E-file your Income Tax Returns for FREE

Saving Schemes – Managing finances becomes a hassle as several people do not know how to handle money. Most individuals would not have enough money to lead a comfortable life. The Government of India has considered all these and launched various saving schemes. These schemes help individuals save a part of their income for future use. Some schemes contribute from the government to the individuals to make their lives easier.

The Government of India will pay the employer and employee contribution to EPF account of employees for another three months from June to August 2020. The benefit is for establishments with up to 100 employees and where 90% of those employees draw a salary of less than Rs 15,000 per month. The contribution to EPF is reduced to 10% from 12% for non-government organisations.

1. What are saving schemes?

Saving schemes are instruments that help individuals achieve their financial goals over a particular period. These schemes are launched by the Government of India, public/private sector banks, and financial institutions. The government or banks decide the interest rate for these schemes and are periodically updated. You can use the savings you make through these schemes for emergencies, retirement, higher education, children’s education, marriage, at the time of job loss, to reduce debts and more.

2. Why is it important to invest in saving schemes?

Saving schemes are important for individuals of a country and, in turn, for an economy because of the following reasons:

  • Safety: Depositing your hard-earned excess money in saving schemes will help secure it for your future needs. Holding on to liquid money may not be safe.
  • Retirement Funds: Periodically, depositing money in long-term saving schemes can help you build a retirement corpus. When you start saving from a young age, it will reward you with a huge corpus that can be used after your retirement and let you lead a comfortable life.
  • Long-Term Benefits: Since most of the schemes make use of compound interest concept for interest calculation, long-term investment can fetch you unbelievable returns. The minimum lock-in period of these schemes is five years, and the maximum can go until you reach the age of 60 years. The compounding of returns, coupled with long-term savings, will earn you interest on interest and end up as a huge amount on maturity.
  • Tax Savings: Many saving schemes offer one or the other kind of tax benefits—may it be tax deductions, exemption, or both. Some schemes qualify for a tax deduction on investment of up to Rs.1.5 lakh under Section 80C of the Income Tax Act. Another set of schemes offer an exemption on the investment, interest accrued, and the maturity amount.
  • Avoid Unwanted Expenses: When you have all the money at hand, you may end up spending it on unwanted items. On the other hand, investing the surplus that remains after meeting the necessary expenses in a suitable saving scheme will help avoid expenditure on unnecessary goods and services.

3. What are the different types of saving schemes available in India?

There are a number of options available when you are looking for saving schemes in India. Many are backed by the Government of India, while RBI and SEBI regulate the others. Alongside, a number of these schemes provide some kind of income tax exemptions/deductions. Here is a list of such saving schemes:

  • Equity-Linked Savings Scheme (ELSS):

    ELSS, also known as tax saving funds, are a form of mutual funds. ELSS investments get tax deductions up to Rs.1.5 lakh under Section 80C. The investment has a compulsory lock-in period of three years. The returns on the redemption of the investments are taxable as capital gains. The gains enjoy an exemption of up to Rs.1 lakh. Beyond this amount, they are taxable at 10%.

    ELSS savings have exposure to the equity market with underlying investments in a mix of debt and equity. The equity component offers higher returns and debt provides a cushion against volatility. The scheme offers higher returns over the long term, above five years. A SIP (systematic investment) provides stability of investment and fetches higher returns. The minimum investment starts at Rs.500.

  • Fixed Deposits (FD):

    Fixed deposit accounts are considered to be hassle-free and the safest investment option in the market. You deposit any amount that is convenient for you, for a specified period that earns interest as per the rate prevailing on the date of deposit.

    The scheme offers flexibility in terms of tenure and the frequency of interest payout. The interest offered on an FD account is much higher than the one offered on a bank savings account.

    If you need the money before the maturity date, you can choose to break the FD or even take an overdraft loan on the FD. You also have the option to reinvest the interest to earn a higher lump sum at the end of the tenure. The interest is taxable and can be subject to TDS for payments exceeding Rs.40,000.

