 years, which can be extended by an additional 3 years after maturity if the subscriber so wishes. Like some of the other best saving schemes in India, SCSS also qualifies for tax benefits under Section 80C of the Income Tax Act.
3. Post-Office Monthly Income Scheme
Post Office Monthly Income Scheme is a saving scheme introduced for subscribers who prefer risk-free investments that offer guaranteed returns. One needs to set up an account in the post office to invest in this scheme.
The saving scheme requires a minimum investment of INR 1000, with a maximum limit of INR 4.5lakh for an individual account, and INR 9 lakh for a joint account. This is one of the best saving schemes in India offering interest which is payable every month. Subscribers can earn an interest of 6.6% in the saving scheme, as of April 2022.
4. National Savings Certificate
NSC or National Savings Certificate is one of the best savings scheme in India that offers tax deduction benefits and can be set up through any post office. The government-backed savings scheme aims to encourage investors belonging to the small and middle-income category.
A National Saving Certificate can be bought for a specific amount of money and offers a pre-determined amount to the investor at maturity. The interest from NSC is paid to the investors at maturity.
National Saving Certificate invites a minimum deposit of INR 1000 and no maximum deposit
Any individual, above the age of 18, can invest in this tax saving investment. NSC investments can also be made on behalf of the minor, by a parent or guardian. Additionally, National Saving Certificate can also be used to secure loans through the banks.
5. Recurring Deposit
Recurring Deposit is a term deposit provided by banks across India. It is one of the best saving schemes in India that is ideal for those investors who can make regular deposits to create a large investment corpus over time. The subscriber has the flexibility to choose the deposit amount and the investment tenure when setting up the RD account.
Unlike other saving schemes in India, Recurring Deposit doesn’t have a fixed rate of interest determined by the government, the rate of interest varies from bank to bank. At the same time, the tenure for Recurring Deposit also impacts the interest rate of this investment.. Currently bank RD tenure can vary from 7 days to 10 years.
Being a saving scheme that pays interest to the subscribers, returns from RD are pre-determined and guaranteed.
FAQs
Q1. Are premature withdrawals allowed in a Senior Citizen Saving Scheme?
Yes, premature withdrawals are allowed in a Senior Citizen Saving Scheme only after completion of 1 year after setting up the account. However, a penalty charge is levied on premature withdrawals.
Q2. How should I create a financially strong savings plan?
A pro tip for all investors is to start at the earliest to strengthen your financial standing and build a strong savings plan. Make it a goal to invest at least 20% of your income in the best saving scheme in India according to your financial goals. You can consider setting up a budget, keep monitoring your income and expenses, and increase your savings as you grow financially in life.
Q3. What will happen if I fail to make a deposit in my PPF account?
PPF account requires a minimum deposit of INR 500 annually to keep it active. Failing to do so can designate the PPF account inactive. An inactive account can be reactivated by making all due deposits and paying a penalty.
Q4. Can I withdraw from NSC before the maturity period?
National Saving Scheme, one of the best saving schemes in India, comes with a lock-in period of 5 years, wherein withdrawals are not generally allowed. However, under certain circumstances, such as the death of the investor or court order, premature withdrawals can be made.
Q5. What are the factors that I should be mindful of when investing in saving schemes?
Even though most government-backed saving schemes offer guaranteed returns according to the interest rate, some factors that one needs to be mindful of are liquidity, interest rate, eligibility criteria as well as terms and conditions applicable to the investment.
Source:
https://www.nsiindia.gov.in/InternalPage.aspx?Id_Pk=62
https://www.nsiindia.gov.in/InternalPage.aspx?Id_Pk=55
https://economictimes.indiatimes.com/wealth/invest/earn-6-6-interest-on-post-office-monthly-income-scheme-check-eligibility-taxation-other-details-here/articleshow/90435693.cms
https://www.nsiindia.gov.in/InternalPage.aspx?Id_Pk=90
https://www.hdfcbank.com/personal/resources/learning-centre/save/what-is-rd-account
https://www.nsiindia.gov.in/InternalPage.aspx?Id_Pk=55
https://economictimes.indiatimes.com/wealth/invest/inactive-ppf-account-follow-this-process-to-reactivate-it/penalty/slideshow/80213798.cms
ARN No: May22/Bg/24
