Top 5 Savings Scheme in India
Savings makes your future comfortable and easy. We all want a solid financial future for ourselves and our loved ones. With that in mind, it’s important to save money for emergencies or when we can no longer work. One great way to do this is by investing in the right places. By putting our money into suitable savings schemes, we can grow our wealth while saving money daily basis.
There are many different types of savings schemes offered by the government to investors, each with its own set of pros and cons. Before making any investment decisions, it’s important to do your research and understand all the options available to you.
Some of the Best Saving Schemes
| Savings Schemes | Current Interest Rate |
|---|---|
| National Pension Scheme | 9%-12% |
| Employee Provident Fund (EPF) | 8.6% |
| Public Provident Fund (PPF) | 7.1% |
| Recurring Deposits | 6-7% |
| Post Office Monthly Income Scheme (MIS) | 6.6% |
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National Pension Scheme
The National Pension Scheme (NPS), which is regulated by the Pension Fund Regulatory and Development Authority, was introduced by an act of parliament in 2004. It applies to all government employees who joined after 1st January 2004, but in 2009 it was made available to all citizens of India aged between 18 and 65 years of age.
Under NPS, your individual savings are pooled together into a pension fund which is then invested by PFRDA regulated professional fund managers. The investment is made according to approved investment guidelines, and the portfolio is diversified. It can comprise of government bonds, bills, corporate debentures and shares. These contributions would grow and accumulate over the years, depending on the returns earned on the investment.
When exiting the NPS scheme, subscribers can use their accumulated pension wealth to purchase a life annuity from a PFRDA empaneled Life Insurance Company. They can also choose to withdraw a part of the accumulated pension wealth as a lump sum.
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Employee Provident Fund
The Employee Provident Fund (EPF) is a government-initiated savings scheme that requires salaried individuals to make an equal financial contribution to their Provident Fund (PF) account. EPF funds can help individuals plan for their retirement in advance, so they can enjoy their golden years without stress. Additionally, the EPF scheme can also help individuals to achieve their financial goals and deal with any unexpected emergencies.
Some of the key features of the EPF Scheme are as follows:
- Both the employee and employer make an equal contribution of 12% of the employee’s monthly salary towards the PF account per month.
- The annual interest rate on the contribution made towards the EPF scheme is 8%-12%.
- Interest is credited to the account of the employees on the 1st of April of every financial year.
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Public Provident Fund
The National Savings Institute was introduced by the Public Provident Fund (PPF) in 1968. As a government-backed savings scheme, it is one of the safest and most popular savings options in India.
Contributions made towards a PPF account are eligible for tax deductions under Section 80C of the Income Tax Act. The scheme offers an annual interest rate of 7.6%, which is compounded annually. The minimum contribution for a PPF account is Rs.500 and the maximum investment is Rs.1.5 lakhs per financial year. The benefits offered by PPF can be paid out as a lump sum or in up to 12 installments per financial year. PPF accounts are also flexible, as individuals can transfer them from one post office or bank to another.
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Recurring Deposit
A recurring deposit, or RD, is a term deposit offered by banks as a savings plan for those who want to earn a higher return on their investment at the time of maturity. RDs encourage disciplined saving habits among people and usually have restrictions on mid-term and premature withdrawals, although some banks may allow early withdrawal with a penalty.
In addition to providing higher interest rates for senior citizens, RDs can also be used as collateral for taking out loans. This makes them an ideal investment option for older adults who want to secure their financial future.
One of the best savings plans for individuals with a monthly income is a recurring deposit (RD), which allows you to deposit a fixed amount every month. The minimum amount to start an RD account at a bank is Rs 500, while the minimum amount for a post office RD is only Rs 10. The interest rate on bank RDs differs according to the bank and is sensitive to market fluctuations. Post office RDs have a fixed interest rate of 8.4%. The tenure of an RD account can be from 7 days to 10 years.
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Post Office Monthly Income Scheme
This is a savings plan where you invest a sum of money each month, for which an interest amount will be paid monthly. Being a low-risk monthly income scheme, this savings plan generates a steady income. The money invested is safe until it matures since the government sponsors the scheme. When the maturity period of the savings plan is reached, you can either withdraw the amount or reinvest in the scheme.
You can begin with an initial investment and grow it gradually over time, as you’re able to afford it. The returns on this savings plan are considerable – in fact, higher than many other similar investment options. However, the post office’s monthly income scheme will be subject to taxation. That said, this option does not have tax deducted at source.