  • Public Provident Funds (PPF):

    PPF is a government-backed long-term tax-free savings scheme. The money deposited with your PPF account will get tax deduction under Section 80C of the Income Tax Act. The interest earned from such savings is also tax-exempt.

    You can open a PPF account at the nearest bank or post office. The money will be locked in for 15 years and can be extended in blocks of five years after the completion of the lock-in period. Returns will be calculated based on compound interest at the rate of 7.1% p.a. A minimum annual investment of Rs.500 can be made. You can invest up to Rs.1.5 lakh per annum.

  • National Savings Certificate (NSC):

    National Savings Certificate, another government-backed saving scheme, provides guaranteed returns along with a tax saving option. You can invest in an NSC at the nearest post office. The lock-in period for the scheme is five years.

    The government reviews the interest rate of the scheme once every quarter and takes a call on it. However, the interest rate will not change during the tenure after you purchase the certificate. Tax deductions can be claimed on the investment up to Rs.1.5 lakh under Section 80C.

    Currently, the interest rate of 6.8% p.a. is applicable. The interest will be annually compounded and paid only on maturity. Upon maturity, the interest accrued is taxable and must be added to the total annual income. The interest reinvested and compounded is eligible for tax deduction under Section 80C.

  • Post Office Monthly Income Scheme:

    Post Office Monthly Income Scheme is similar to a regular savings bank account. Individual account holders can invest from a minimum of Rs.1,500 up to Rs.4.5 lakh in the scheme. The account holder will be able to get a fixed monthly income in the form of interest credited to the savings account with the same post office. The current interest rate is 6.6%.

    The scheme is open only for resident Indian citizens. In case of joint account holders, two or three individuals can invest jointly up to a maximum Rs.9 lakh in the scheme. The investments and interest earned are not eligible for any tax deduction or exemption.

  • Senior Citizens Savings Scheme (SCSS):

    SCSS is designed for senior citizens who want to park their retirement funds. Individuals aged between 55 years and 60 years with early retirement can also opt for the scheme within one month from the receipt of their retirement benefits. SCSS allows only one deposit. The minimum investment is Rs.1,000, and the maximum is Rs.15 lakh.

    The tenure of the scheme is five years and can be optionally extended for another three years. It comes with an interest rate of 7.4% per annum. The interest is credited quarterly in a savings account maintained with the same post office. The investment in SCSS qualifies for deduction under Section 80C up to a maximum of Rs.1.5 lakh. The interest earned annually is taxable. But, the senior citizens can claim a deduction of up to Rs.50,000 under Section 80TTB.

  • Kisan Vikas Patra (KVP):

    You can invest in Kisan Vikas Patra, a fixed-rate small savings scheme, by approaching your nearest post office. The investment has a tenure of 113 months at an interest rate of 6.9%. Your money stands doubled at the end of the tenure of nine years and five months (113 months). The scheme encourages long-term investments and suits risk-averse investors who have excess money.

    The minimum investment is Rs.1,000 with no upper limit on investments. KVP offers guaranteed returns and comes with a premature encashment option after completing two and a half years. There is a possibility of changes in the maturity period based on interest rate variation. However, the maturity value will be printed on your certificate. The investment and interest earned are not eligible for a tax deduction or an exemption.

    You can use the certificate as a collateral to get loans from banks.

  • Sukanya Samruddhi Yojana (SSY):

    The SSY scheme was launched by the Prime Minister Narendra Modi aiming at securing a girl child’s future. This government-backed scheme can be opened by the parents of a girl child aged below 10 years. Parents are required to contribute for 15 years. Individuals can get a tax deduction of up to Rs.1.5 lakh per year under Section 80C.

    A maximum of two such accounts can be opened per household, one for each girl child. In the case of more than two girl children in a household, the rest of the girl children cannot avail the benefits of the account.

