The interest rates of small savings schemes are linked to government bond yields. These change on a quarterly basis.
Due to the guarantee of the government in many such deposit schemes like National Saving Monthly Income Scheme (MIS), PPF, there is no fear of sinking money in them. In addition, tax benefits are also available.
Even though the interest rates on small savings schemes are not very high, they are a safe and disciplined way to deposit money. The interest rates offered on small savings schemes are linked to government bond yields, which are revised on a quarterly basis.
The post office offers many such deposit schemes to the customers that offer tax benefits along with sovereign guarantee. The government guarantees that your money will not sink.
Apart from this, the government also operates some schemes like Public Provident Fund (PPF) through public sector banks. These are such savings schemes, in which a large amount can be raised even with small investments.
Among the various schemes run by India Post, PPF, National Savings Certificate (NSC), National Saving Monthly Income Scheme (MIS) and Sukanya Samriddhi Yojana are the most popular ones.
People can invest in any of these schemes by opening an account in the post office. To open an account, you have to get the account opening form from the post office and fill it along with the KYC form. Also, you have to tell in which scheme you want to invest. Here are some of the features of small savings schemes:
One of the safest investment options, investment in PPF also offers income tax exemption under section 80C of the Income Tax Act. You can deposit up to 1.5 lakh rupees in this scheme in every financial year.
The interest earned from this is also not taxed. You can contribute a minimum of Rs 500 in any financial year. At present, it gets 7.1 percent annual (compound annual) interest.
It has a lock-in period of 15 years. However, after 15 years, you can extend this plan to a block of five years. PPF accounts can also be opened in banks.
national savings certificate
National Savings Certificate is also quite popular among small savings schemes, which also provide tax benefits to the investor. The minimum deposit limit in this is Rs 1,000, while there is no upper limit. The duration of the scheme is 5 years. At present, the government is giving 6.8 percent compound interest rate on it.
National Saving Monthly Income
A minimum deposit of Rs 1,000 can be made in this scheme, while the maximum investment limit in an account is up to Rs 4.5 lakh. The maximum limit for investment in a joint account is Rs 9 lakh. At present, 6.6 percent annual interest is available on this scheme. Interest is paid monthly.
You cannot get this account permanently closed before the completion of 1 year. If the investor closes the account after 1 year and before 3 years, a penalty equal to 2 per cent of the principal amount is deducted. Similarly, if the account is closed after 3 years and before 5 years, 1% is deducted from the principal amount.
Sukanya Samriddhi Yojana
The government had started the Sukanya Samriddhi Yojana to secure the future of the girl child. At present, 7.6 percent interest rate is being given under this scheme. The minimum deposit amount for the scheme is Rs 250, while the upper limit is Rs 1.5 lakh each financial year.
Investments can be made for 15 years from the date of account opening. However, the scheme will mature after 21 years from the date of opening of the account or at the time of marriage of the person in whose name the account is opened.
