Saving Schemes

What are Saving Schemes?

Saving schemes are financial components that are designed to encourage people to save money by making small contributions at regular intervals. You can choose any of the available schemes based on your requirements. These schemes can help you to fulfil your long-term financial needs or you can use the balance for expenses like marriage, education, medical emergencies etc. 
 

Investing in savings schemes with proper discipline can help you to generate a good ROI (Return on Investment) with low risk, as they are backed by the government. Some of the best savings schemes include the Post Office Monthly Income Scheme (POMIS), Recurring Deposits (RD), Public Provident Fund (PPF), etc. Keep reading this article to know more about them.
 

As discussed before, savings schemes are financial instruments where you can get higher returns than a normal savings account by investing small amounts for a fixed interval. Savings schemes in India are generally offered by the government, banks or other financial institutions and have low risk with stable returns. 
 

In the past, people usually preferred to keep their money to themselves. But this is not a smart decision as their way of saving cannot beat the inflation rate. 
 

With different saving plans available for all, Indian citizens have the option to increase their wealth with a higher interest rate than inflation. By investing in these schemes, you can save money for your child’s education, marriage and even for your retirement.
 

The interest rates can vary between 6.5% and 8.5% based on different schemes, age group, location, and other factors.

2. Unit Linked Insurance Plan (ULIP)
 

Unit Linked Insurance Plan (ULIP) is a financial instrument that is a combination of both investment and life insurance. You can get both insurance coverage and investment benefits by investing in this scheme.

Check out the Features:
 

Some key features to consider for this best saving schemes are -

• Unit Linked Insurance Plan (ULIP) offers life insurance coverage for the policyholder. If the policyholder dies, the nominee will receive the sum assured amount as per policy terms.
  
• It allows you to invest your amount in various asset classes such as debt, equity, etc. Throughout the investment period, you have the flexibility to choose your fund preferences.
  
• The risk of ULIP depends on the asset class and the returns can vary based on the market fluctuations.
  
• There is a lock-in period of 5 years. You have to pay the exit fee if you want to withdraw your investment during this period.
  
• It has various charges such as fund management charges, premium allocation charges, mortality charges, administration charges, etc.
  
• By investing in ULIP, you can get tax benefits under 80C, 80CCC, 80D, and Section 10 (10D) of the Income Tax Act.

4. National Saving Certificate (NSC)
 

The National Savings Certificate (NSC) is one of the best savings schemes that is backed by the Indian Government. This scheme is a good investment option for low and middle-income investors and you can open one easily from your nearest post office.
 

Check out the Features:
 

Here are its benefits and features -

• National Savings Certificate (NSC) is a low-risk investment option as it is a government-backed investment scheme.
• An individual can claim tax deductions of up to Rs. 1.5 lakh in a financial year under the 80C of the Income Tax Act of 1961 by investing in this scheme.
• The minimum investment amount is only Rs. 1,000 or you can invest a multiple of 100, allowing you to start with a minimum amount.
• The interest rate changes every quarter and gives your investment compounded returns annually. But it is payable only at the time of maturity.
• NSC has a maturity period of 5 years and you can use loan collaterals to get secured loans.

6. Recurring Deposits (RD)
 

Recurring Deposits (RD) is another best savings scheme which is usually offered by post offices and banks. It allows you to earn interest on your investment by investing a fixed amount every month.
 

Check out the Features:
 

Read the following features and benefits of RD -

• Recurring Deposits (RD) allows you to start your monthly deposit with as low as Rs. 10.
  
• The minimum investment tenure is 6 months and the maximum tenure is 10 years.
• The interest rate of recurring deposits usually varies between 6% and 9% (depending on the bank).
• The interest is credited quarterly to your RD account with your principal amount and you will get compounded returns.
• You cannot make a premature or partial withdrawal in this savings scheme. You have to close your RD account before maturity to get back your amount. However, a penalty amount will be deducted if you close it before maturity.
• If you fall under the Senior Citizen category (Age>=60 years) you will get a higher interest on your investment amount.
  
• If your age is 60 or above, you can get tax benefits by investing in a recurring deposit.
• By filling out the 15G/15H form, you can request the bank or post office not to deduct TDS from your interest.

8. Public Provident Fund (PPF)
 

The Public Provident Fund (PPF) is one of the most popular long-term investment cum savings options which helps to secure your future. This saving scheme is an ideal option for investors who want to get high but stable returns.
 

Check out the Features:
 

Here are its features and importance -

• Public Provident Fund (PPF) has an interest rate of 7.1% per annum and offers risk-free guaranteed¹ returns.
  
• The minimum deposit amount is Rs. 500 and the maximum deposit amount is Rs. 1.5 lakh in every fiscal year.
• By investing in this saving scheme, you can claim up to Rs. 1.5 lakh as a tax deduction under the 80C section of the Income Tax Act^#.
• The scheme has a lock-in period of 15 years when you cannot withdraw the whole amount. Once the lock-in ends, you can extend it by 5 years.
• A loan facility is available between 3 years and 6 years from the date of opening. Before or after this duration, you cannot avail loan using your PPF account.
• In certain conditions, a partial withdrawal is allowed from 7th year onwards.

10. National Pension Scheme (NPS)
 

National Pension Scheme (NPS) is a pension program scheme launched by the Central Government of India. Any employee from the private, public or unorganised sector can invest in this scheme. However, an employee from the armed forces sector can not invest in this savings scheme.
 

Check out the Features:
 

Here are the features of this popular savings scheme in India -

• The National Pension Scheme (NPS) is available to all citizens in India. But earlier, it was only available for employees under the Central Government.
• This scheme cannot offer guaranteed¹ returns as it is a market-linked investment scheme. But, it offers much higher returns compared to PPF.
• Traditionally, this saving scheme offers an annual return between 9% and 12% based on the market situation. You can use a saving calculator to know the actual returns.
• A certain portion of your investment amount goes under equity investment (50% - 75% of your invested amount).
• You can get tax benefits under Section 80C and 80CCD under the Income Tax Act of 1961^# by investing in this.
• Every investor gets a Permanent Retirement Account Number (PRAN) from NPS. It ensures seamless portability across jobs and locations.
  
• NPS is one of the lowest-cost pension schemes in the world which helps to build retirement corpus along with the tax benefits.

List of Savings Schemes in India

HDFC Life Savings Schemes Plans

HDFC Life offers various savings schemes that combine both life insurance and savings-oriented investment options. By investing in these schemes, you can get life insurance, tax-saving benefits, etc. A detailed discussion of the types of savings plan is provided below.