The best small savings schemes

Image: Small savings schemes are a 'must-have' proposition for most investors.
Photographs: Uttam Ghosh

The financial literacy of an individual today is increasing in terms of different investment or tax savings instruments.

The risk appetite for people to invest in stock markets and mutual funds is also increasing.

Despite the presence of alternate investment options, small savings schemes continue to be the preferred choice for a sizable chunk of the investing population.

The high safety levels coupled with the attractive returns make small savings schemes a 'must-have' proposition for most investors.

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The best small savings schemes

Image: Small savings schemes are designed to provide safe and attractive investment options
Photographs: Uttam Ghosh

What are Small Savings Schemes?

Small savings schemes are designed to provide safe and attractive investment options with tax returns to people who want to stay away from the uncertainties of the stock market.

These schemes are operated through the large number of post offices and public sector banks throughout the country.

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The best small savings schemes

Image: Instruments under the small savings scheme provide assured returns.
Photographs: Uttam Ghosh

What are the investment instruments available under the Small Savings Scheme?

The tax savings and investment instruments available under the small savings scheme are:

Public Provident Fund
Employees' Provident Fund
National Savings Certificate
Kisan Vikas Patra
National Savings Scheme, 1992
Relief Bonds
Post office monthly income scheme
Post office time deposits

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The best small savings schemes

Image: Repayment of principal on maturity is safe since these schemes are government backed.
Photographs: Dominic Xavier

What are its benefits?

The attraction of small-savings schemes lies in many factors:

Assured returns: Instruments under the small savings scheme provide assured returns even through volatile markets.

Government sponsored: Since all these schemes are controlled by government-run post-offices and public sector banks, the safety of your investment, timely payments of interest and repayment of principal on maturity is safe.

Ease for small investors: Some of these investment schemes have a minimum investment of Rs 5, making it easy for anyone to invest in the schemes.

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The best small savings schemes

Image: Access to your investments is very easy
Photographs: Dominic Xavier

Tax benefits: For people with high taxable incomes, the tax benefits offered by these schemes are very attractive.

Liquidity: Access to your investments is very easy.

Most of the schemes provide for premature withdrawals and a few of the schemes also offer loans based on the investment made.

These schemes can be shifted from one post office to another. Hence they are suitable for persons having transferable jobs.

What are the features of the investment instruments in the Small Savings Scheme?

Some of the investment instruments under the small savings scheme are listed below along with their features.

Instrument	Interest	Term	Min/Max Investment	Tax Benefit
National Savings Certificate	8% compounded half yearly	6 Years	Rs. 100/No upper limit	Section 80C
Post Office Recurring Deposits	9% per annum	5 Years	Multiples of Rs. 5/ No upper limit
National Savings Scheme, 1992	9% per annum	No Fixed Tenure	Multiples of Rs. 100/ No upper limit	Section 80C
Public Provident Fund	8% per annum	15 years	Rs 500/Rs 70,000	Section 80C
Kisan Vikas Patra	Amount invested doubles in 8 years 7months	8 years 7 months	Multiples of Rs. 100/ No upper limit	None
Relief Bonds	6.5% (Non-Taxable), 8% Savings (Taxable) compounded half-yearly	5 years (6.5% version), 6 years (8% version)	Rs. 1,000/ No upper limit	6.5% version (exempt from income tax), 8.5% (not exempt from income tax)

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