    Individuals can invest a minimum of Rs.250 and up to a maximum of Rs.1.5 lakh per annum. The present rate of interest is 7.6% p.a. The tenure of the account is 21 years from the date of opening or until the girl child gets married after the age of 18 years. The scheme allows for a partial withdrawal of up to 50% of the balance after attaining 18 years, for meeting expenses of higher education.

  • Atal Pension Yojana (APY):

    The APY scheme is named after the former Prime Minister of India, Mr Atal Bihari Vajpayee. It mainly targets the welfare of the weaker section of the society, especially those from the unorganised sectors and includes a very low premium.

    Individuals within the age group of 18-40 years are eligible to apply for the scheme. The premium must be paid for a minimum of 20 years.

    Unlike other schemes, you have to target a monthly pension you want to receive to figure out the monthly contribution you need to make. The contribution also depends on the age at which you are starting the contribution. The monthly minimum pension you can get is Rs.1,000, and the maximum is Rs.5,000, upon attaining the age of 60.

    The government will make a co-contribution of 50% of your annual contribution or Rs.1,000 per annum, whichever is lower. Such co-contribution will be made for five years if you have subscribed for the scheme between 1 June 2015 and 31 December 2015 to get this benefit. You will be eligible for a government contribution if you do not have any other statutory saving schemes and if you are not an income taxpayer.

  • National Pension System (NPS):

    National Pension System is an initiative by the Central Government and makes a reliable source of income after retirement. The scheme is open for state and central government employees and private employees in organised and unorganised sectors. The scheme is for Indian citizens in the age group of 18 years to 60 years.

    The amount of contribution is made from the employee’s monthly salary, and an equal amount will be contributed by the employers (including government employees). The contribution is 14% in the case of government employees, and 10% in case of any other employees. In the case of other eligible salaried employees, NPS serves similar to any other long-term pension schemes.

    The employer’s and employee’s contribution is eligible for tax deduction under Section 80C up to a limit of Rs.1.5 lakh. Individuals can make a self contribution and claim an additional deduction of Rs.50,000. Upon retirement, the account holders can withdraw up to 60% of the corpus tax-free. The balance 40% is used to buy an annuity plan to receive a monthly pension after retirement.

    Calculate monthly Pension & Tax Benefits through Cleartax NPS Calculator

  • Employees Provident Fund (EPF):

    Employee Provident Fund (EPF) is a savings scheme operated under the EPFO guidelines. An employer and employee covered under EPF have to mandatorily contribute to a Provident Fund (PF) account in the name of the employee. EPF offers long-term retirement planning for the working class. The account is transferable from one employer to another. The account can be maintained until retirement.

    The employer and employee contribute 12% of the monthly salary into the provident fund account. The account if eligible for interest on the accumulated balances. The interest rate for FY 2019-20 is 8.5% p.a. The account also offers financial security for the account holders in case of emergencies. The employees’ contribution is eligible for deduction under Section 80C.

  • Voluntary Provident Fund (VPF):

    Salaried individuals can opt for an additional contribution of up to 100% of their basic salary and dearness allowance over and above the 12% contribution done to the Employee Provident Fund (EPF). An interest rate of 8.5% can be accrued on the accumulated funds. You must know that the employer will not make any contribution when you opt for VPF.

  • Pradhan Mantri Jan Dhan Yojana:

    Pradhan Mantri Jan Dhan Yojana is a savings scheme that is tailor-made for citizens who are below the poverty line. The account holders can make use of the scheme for reinvestments.

    The scheme is convenient for this class of people as they do not have to maintain a minimum balance in their accounts. They will receive additional accidental insurance cover of Rs.1 lakh and a life cover of Rs.30,000 that is payable on the death of the beneficiary.

    The government has made this scheme more user-friendly with the mobile banking facility. In addition to the other benefits, account holders can also avail interest on their deposits. The account holders will also be eligible for an overdraft facility of up to Rs.5,000 applicable to one account per household.

