Top 5 Government Saving Schemes

Investments are the essence of financial planning and meeting the financial goals. To encourage individuals to invest more, several saving schemes are introduced by the Government, financial companies, and banks. These Government-backed schemes are suitable for the investors who are willing to invest in long-term saving schemes, enjoy tax benefits in the old regime of taxation (in some cases), but are reluctant to take any risks.

The applicable interest rates are revised and decided by the government every 3 months to a year. Before you chose the best saving scheme for your investment, get an insight of the pros and cons, functions and features of the top five government saving schemes in 2023 here-

Comparison Top 5 Government Saving Schemes

Here is a tabular representation of five best saving schemes in India which can considered for investors with low to no risk appetite:

Parameters	National Pension Scheme (NPS)	Sukanya Samriddhi Yojana (SSY)	Public Provident Fund (PPF)	National Savings Certificate (NSC)	Senior Citizens Saving Scheme (SCSS)
Interest Rate (%)	8 to 10%	7.6%	7.1%	7%	8%
Entry Age	18 years	Girl child below 10 years	No age limit	No age limit	55 Years
Minimum Deposit	Rs.250 (Tier 2) & Rs.500 (Tier 1)	Rs.500	Rs.500	Rs.100	Rs.1000
Maximum Investment	No limit	Rs.1.5 Lakh	Rs.1.5 lakh (Max. 12 installments)	No limit	Rs.15 Lakh
Maturity	After the age of 60 years	21 years	15 Years	5 Years & 10 Years	5 Years
Premature Withdrawals	Allowed only under Tier 2 account	Allowed after the age of 18 years	After completion of 5 years of investment	Allowed	Allowed
Tax Benefits	Up to Rs. 2 lakh (Tier 1) & No tax benefit (Tier 2)	Up to Rs.1.5 lakh. Interests are also exempt from taxes	Comes under Exempt-Exempt-Exempt Category (EEE)	Up to Rs.1.5 Lakh	Eligible for tax deductions on investments up to Rs.1.5 Lakh

National Pension Scheme (NPS)

The National Pension Scheme was introduced by the Central Government with an objective of providing regular income to subscribers after their retirement. It is a pension scheme open to all citizens of India. The contributions of NPS subscribers are invested into various market linked securities such as equities, government bonds, corporate bonds. The expected rate of interest under NPS is 8% to 10% on the contributions made.

There are two types of NPS accounts- NPS Tier 1 and NPS Tier 2 with different tax treatment and investment requirements.

Parameters	NPS Tier 1	NPS Tier 2
Minimum investment	Rs.500 or Rs.1000	Rs.250
Maximum investment	No limit	No limit
Tax Rebate	Up to Rs.2 Lakh	Not eligible
Premature withdrawals	Not allowed	Up to 25% after 3 years of continuous contribution

• Indian citizens between the age of 18 to 65 years of age can invest in NPS
• The scheme requires at least one contribution in a financial year
• Payments are accepted in form of Demand Draft, Cheque or Cash
• Under Section 80C of the Income Tax Act, NSP Subscribers can get tax benefits on investments up to Rs.1.5 lakh
• Under Section 80CCD(1B), an additional tax benefit of Rs.50,000 on investments can be claimed by the investors

Related Article: National Pension Scheme (NPS) Eligibility, Types, Contributions & Charges

Sukanya Samriddhi Yojana (SSY)

Under the “Beti Bachao, Beti Padhao” campaign, Sukanya Samriddhi Yojana (SSY) is a savings scheme aimed to benefit the girl child in India. SSY accounts can be opened in the name of a girl child below the age of 10 years. The current rate of interest for Q4 (January to March) is 7.6%.

• After opening an account, minimum Rs.250 and maximum Rs.1.5 lakh can be contributed in a financial year. Subscribers are required to contribute at least the minimum amount for 15 years from the date of account opening
• This scheme has a tenure equal to the time the girl child is 21 years of age. The invested amount can be redeemed for her marriage (after 18 years) or for higher education
• Investments under Sukanya Samriddhi Yojana (SSY) fall under the Exempt-Exempt-Exempt (EEE) category. This implies that the principal amount, the maturity amount and interest are tax free. Under existing taxation rules of this scheme, the tax deduction benefit on the principal amount invested is up to Rs 1.5 lakh per annum under Section 80C of the Income Tax Act, 1961
• Since it is a long term investment, the subscribers also enjoy the benefit of compounding. One account can be transferred from one part of the country to another (bank/post office) in case of transfer of parent/guardian operating the Sukanya Samriddhi Account

To know how to calculate your Sukanya Samriddhi Amount, Click Here

Public Provident Fund (PPF)

PPF or Public Provident Fund is a tax-free scheme regulated by the Government of India in which the principal and interest rate amounts are guaranteed and completely risk-free. The applicable interest rate on PPF for the fourth quarter of FY 2022-2023 i.e. from 1st January to 31st March 2023 has been fixed at 7.1%. 

