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The best small savings schemes

May 5, 2009 17:49 IST

The best small savings schemes

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The financial literacy of an individual today is increasing in terms of different investment or tax savings instruments.

The risk appetite for people to invest in stock markets and mutual funds is also increasing.

Despite the presence of alternate investment options, small savings schemes continue to be the preferred choice for a sizable chunk of the investing population.

The high safety levels coupled with the attractive returns make small savings schemes a 'must-have' proposition for most investors.

Text: BankBazaar.com

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Image: Small savings schemes are a 'must-have' proposition for most investors.
Photographs: Uttam Ghosh
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The best small savings schemes

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What are Small Savings Schemes?

Small savings schemes are designed to provide safe and attractive investment options with tax returns to people who want to stay away from the uncertainties of the stock market.

These schemes are operated through the large number of post offices and public sector banks throughout the country.

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Image: Small savings schemes are designed to provide safe and attractive investment options
Photographs: Uttam Ghosh
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The best small savings schemes

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What are the investment instruments available under the Small Savings Scheme?

The tax savings and investment instruments available under the small savings scheme are:

  • Public Provident Fund
  • Employees' Provident Fund
  • National Savings Certificate
  • Kisan Vikas Patra
  • National Savings Scheme, 1992
  • Relief Bonds
  • Post office monthly income scheme
  • Post office time deposits

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Copyright 2008 www.BankBazaar.com. All rights reserved.


Image: Instruments under the small savings scheme provide assured returns.
Photographs: Uttam Ghosh
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The best small savings schemes

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What are its benefits?

The attraction of small-savings schemes lies in many factors:

Assured returns: Instruments under the small savings scheme provide assured returns even through volatile markets.

Government sponsored: Since all these schemes are controlled by government-run post-offices and public sector banks, the safety of your investment, timely payments of interest and repayment of principal on maturity is safe.

Ease for small investors: Some of these investment schemes have a minimum investment of Rs 5, making it easy for anyone to invest in the schemes.

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Copyright 2008 www.BankBazaar.com. All rights reserved.


Image: Repayment of principal on maturity is safe since these schemes are government backed.
Photographs: Dominic Xavier
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The best small savings schemes

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Tax benefits: For people with high taxable incomes, the tax benefits offered by these schemes are very attractive.

Liquidity: Access to your investments is very easy.

Most of the schemes provide for premature withdrawals and a few of the schemes also offer loans based on the investment made.

These schemes can be shifted from one post office to another. Hence they are suitable for persons having transferable jobs.

What are the features of the investment instruments in the Small Savings Scheme?

Some of the investment instruments under the small savings scheme are listed below along with their features.

Instrument

Interest

Term

Min/Max Investment

Tax Benefit

National Savings Certificate

8% compounded half yearly

6 Years

Rs. 100/No upper limit

Section 80C

Post Office Recurring
Deposits

9% per annum

5 Years

Multiples of Rs. 5/ No upper limit

 

National Savings Scheme, 1992

9% per annum

No Fixed Tenure

Multiples of Rs. 100/ No upper limit

Section 80C

Public Provident Fund

8% per annum

15 years

Rs 500/Rs 70,000

Section 80C

Kisan Vikas Patra

Amount invested doubles in 8 years 7months

8 years 7 months

Multiples of Rs. 100/ No upper limit

None

Relief Bonds

6.5% (Non-Taxable), 8% Savings (Taxable)  compounded half-yearly

5 years (6.5% version), 6 years (8% version)

Rs. 1,000/ No upper limit

6.5% version (exempt from income tax), 8.5% (not exempt from income tax)

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BankBazaar.com is an online marketplace where you can instantly get loan rate quotes, compare and apply online for your personal loan, home loan and credit card needs from India's leading banks and NBFCs.
Copyright 2008 www.BankBazaar.com. All rights reserved.


Image: Access to your investments is very easy
Photographs: Dominic Xavier
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