  • Deposit Scheme for Retiring Government Employees:

    This saving scheme is limited to the retiring public sector employees. You must open an account with any bank or post office within three months from the receipt of your retirement benefits. The interest will be paid out on a half-yearly basis, on 30 June and 31 December.

    You can make withdrawals from the account after completing one year. You can make a maximum of one withdrawal in a calendar year and must be in multiples of Rs.1,000. An interest rate of 7% p.a. will be applicable from the date of deposit. The interest is eligible for tax exemption under section 10(15)(iv)(i).

4. Comparison table

Scheme

Duration

Rate of Interest*

Amount Contributable

Taxability of the Returns

ELSS

3 years

 

Minimum: Rs.100 per annum

Maximum: No limit

Long-term capital gains taxed at 10% + dividends from ELSS is taxed at 10%

FD

7 days to 10 years; as per your convenience

3.5% p.a.to 6.8% p.a.

Minimum: Rs.500

Maximum: No limit

Interest is taxed as per the income slab rates; TDS of 10% above Rs.40,000

PPF

15 years

7.1% p.a.

Minimum: Rs.500 per annum
Maximum: Rs.1.5 lakh

Interest income is tax-exempt

NSC

5 years

6.8% p.a.

Minimum: Rs.100 per annum
Maximum: No limit

Interest is taxed as per the slab rates

Post Office Monthly Income Scheme

5 years

6.6%

Minimum: Rs.1,500 per annum
Maximum: Rs.4.5 lakh

Interest is taxed as per the slab rates

Senior Citizens Savings Scheme

5 years

7.4% p.a.

Minimum: Rs.1,000
Maximum: Rs.15 lakh 

Interest is taxed as per the slab rates. Entitled to deduction up to Rs.50,000.

Kisan Vikas Patra

124 months (10 years and 4 months)

6.9% p.a.

Minimum: Rs.1,000

Maximum: No limit

Returns are fully taxable

SSY

Until the girl child turns 21 years or she gets married after 18 years of age

Contribution Period: 15 years

7.6% p.a.

Minimum: Rs.250 per annum
Maximum: Rs.1.5 lakh

Interest earned is tax-exempt

Atal Pension Yojana (APY):

20 years

N/A

Minimum Monthly Pension: Rs.1,000

Maximum Monthly Pension: Rs.5,000

Not taxable

NPS

Until the age of 60 years

5% p.a.to 8% p.a.

Minimum: Rs.1,000 per annum

Maximum: No limit

Upon retirement, 60% of the corpus is tax-free. Annuity pension received on balance 40% is taxed at slab rates.

EPF

5 years

8.5% p.a.

12% of the basic salary

Not taxable after the completion of the lock-in period

VPF

5 years

8.5% p.a.

Anything above the 12% EPF contribution up to 100% of the basic salary

Not taxable after the completion of the lock-in period

Pradhan Mantri Jan Dhan Yojana

N/A

4%

No limit

Not taxable

Deposit Scheme for Retiring Government Employees

N/A

9% p.a.

