Saving Schemes: Evaluating the Best Saving Schemes in India 2023

As time has its own way of changing things, it is quite obvious that today's India is quite different from the India a few decades ago. There's a long list of things that have changed in the nation. Each field, industry, states or cities, or sectors have developed in their own way. India is going online, people becoming more intellectual, the luxuries of then becoming the necessities of now; everything has changed drastically. 

One such another thing that has changed over time is the saving system. Earlier, the system was way different from what it is today. People used to save some extra money as their future savings, keeping it inside grain sacks, metal vaults, or small indoor storage units. However, as much as these methods were risky and couldn't 100% avoid the risk of theft, there was one other loss attached to it; the loss of the benefits of interest.

To change such ancient, conventional systems of savings, the government has introduced more reliable and user-friendly saving schemes. These saving schemes were introduced as an inducement to promote healthy saving and investing habits in India.

Let's understand what a saving scheme is and what are the various saving schemes available for Indian citizens. 

What is a saving scheme? 

Saving Schemes are launched by the Government of India or public sector financial institutions or banks for the citizens of India. As mentioned above, these are the investment options which have been introduced with the motive of promoting more and more saving by the citizens in India. 

As these schemes are government-backed, they are highly reliable with all the measures of safety and security. The other advantage that comes up with the saving schemes is that they provide certain tax exemptions. 

Saving Schemes are not only beneficial for the customers but also for the government as it is also a way to increase the inflow of money into the Indian economy. Under the saving scheme, people can invest for any reason; be it children's education, children's/own marriage, retirement plans, house purchase, etc.

Different Saving Schemes

There are different types of saving schemes prevalent in India, some of which are as follows:

1. Senior Citizen Savings Scheme 

Senior Citizen Saving Scheme (SCSS) is a scheme which solely aims to improve the life of citizens after their retirement. The aim of this scheme is to provide a regular income to the people who are aged above 60 years. A certified bank or a post office could provide you with the senior citizen saving scheme. 

In the Senior Citizen Saving Scheme the investors have been categorized into three categories; senior citizens above 60 years, retired defence personnel above 50 years, and lastly, people between the age of 55-60 years who have opted for the voluntary retirement scheme. 

The tenure of this saving scheme is of 5 years, with the interest rate being 7.4%. To open an account under this scheme, the investor is required to submit a minimum of Rs. 1000 till a maximum limit of Rs. 15 lakh. As it was mentioned above, the tax exemption is provided on both the principal amount as well as the interest earned on that amount. 

2. Equity Linked Savings Scheme (ELSS) 

Equity Linked Saving Scheme is another scheme which provides the benefits in its own typical way. It is a kind of mutual fund. ELSS comes up with a lock-in period of just 3 years, investing at least 80% of assets in equity (stocks) that offers a higher compounding potential in the long term among the other tax-saving schemes. 

Things to be kept in mind before investing in ELSS is that the Minimum Investment Amount differs for fund houses, and there is no limit on maximum investment. In this scheme, the interest is taxable at 10% (LTCG). 

3. Sukanya Samriddhi Yojana

The Sukanya Samriddhi Yojana, launched by Prime Minister Narendra Modi, is a government saving scheme that is developed with the goal to benefit girls of 10 years or younger.

Under the scheme, a parent or legal guardian of a girl child can open a maximum of 2 accounts for 2 girl children. The account under the scheme matures after 21 years of opening the account or in case of the marriage of the girl child after she reaches the age of 18 years. 

The tenure of investment is 21 years, with the interest rate of 7.6%. In the case of Sukanya Samriddhi Yojna, the minimum amount of investment is Rs. 1000 per annum, and the maximum amount of investment can be up to Rs. 1.5 lakh per annum. 

Also, Tax Deduction on Principal allowed under section 80C of the Income Tax Act is up to Rs 1.5 lakh. The interest received is also not taxable in this scheme.

4. Post Office Monthly Income Scheme (POMIS) 

The Post Office Monthly Income Scheme (POMIS) is a small saving scheme that is backed up by the Ministry of Finance of the Government of India. This scheme allows the investor or the depositor to save or set aside a specific amount on a monthly basis. 

Thereafter, interest is calculated and added to this investment at a favourable rate and paid out to the depositor or the investor on a monthly basis. With the current interest rate of 6.6%, the post office monthly income scheme is one of the highest-earning schemes in India.

