As investors, it’s essential to prioritize saving before entering the world of investments. In India, various small saving schemes are tailored to help individuals grow their savings efficiently.
Let’s explore more about small saving schemes to understand the concept and find the best options available.
What are Small Saving Schemes?
In India, small saving schemes serve as a cornerstone of financial planning for millions of individuals, offering accessible and reliable avenues for accumulating savings and generating returns. These schemes, backed by the government, cater to savers’ diverse needs and preferences across different income levels and risk tolerances. From the popular Public Provident Fund (PPF) and Sukanya Samriddhi Yojana (SSY) to the lesser-known Kisan Vikas Patra (KVP) and Senior Citizen Savings Scheme (SCSS), there is a wide array of options available to suit various financial goals and timelines.
With attractive interest rates, tax benefits, and the assurance of government backing, small savings schemes continue to play a significant role in fostering a culture of savings and financial inclusion in India. Typically offering returns in the 6-8 percent range, they are ideal for those prioritizing safety and stability in their investment strategy.
Here’s a table with the updated interest rate for this quarter:
| Small Savings Scheme | Interest rate |
| Post Office Savings Account | 4% |
| Post Office Recurring Deposit | 6.7% |
| Post Office Monthly Income Scheme | 7.4% |
| Post Office Time Deposit (1 year) | 6.9% |
| Post Office Time Deposit (2 years) | 7% |
| Post Office Time Deposit (3 years) | 7.1% |
| Post Office Time Deposit (5 years) | 7.5% |
| Kisan Vikas Patra (KVP) | 7.5% |
| Public Provident Fund (PPF) | 7.1% |
| Sukanya Samriddhi Yojana | 8.2% |
| National Savings Certificate | 7.7% |
| Senior Citizens’ Saving Scheme (SCSS) | 8.2% |
| Mahila Samman Savings Certificate | 7.5% |
Small Savings Schemes and the Current Returns
Post Office Savings Account: India Post’s savings schemes are widely favored due to their low risk and guaranteed returns. This account offers:
- Minimum deposit: ₹500
- Account holders can withdraw a minimum of ₹50
- No maximum deposit limit
- The interest rate of 4 percent per annum applies to both individual and joint accounts, compounded annually.
- Duration is open-ended
- Tax on Interest is applicable
Post Office Time Deposit Account: This account can be opened with a minimum deposit of ₹1,000 in multiples of ₹100. There is no maximum limit on the deposit amount. The interest rates vary depending on the duration of the deposit:
- 1-year time deposit: 6.9%
- 2-year time deposit: 7%
- 3-year time deposit: 7.1%
- 5-year time deposit: 7.5%
PPF (Public Provident Fund): The Public Provident Fund (PPF) scheme stands out as India’s highly favored and secure investment avenue. It offers:
- Investors can start with a minimum investment of ₹500
- Can invest up to ₹1.5 lahks in a financial year
- The interest rate of 7.1% per annum is compounded yearly.
- Minimum tenure of 15 years
- Tax on interest is not applicable
Senior Citizen Savings Scheme: The Senior Citizen Savings Scheme (SCSS) was introduced to support individuals aged 60 and above. Additionally, those between 55 and 60 who have opted for the Voluntary Retirement Scheme (VRS) are eligible to participate in the SCSS.
- Minimum deposit of ₹1,000
- Maximum limit of ₹30 lakh
- The scheme offers a competitive interest rate of 8.2%
- Duration is five years
- Tax on Interest is applicable
Post Office Monthly Income Scheme Account: The Post Office Monthly Income Scheme (POMIS) is a small savings scheme supported by the Government of India. It allows investors to save a fixed amount each month.
- Minimum deposit of ₹1,000, investors can earn a monthly income.
- The maximum investment allowed is ₹9 lakh for a single account and ₹15 lakh for a joint account.