Minimum: Rs.1,000

Maximum: Not exceeding total retirement benefits

Not taxable

Make Small Investments for Bigger Returns

Start SIP Now

All Articles

  1. The objective of the National Savings Recurring Deposit Scheme is to provide small investors means to invest small amounts regularly to meet future needs.
  2. The Government of India announced the National Savings Time Deposit Scheme under the provisions of Section 15 of the Government Savings Bank Act, 1873.
  3. Pradhan Mantri Vaya Vandana Yojana (PMVVY) is retirement cum pension scheme announced by the Indian Government in May 2017.
  4. Value investing is a strategy which involves choosing stocks that appear to have their current stock value much lesser than the book or intrinsic value.
  5. National Savings Monthly Income Scheme is an excellent investment option for pensioners and those looking for a regular inflow of funds.
  6. EPF Form 31, also known as EPF Advance Form, is generally used to file a claim for partial withdrawal or advance from the Employees’ Provident Fund (EPF) account. Read more about the form here.
  7. EPF Form 5 is to be submitted by employers to the EPF Commissioner’s office on a monthly basis with the details of the newly joined employees who are eligible for EPF benefits.
  8. To provide relief to employees, an advance can be obtained as EPF withdrawal by employees up to three months’ salary or wages plus dearness allowance, or 75% of the balance standing in their account, whichever is less.
  9. One of the crucial documents one must provide to get a smooth flow of pension funds every month is to submit Jeevan Pramaan Patra/Life Certificate to the pension disbursing agency.
  10. EPF Form 19 must be duly filled and submitted when you are looking to withdraw EPF account balance at specified cases. Know more about the process here.
  11. Both VPF and PPF are excellent tax-saving options. They are backed by the sovereign guarantees and offer a fixed rate of return on the investments.
  12. The employees don’t have to look at other tax-saving investment options as VPF itself offers tax deductions and guaranteed returns.
  13. The FM introduced a new facility in Budget 2020 where individuals can get instant PAN through their Aadhaar without submitting a detailed application form.
  14. UIDAI has come up with another version of Aadhaar card i.e Masked Aadhaar that can be downloaded from the website. Read here to know more.
  15. It is a human tendency to lose/misplace documents. If you lose/misplace Aadhaar card, there is a way to retrieve the card. Read here to know the way.
  16. Download the Aadhaar enrolment form from the UIDAI website or get an offline copy from the nearest Aadhaar center. Read here to know more.
  17. UIDAI allows you to lock your aadhaar number to prevent any misuse. You need to have a virtual ID to lock the Aadhaar number. Read here to know more.
  18. The UIDAI has introduced a feature to ensure high security of data. This new layer of security is called Aadhar Virtual ID (VID). Read here to know more.
  19. Elections are a mammoth event in our country. India being the biggest democracy in the world draws a massive number of voters to the voting booths every year.
  20. With 900 million eligible voters, India is definitely the largest democracy in the world. 2019, is a crucial year for our democratic nation given that the most significant democratic election is going to be held soon.
  21. Voter ID card is an important ID to vote in the election. Discover a step-by-step breakdown on Voter ID Download. Read more about voter id download.
  22. Aadhaar card status update, inquiry, and more processes have been made online by the government. Read on to know the stepwise process for Update etc.
  23. e-Aadhaar Card Download: Steps to download e aadhaar card online. Check status and step by step procedure to download Aadhaar card via self-service aadhaar portal & via enrolment centre.
  24. Aadhar card serves as a proof of address and identity. Therefore all details in Aadhaar should be accurate. Read on to know how to update aadhaar online or through Enrolment center.
  25. When choosing a retirement plan we always get confused between NPS vs PPF. So, here's some much-needed information which will help you make the right decision.
  26. All provident fund investments are made in the account maintained by EPFO (Employee’s Provident Fund Organization). The EPFO allocates a Universal Account Number (UAN) for such accounts. Read more about UAN Status, Passbook Checking Your Account Balance
  27. PPF stands for Public Provident Fund which is a long term investment scheme declared by the government of India. It is a safe deposit scheme that offers tax exemptions and attractive interest rates.
  28. The article lists the features of the PPF product and steps procedure on how to open a PPF account with SBI; alongwith the important points to be noted while opening a ppf account.
  29. The article lists the features of the PPF product and steps procedure on how to open a PPF account with ICICI; alongwith the important points to be noted while opening a ppf account.
