Saving Schemes

Small savings schemes are designed to provide safe and attractive investment options to the public and at the same time to mobilise resources for development.

 

 

Benefits of Saving Schemes

Saving money can be considered part of the Indian tradition that attributes to responsible and cultured living. The point where in an individual earns his/her first salary and opens up a small savings account, the person is considered to be all ‘grown-up’ and many shades better than his/her careless, spendthrift and antisocial self from the teenage and late adolscent years. Why must you subscribe to saving schemes in India? Read on…

  1. Readily Available- The Indian government, through both the public and private sector banking system, offers a multitude of saving schemes that are easy to enroll with and are perfectly suited for the strategic as well as casual investor. Their simplicity and abundance makes them a much preferred savings option.

  2. Long Term Planning- Quite opposite to the run and burn concept, long term savings are focussed on a time in the future when abundant monies will be required to comply with an expected requirement. Retirement, marriage of a son/daughter, long awaited foreign trip, etc. demand strategic, long term financial planning.

  3. Wide Ranges of Products- In India, saving schemes include a plethora of different products that are intended for a wide segment of potential customers. From the Public Provident Fund (employed- retirement fund) and Employee Provident Fund to Kissan Vikas Patra (Agriculturists) and Sukanya Samriddhi Yojana (exclusively for the girl child), the choices are many and super specialised.

  4. Simple to Enroll- Limited documentation, clearly defined procedures and the Indian Government’s backing ensures that these saving schemes are simple to opt for and safe to be locked onto.

Types of Saving Schemes

  • National Saving Certificate (NSC)

  • Senior Citizen Savings Schemee

  • 15 year Public Provident Fund Account

  • Sukanya Samriddhi Accounts

  • Post Office Monthly Income Account Scheme

  • Post Office Time Deposit Account

  • 5-Year Post Office Recurring Deposit Account

  • Post Office Savings Account

National Saving Certificate (NSC)  

From 1.4.2016, interest rates are as follows:- 8.1% compounded six monthly but payable at maturity. INR. 100/- grows to INR 147.61 after 5 years.

  • A single holder type certificate can be purchased by, an adult for himself or on behalf of a minor or by a minor.

  • Deposits qualify for tax rebate under Sec. 80C of IT Act.

  • The interest accruing annually but deemed to be reinvested under Section 80C of IT Act.

  • In the case of NSC, the interest is taxed.

  • In case of NSC VIII , transfer of certificates from one person to another can be done only once from date of issue to date of maturity.

Senior Citizen Savings Schemee

From 1.4.2016, interest rates are as follows:- 8.6% per annum, payable from the date of deposit of 31st March/30th Sept/31st December in the first instance & thereafter, interest shall be payable on 31st March, 30th June, 30th Sept and 31st December.

There shall be only one deposit in the account in multiple of INR.1000/- maximum not exceeding INR 15 lakh.

  • An individual of the Age of 60 years or more may open the account.

  • Maturity period is 5 years. 

  • A depositor may operate more than one account in individual capacity or jointly with spouse (husband/wife).

  • Account can be opened by cash for the amount below INR 1 lakh and for INR 1 Lakh and above by cheque only. 

  • In case of cheque, the date of realization of cheque in Govt. account shall be date of opening of account. 

  • Nomination facility is available at the time of opening and also after opening of account. 

  • Account can be transferred from one post office to another 

  • Premature closure is allowed after one year on deduction of an amount equal to1.5% of the deposit & after 2 years 1% of the deposit. 

  • After maturity, the account can be extended for further three years within one year of the maturity by giving application in prescribed format. In such cases, account can be closed at any time after expiry of one year of extension without any deduction. 

  • TDS is deducted at source on interest if the interest amount is more than INR 10,000/- p.a. 

  • Investment under this scheme qualifies for the benefit of Section 80C of the Income Tax Act, 1961 from 1.4.2007.

  • Interest is taxable

 15 year Public Provident Fund Account

From 1.4.2016, interest rates are as follows:-  8.10% per annum (compounded yearly).

  • Minimum INR. 500/- Maximum INR. 1,50,000/- in a financial year.

  • Deposits can be made in lump-sum or in 12 installments.

