Saving Schemes – Concept, Structure, Reasons to Invest, Available Schemes & more

Know everything about Saving Schemes here.

Whenever you might hear the term saving, you would be thinking of it as a term where you have to keep some money aside and kill your dreams.

If you are someone who feels like this, then you should know that you are wrong. Saving is all about investing your money at a place that allows your money to grow over time.

When you save your money, you are ideally adding to your life goals. When you save money, you eventually make your future secure.

Now you must be curious to save more money and learn about saving schemes, don’t worry, this blog is just for you.

What are Saving Schemes?

In today’s world-saving schemes cannot be overlooked mainly because handling finances is stressful for the majority of people because they are confused about how to save money.

On the other hand, there are still a plethora of people who don’t have plenty of money to lead a comfortable life.

Keeping all these factors in mind, the government of India had launched some saving schemes.

The main agenda of these saving schemes is to motivate people to save for their future. They help in making people’s lives easier.

From June to August 2020, the government of India will contribute towards to EPF account of employees keeping in mind the ongoing pandemic.

Above all, these savings schemes help people to achieve their economic agendas over a period of time.

The government of India, public and private sector organizations launch such schemes.

Open Demat Account Now! – Zero Brokerage on Delivery

Structure of Saving Schemes

For all the schemes, the government decides the interest rate that will be charged over a period of time, and also, they are updated regularly.

People can use their savings for anything, including emergencies, weddings, to pay debts, a child’s education, or retirement.

The main agenda of these schemes is to cultivate saving habits among people. Besides the people’s welfare, the tools also enhance the flow of money into the economy.

Initially, people only kept their money with themselves, which led to stagnation in the economy.

Through the savings scheme that is government-backed, can allow people to enhance their wealth with higher interest rates and also reap some fantastic benefits, including tax exemption that some schemes offer.

The saving schemes cater to a plethora of milestones, and they are perfect for long term wealth creation as they feature some specific lock-in period.

You can choose to invest in saving schemes because market volatility doesn’t affect it much. They are ideal for investors who are not risk savvy.

Additionally, the interest rates are often revised for several saving schemes, which keep up with the increase in inflation and living costs.

Thus, investing in saving schemes is a smart way to grow your wealth and also serve your day to day requirements.

Check out all Govt. Savings Scheme available for Investment

Reasons you should invest in Saving Schemes

Safety – When you choose to invest your hard-earned money into saving schemes, you can secure it for your future goals. It might not be safe to keep liquid money.

Retirement benefit – When you timely deposit your money in long-term saving schemes, then you can surely save for your retirement.

But experts suggest that you should start saving at a young age to avail a massive corpus at your retirement. Above all, this saving will help you lead a comfortable life post-retirement.

Long term benefit – As the majority of the schemes include compound interest calculation, long term investment can earn you some fantastic returns.

Five years is the minimum lock-in period for these saving schemes, and the maximum period can go up to 60 years.

With long-term savings, the compounding interest is most likely to be integrated, and you will end up earning interest on interest. Hence you can grow a lot of wealth till the time it matures.

Tax saving – Almost all schemes offer some of the other kinds of tax benefit like tax deductions, or exemption, or sometimes even both.

The schemes at times fall under the category of tax deductions up to Rs.1.5 lakh under Section 80C of the Income Tax Act.

On the other hand, some schemes offer an exemption on interest accrued or maturity amount.

Avoid unnecessary expenses – If you have unlimited money with you, then you are most likely to buy things that you don’t even need.

Thus, you should choose to invest the surplus which is left after spending on all the essentials. By investing, you won’t only curb on paying extra but also help you in saving for your future need.

Learn everything about Retirement Planning here

Types of Saving Schemes available in India

Here are the various types of Saving Schemes available for investment in India –

Mutual Funds

If you are planning to explore and get some benefits from the equities and debts, then you can surely choose to invest in mutual funds.

This is a great option, mainly because you can invest in the stock market without any risk.

Above all, you don’t need any expertise to trade, while when you choose to trade yourself, you need to be an expert.

Hence, you can also invest in SIP, which is one of the best options to invest in mutual funds. Under SIPs, all you need to do is make small payments regularly.

Fixed Deposits

If you are someone who wishes to have some offset risk with guaranteed returns, then you can smartly invest in fixed deposits.

The Fixed deposit scheme is ideal for investors who don’t want to take the risk.

Under this scheme, you have to deposit a fixed sum as the principal amount for a specific time span and earn a fixed rate of return.

Furthermore, the best part about investing in this scheme is you get tremendous flexibility in terms of the tenor.

If you have some emergency, then you can also prematurely break the FD or get a loan against the FD.

The scheme allows people to invest the interest and also receives a lump sum amount of money on investment on the maturity of the fixed deposit.

Senior citizens are offered more interest rates on fixed savings so they can lead their retired life comfortably.

Thus, you need to know the interest rate is most likely to vary from bank to bank. The tax exemption here is up to Rs 1.5 lakh under section 80C of the income tax act.

Public Provident Fund or PPF

One of the most popular saving schemes in the country is the general provident fund. It has mainly got its prominence due to its safety feature.