- The scheme offers a monthly interest rate of 7.4%
- Lock-in period for 5 years
- Interest earned is taxable
National Savings Certificate: The National Savings Certificate (NSC) is a fixed-income investment scheme available at all post office branches. The Government of India’s initiative aims to encourage small—to mid-income investors to save and invest while also providing tax benefits.
- Minimum investment of ₹1,000, with no maximum limit
- The interest rate of 7.7% is compounded annually and payable at maturity.
- Lock-in period for 5 years
- Tax benefit of Up to Rs.1.5 lakh under Section 80C
Post Office Recurring Deposit Scheme: The 5-year Post Office Recurring Deposit (PORD), also called the National Savings Recurring Deposit, offers a convenient way to save regularly over 5 years, with 60 monthly installments.
- Investors are allowed to deposit ₹100 per month or in multiples of ₹10
- The interest rate is 6.7% annually between Jan 1 to March 31, compounded quarterly.
- No maximum limit on the deposit amount
Sukanya Samriddhi Account Scheme: Prime Minister Narendra Modi initiated the Sukanya Samriddhi Yojana (SSY) scheme, which is designed to safeguard the future of girl children.
- Minimum investment of ₹250
- Maximum of ₹1.50 lakh in a financial year
- The interest rate is 8.2% per annum, effective from Jan 1, 2024
- Duration is for 21 years
- Tax on interest is not applicable
Kisan Vikas Patra: The Kisan Vikas Patra (KVP) scheme, launched in 1988, is a small savings certificate program that aims to foster long-term financial planning and discipline among individuals.
- Minimum investment of ₹1,000, with no maximum limit
- The interest rate of 7.5% is compounded annually
- Tax benefits under Section 80C of the Income Tax Act, 1961
Mahila Samman Savings Certificate: The Mahila Samman Savings Certificate, introduced in 2023 by the Government of India, is a small savings scheme specifically tailored for women beneficiaries. Its primary objective is to instill a culture of saving among the women of India.
- Minimum deposit of ₹1,000
- Maximum deposit facility of up to Rs.2 lakh
- Investors can earn an annual interest rate of 7.5%
- Tax on the interest is applicable.
Benefits of Investing in Small Savings Schemes
- Government Backing: The government backs small savings schemes, providing investors with security and assurance. This backing ensures that the returns on these schemes are guaranteed, making them a reliable investment option for individuals seeking stable returns.
- Tax Benefits: Several small savings schemes, such as the Public Provident Fund (PPF) and Senior Citizen Savings Scheme (SCSS), offer tax benefits under Section 80C of the Income Tax Act. Investors can claim deductions of up to ₹1.5 lakh on their investments, helping them reduce their tax liability.
- Portfolio Diversification: Investing in small savings schemes can help diversify your investment portfolio. You can balance your overall investment portfolio’s risk and return profile by allocating some of your funds to these schemes. This diversification can help mitigate risk and enhance long-term returns.
Conclusion:
Small saving schemes in India offer many options for investors to grow their savings while enjoying various tax benefits and financial security. Whether it’s planning for retirement, securing your children’s future, or generating a regular income stream, these schemes cater to diverse financial goals. By exploring and investing in these schemes today, investors can take significant steps towards achieving their long-term financial objectives.
FAQs
Can I invest in multiple small saving schemes simultaneously?
Yes, investors can simultaneously invest in multiple small savings schemes based on their financial goals and risk appetite. However, before diversifying your investments, it's essential to consider factors such as maturity periods, interest rates, and tax implications.
Are small saving schemes risk-free?
Small saving schemes offered by the government of India are considered relatively safe as they come with a sovereign guarantee. However, assessing the risks associated with factors such as interest rate fluctuations, inflation, and taxation is essential while making investment decisions.
Can I withdraw my investment prematurely from small saving schemes?
While premature withdrawal options vary between small savings schemes, most schemes have provisions for partial or full withdrawal under specific circumstances. However, early withdrawals may attract penalties or lower interest rates, so investors should carefully evaluate their financial needs before opting for premature withdrawals.
I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.