  • An individual can open account with INR 100/- but has to deposit minimum of INR 500/- in a financial year and maximum INR 1,50,000/- 

  • Joint account cannot be opened. 

  • Account can be opened by cash/cheque and In case of cheque, the date of realization of cheque in Govt. account shall be date of opening of account. 

  • Nomination facility is available at the time of opening and also after opening of account. Account can be transferred from one post office to another. 

  • The subscriber can open another account in the name of minors but subject to maximum investment limit by adding balance in all accounts. 

  • Maturity period is 15 years but the same can be extended within one year of maturity for further 5 years and so on. 

  • Maturity value can be retained without extension and without further deposits also. 

  • Premature closure is not allowed before 15 years. 

  • Deposits qualify for deduction from income under Sec. 80C of IT Act.

  • Interest is completely tax-free. 

  • Withdrawal is permissible every year from 7th financial year from the year of opening account.. 

  • Loan facility available from 3rd financial year. 

  • No attachment under court decree order. 

  • The PPF account can be opened in a Post Office which is Double handed and above.

 Sukanya Samriddhi Accounts

Rate of interest 8.6% Per Annum (w.e.f 1-4-2016),calculated on yearly basis ,Yearly compounded.

  • Minimum INR. 1000/-and Maximum INR. 1,50,000/- in a financial year. Subsequent deposit in multiple of INR 100/- Deposits can be made in lump-sum No limit on number of deposits either in a month or in a Financial year m No limit on number of deposits either in a month or in a Financial year

  • A legal Guardian/Natural Guardian can open account in the name of Girl Child.

  • A guardian can open only one account in the name of one girl child and maximum two accounts in the name of two different Girl children.

  • Account can be opened up to age of 10 years only from the date of birth. For initial operations of Scheme, one year grace has been given. With the grace, Girl child who is born between 2.12.2003 &1.12.2004 can open account up to1.12.2015.

  • If minimum Rs 1000/- is not deposited in a financial year, account will become discontinued and can be revived with a penalty of Rs 50/- per year with minimum amount required for deposit for that year.

  • Partial withdrawal, maximum up to 50% of balance standing at the end of the preceding financial year can be taken after Account holder’s attaining age of 18 years.

  • Account can be closed after completion of 21 years.

  • Normal Premature closure will be allowed after completion of 18 years /provided that girl is married.

Post Office Monthly Income Account Scheme

From 1.4.2016, interest rates are as follows:-  7.80% per annum payable monthly.

  • In multiples of INR 1500/-

  • Maximum investment limit is INR 4.5 lakhs in single account and INR 9 lakhs in joint account. 

  • An individual can invest maximum INR 4.5 lakh in MIS (including his share in joint accounts)

  • For calculation of share of an individual in joint account, each joint holder have equal share in each joint account.

  • Account may be opened by individual. 

  • Account can be opened by cash/cheque and in case of cheque the date of realization of cheque in Govt. account shall be date of opening of account.

  • Nomination facility is available at the time of opening and also after opening of account. 

  • Account can be transferred from one post office to another. 

  • Any number of accounts can be opened in any post office subject to maximum investment limit by adding balance in all accounts. 

  • Account can be opened in the name of minor and a minor of 10 years and above age can open and operate the account. 

  • Joint account can be opened by two or three adults. 

  • All joint account holders have equal share in each joint account. 

  • Single account can be converted into Joint and Vice Versa.

  • Minor after attaining majority has to apply for conversion of the account in his name. 

  • Maturity period is 5 years from 1.12.2011. 

  • Interest can be drawn through auto credit into savings account standing at same post office, through PDCs or ECS./In case of MIS accounts standing at CBS Post offices, monthly interest can be credited into savings account standing at any CBS Post offices. 

  • Can be prematurely en-cashed after one year but before 3 years at the discount of 2% of the deposit and after 3 years at the discount of 1% of the deposit. (Discount means deduction from the deposit.)

  • A bonus of 5% on principal amount is admissible on maturity in respect of MIS accounts opened on or after 8.12.07 and up to 30.11.2011. No bonus is payable on the deposits made on or after 1.12.2011.