A minimum of Rs.1,500 to a maximum investment of Rs. 4.5 Lakh can be made under the POMIS scheme. Even if you hold this scheme in more than one post office, the total of all your deposits cannot exceed this limit of Rs. 4.5 Lakhs. 

5. National Savings Certificate (NSC) 

NSC is another income tax saving technique that comes with a tenure of 5 years. The National Saving Certificates provide a fixed rate of interest, which is currently 6.8% per annum. 

The interest which is received from this income tax saving technique is a decent tax-saving option and under section 80C, up to Rs. 1.5 lakh could be taken as a rebate.  

National Saving Certificate could be obtained from any of the post offices by Indian citizens. This investment option under the saving scheme is a preferred choice of those individuals who are looking for safer and secured investment avenues as it is backed by the Government of India, hence, carrying a low risk. 

6. Public Provident Fund (PPF) 

Whenever the thought of a saving option, Public Provident Fund or PPF is usually the first one that is considered, it has been a popular scheme since generations, and hence, people usually choose to opt for this. It is widely considered as one of the safest saving options in the country. 

In PPF, a long-term investment could be made with a tenure of 15 years and can also be extended in blocks of five years after the completion of the lock-in period. One can open a PPF account in banks and post offices with a minimal amount of Rs. 500. 

The PPF rates change every quarter, which is currently at 7.1%. The interest on PPF is tax-free. 

7. Pradhan Mantri Vaya Vandhana Yojana (PMVVY) 

PMVVY is another saving scheme that is available to the citizens of India and is best suited for senior citizens aged 60 years or more. PMVVY is a pension plan run by the Life Insurance Corporation (LIC) of India. 

The tenure of the PMVVY is 10 years, where an assured return of 7.4% per annum. In this scheme, the investor is as benefitted as it is up to them whether they choose for monthly/quarterly/ half-yearly or yearly payment of their pension. 

The minimum amount required for investment is Rs. 1000, whereas the maximum limit is Rs. 15 lakh. The principal amount is tax-deductible, and the interest earned is exempted from tax. 

8. National Pension Scheme (NPS) 

The National Saving Scheme is also a sought after scheme in the country. It is included in the list of the most reliable and secured schemes of India. It comes up with the motive to provide monthly, regular income to its investors after their retirement. 

In this scheme, employees are required to invest in NPS while they are employed. The entire collected amount throughout the duration of the scheme is broken down through an annuity plan. After this, it is paid out to the investor every month post-retirement. This scheme aims to make the life of the retirees more financially secured and independent. 

This scheme is secured for state and central government organizations, employees of MNCs, and citizens who are employed in the unorganized sectors. 

9. Tax Saving Fixed Deposits 

Tax saving fixed deposit is a scheme which is highly recommended by various people in India. People prefer these schemes to invest in as it comes up with lower risk and a fixed and guaranteed return on a long- term basis. The investment made under the scheme is allowed as a deduction up to Rs 1.5 lakh, under Section 80C of the Income Tax Act. 

The scheme comes up with a tenure of 5 years, where the interest rates differ from bank to bank. Currently, it's in the bracket of 6.50% to 7.50%. The lower limit of investment is Rs. 100; however, there is no maximum limit. 

10. Post Office Savings Account 

The Post office saving account is a very popular option for investment which is opted by many people who want to save and grow their money at the same time. It is an account which could be considered as a regular savings account, with a better rate of returns. 

With government backing, it is also a secured and trustworthy option to invest in. The Post office savings account gives the right to withdraw the amount partially or completely in the case of emergencies.

In this saving scheme, the account could be opened either jointly or single-handedly. The current rate of interest is 4%, for both joint accounts and single accounts. 

Final Thought 

There is a long list of saving schemes with different profiles that cater to a variety of investors out there. The best thing is that most of such schemes are supported by the government and hence can be considered more trustworthy. 

All you have to do is just search out the one which suits you the best; considering factors like interest rates, lock-in period, minimum-maximum investment amount, or whether tax treatment fulfils your requirements.

Savings have always been considered as a very important part of a person's financial management. However, in today's scenario where the global pandemic has hit the world quite hard, saving has become a necessity. The pandemic has once again brought to light the fact that one should always have funds for unforeseen circumstances. 

So, if you haven't planned out any saving plan yet, then this is the time! 

Happy (and smart) investing!