When you invest under this scheme, you get a tax exemption under Section 80C of the Income Tax Act.

Both the contributions and interest rate are exempted under this scheme. You can visit either post offices or banks to invest in this scheme.

The time span of this scheme is around 15 years. You can also enhance the duration by five years if you wish to.

The minimum contribution under this scheme is Rs.500, and a maximum is Rs.1.5 lakhs per year. It is not applicable to joint accounts.

Employee Provident Fund or EPF

The saving scheme operates under the FDPO guidelines.

Under this scheme, both employer and employee are covered, and they need to deposit some money in the provident fund account for the employee’s benefit.

The best part about this scheme is it offers long term retirement planning to the employees. Employees can maintain the account till they retire.

Both the employer and the employee have to deposit 12% of the monthly salary to the provident fund account.

The current interest rate on this account is 8.5% yearly. In case of emergencies, the account holder offers financial security.

Under section 80C of the income tax act, the employees can avail an exemption for their contribution.

Unit Linked Insurance Plan or ULIP

This scheme is a fusion of insurance and investment. Under the unit-linked insurance plan, the insurance provider puts some amount of the contribution to the policy as a premium.

At the same time, some are invested in the equities or debts mutual fund. You can invest the money as per your goals, including children’s marriage, higher education, etc.

You can also avail of an exemption under section 80C of the income tax act. The maximum amount for exemption is Rs1.5 lakhs.

The minimum contribution varies from fund to fund, but generally, it is Rs.2500, and there is a maximum amount for contribution.

The rate of return is never fixed as you get returns based on the market. The minimum tenure is five years, and the maximum is 20 years.

Equity Linked Savings Scheme or ELSS

It is a type of mutual fund. The minimum tenure under this scheme is ten years, while there is no maximum tenure.

The equity-linked saving scheme is also known as the tax savings scheme. Investors can claim tax exemption up to Rs1.5 lakhs under section 80C of the income tax act.

The taxable income is 10% on the long term capital gains. Under this scheme, 80% of the amount is invested in equities and 20% in debt.

It is mainly done so people can gain more returns. The minimum investment amount under this scheme is Rs.100, and it can vary from company to company.

National Pension System or NPS

The scheme is an initiative by the central government. It is mainly offered to employees so they can lead a comfortable life after retirement.

Both central and state government employees are eligible to invest in this scheme.

The employees need to be Indian and in the age group of 18 to 60 years. The employee’s monthly salary is contributed to the scheme.

The deposit is 14% for government employees while 10% for other employees. Under section 80C of the income tax act, one can avail of an excess of Rs.1.5 lakhs.

Pradhan Mantri Jhan Dhan Yojana

The life Insurance corporation of India runs this scheme. It is mainly for senior citizens who are aged 60 years minimum. Citizens can get an assured return of 8% p.a. for ten years.

But the investor has the choice to get the premium monthly, quarterly, half-yearly, or yearly. The minimum contribution is Rs.1000, and the Maximum is 15 lakhs.

The interest on the saving is eligible for tax exemption.

National Savings Certificate

You can obtain dual benefits by investing in this scheme as it is not only a fantastic investment option but also offers a tax advantage.

Indian citizens can avail themselves of the national savings certificate by visiting any post office.

This scheme is ideal for those who wish to invest in safer avenues as the NSC carries minimum risk.

The investment tenure under this scheme is five years, and every year, the Ministry of Finance decides the interest rate.

The current interest rate is 8% p.a. The minimum investment amount is Rs.100, and there is no maximum amount. Under this, the interest rate is not exempt, unlike other schemes.

Atal Pension Yojana

The main agenda of this scheme is to help individuals who fall below the poverty line.

The scheme is mainly beneficial for people working in the unorganized sector as they need some kind of financial assistance from the government.

Under this scheme, people have to pay the minimum amount, and they will receive the maturity amount post-retirement. But to avail, the benefits, people must have an active savings account.

Individuals falling in the age bracket of 18 and 40 years are eligible to apply for this scheme. The minimum tenure of the scheme is 20 years.

Hence, people who choose to invest in this scheme are not eligible to invest in other schemes.

Sukanaya Samridhi Yojana

The scheme is a government initiative, and it mainly aims to benefit the girl child who is either ten years or young.

The interest rate of this account is 8.4%. The minimum investment per year is Rs1000, and the Maximum is Rs1.5 lakh.

The girl child’s parent or legal guardian can open this account. The account matures once the girl child attains maturity at 18 or at the time of her marriage when she is 21.

Even if the girl is unmarried premature withdrawals up to 50% of the amount can be made. There is no tax on interest.

Hence, these are some fantastic savings scheme which you can choose to invest in.

Conclusion – Savings Schemes

You get vast number of options that you can choose from, but, for the first thing, you need to develop the idea of saving your money.

Make sure you are well aware of your financial status, and probably have a view of the future.

According to the mind set you develop, and the fund you wish to create, you can furthermore choose the most appropriate plan for you.

Open Demat Account Now! – Zero Brokerage on Delivery

Most Read Articles