  30. The article lists the features of the PPF product and steps procedure on how to open a PPF account with HDFC; alongwith the important points to be noted while opening a ppf account.
  31. A Voter ID Card is a photo identity card issued by the Election Commission of India to all Indian citizens eligible to vote. Voter ID card also know as EPIC or election card is an identity proof of the voters. Read more about voter id card.
  32. UIDAI - the article gives a detailed understanding of the role and functioning of the www.uidai.gov.in / Official Aadhaar Website. Guide about How to login, check status & also know about the latest UIDAI updates.
  33. EPFO ( Employee Provident Fund Organisation ) is established to assist the Central Board of Trustees in India and is under the administrative control of the Ministry of Labour & Employment. Know about EPFO Login & EPFO member portal, Applicability, structure, functions & Latest Updates
  34. The Public Provident Fund ( PPF ) Scheme was started by the National Savings Organization to promote small savings. Read on to know everything about PPF.
  35. Know about the details of EPF payment online on the Employees’ Provident Fund Organization / EPFO portal. It also lists the supporting banks and the link to them, where the payment can be made.
  36. Linking PAN with Aadhaar has now become compulsory. But the govt has exempted a few class of individuals from it, subject to certain conditions.Read this article to know about the Applicability and Exemptions
  37. The Employees’ Provident Fund Organisation / EPFO India provides an easy online procedure to check the status of your Provident Fund claim. Learn how to claim PF / EPF and check PF claim status online by UAN,SMS or Mobile App.
  38. The introduction of UAN has brought about a change in the procedure for PF transfer online.. Know more on the procedure for PF transfer online
  39. Aadhaar number needs to be produced mandatorily if you want to open a post office account or invest in the National Savings Certificate. Learn more here...
  40. Linking of Aadhaar with insurance policies has been made mandatory by the government. To learn how to do so, read our in-depth article...
  41. Ration cards are used by the individuals to get subsidized food. The government has made it mandatory to link Aadhaar to ration card for authenticity.
  42. Linking of Aadhaar with LPG connection is necessary for receiving the benefit of LPG subsidy. Learn more about this in our in-depth article...
  43. Every salaried individual needs to update their Aadhaar details and link it to their PF and UAN account. how do you do it? Learn more here...
  44. It is mandatory by law to link Aadhaar with Voter ID. You can do it through different steps at your own convenience. Learn more here...
  45. Calculate the amount of money you will accumulate on retirement via ClearTax PF Calculator. Know about PF/ EPF benefits, interest rates & how to transfer EPF money online.
  46. PPF Calculator : Calculate your Public Provident Fund Interest / returns with ClearTax Online PPF Calculator. Know about PPF benefits and how it can help you in saving your taxes.
  47. The article discusses the step by step process about Aadhaar Seeding online & offline i.e, linking your Aadhaar card to your bank account
  48. A comparative analysis of Equity Linked Savings Scheme / ELSS & Public Provident Fund / PPF based on various parameters: lock-in period,liquidity, tax benefits & returns.
  49. This article discusses about steps to link your Aadhaar with Mutual Funds account using e-KYC facility offered by ClearTax and other ways to link.
  50. PPF / Public Provident Fund is a Tax Saving Scheme run by the Government of India. Learn how to open a PPF Account and know about its interest rates, withdrawal procedure, essential features & tax benefits.
  51. EPF / Employee Provident Fund balance check can be done now in less than 5 minutes either by way of an SMS, by giving a missed call, using the EPFO app or through the Employees' Provident Fund Organisation / EPFO portal.
  52. EPF withdrawal is taxable under certain circumstances and exempt under certain circumstances. Read this article to know more about EPF withdrawal
  53. PF / EPF withdrawal can be done either by submission of a physical application for withdrawal or an online application. You can online check Employee Provident Fund Withdrawal, Claim Status, Transfer & Balance in EPFO portal.
  54. Aadhaar has to be quoted mandatorily while applying for PAN. If you do not have Aadhaar but has applied for it, then you can also quote your 28-digit enrolment id.
  55. Per the the latest notification from the PFRDA, dated March 6th, 2017, you can now transfer funds from EPF to NPS.
  56. A guide with screenshots on how to link aadhar to PAN Card/ Permanent Account Number. Compulsory to provide both Aadhaar & PAN Crad pannumber while filing Income Tax Return ( ITR ) .
  57. Learn the procedure on how to apply for Aadhaar Card and check status of allotment of Aadhaar Card Online.