• Subscribers are supposed to make a minimum contribution worth Rs.500 and maximum contribution of Rs.1.5 lakh in the financial year
• A PPF account can be opened by any individual who is a resident of India. However, a resident Indian who has become an NRI after opening a PPF account can continue the account till maturity
• Contributions up to Rs.1.5 lakh made to the PPF account are eligible for deductions under Section 80C of the Income Tax Act, 1961. The interest earned and maturity amount are also exempted from tax
• The tenure of the scheme is 15 years which can be extended by 5 years. The account can be opened at post offices and banks
• It must be noted that PPF returns are higher than FD rates of many banks in that period
• The subscribers also get flexibility in transferring the account from one post-office or bank to another

If you want to read more about PPF, How to open a PPF account, Interest Rates, Taxability, Transfer of PPF account and Premature Termination, Click Here

National Savings Certificate (NSC)

The National Savings Certificate (NSC) is a fixed income savings plan available for the residents of India. It is a government backed saving scheme which encourages the individuals, majorly belonging to the small and mid-income section, to invest and save on taxes. It is one of the best tax-saving schemes with fixed returns and low risk investments.

• Everyone and anyone except Hindu Undivided Families (HUFs), Trusts and Non-resident Indians are eligible to invest in NSC
• The interest rates are revised by the government every quarter. The current rate of interest for the 5 years scheme is 7%
• The minimum age of an investor of NSC should be 18 years. However, minors are allowed to get NSC with an adult under the joint account facility
• NSCs are available with two fixed maturity period- 5 years and 10 years
• There is no capping on maximum number of NSCs that an individual can purchase
• NSC is issued in denominations of Rs. 100, Rs. 500, Rs. 1000, Rs. 5000 and Rs. 10,000
• Principal invested qualifies for tax savings under Section 80C of the Income Tax Act, 1961 up to Rs. 1.5 lakhs annually
• The investor is allowed to nominate any member of his family to inherit his investments in NSC (in case of sudden demise of the account holder)

Senior Citizens Saving Scheme (SCSS)

The Senior citizens saving scheme was launched to help the individuals above the age to 60 years to initiate savings and get regular income in return. It is one of the best tax saving investment plans with regular income and high safety. The individuals between the age of 55 to 60 years who have opted for Voluntary Retirement can also benefit from this scheme.

Click Here to read more on Senior Citizens Saving Scheme

• This scheme has a rate of interest of 8% per annum. The returns from SCSS are higher than that of savings or Fixed Deposit (FD) account
• The scheme matures after a period of 5 years. However, the maturity duration can be extended by 3 years
• Investors are allowed to make a lump sum deposit with a minimum deposit of Rs.1000. Also, deposits greater than Rs.1000 are supposed to be made in the multiples of Rs.1000
• The maximum SCSS limit deposit is Rs.15 lakh, either through a single or a joint account
• Under this scheme, tax deduction up to Rs.1.5 lakh can be claimed as per Section 80C of the Income Tax Act
• In case the subscriber opts to close the account after 1 year, but before the term of two years, 1.5% of the deposited amount is subject to deductions as charges for premature withdrawal. And, if he/she opts to close the account after two years of continuous contributions, 1% of the deposited amount is charged for premature withdrawal

Advantages of investing in Government Saving Schemes

There are several advantages associated with investments in saving schemes. Here are a few of them-

• Saving schemes help individuals to invest for their long-term financial goals such as retirement, child’s marriage, child’s education etc.
• Since these are government-backed schemes, there are low to no risks involved and the contributions are absolutely safe & secure
• The individuals who are willing to invest in saving plans from the government get a lot of options formulated to help different people from different sections of the society- girl child, senior citizens, employed and unemployed persons
• The savings scheme accounts are easy to open, maintain and monitor. Most of the schemes are available online for easy access
• There are schemes such as PPF, SCSS which give higher returns than other saving accounts or FDs

Frequently Asked Questions

Q.1: What are saving schemes?

Ans: Saving Schemes are investment options regulated by the government of India or by public sector financial institutions. They have varying interest rates (revised by the Govt.), tenure and tax treatment. These investment options are suitable for investors seeking long-term investments

Q.2: Are all saving schemes tax free?

Ans: No, not all the saving schemes give tax rebate. Some of the popular tax-free saving schemes are- 

• Public Provident Fund (PPF)
• Employees Provident Fund (EPF)
• National Savings Certificate (NSC)

Q.3: What are the top 10 small saving schemes in India?

Ans: 10 best small saving schemes available in India are-

• Sukanya Samriddhi Yojana (SSY)
• Public Provident Fund (PPF)
• Post-Office Monthly Savings Scheme (POMSS)
• Senior Citizens Saving Scheme (SCSS)
• National Pension Scheme (NPS)
• National Savings Certificate (NSC)
• Employees Provident Fund (EPF)
• Atal Pension Yojana (APY)
• Kisan Vikas Patra (KVP)
• Recurring Deposits (RD)