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    Saving Schemes In India

    • 5 min read
    • Last Modified Date: January 30, 2023
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    Have you ever tried to manage your finances? What a pain, right? Managing funds gets difficult since many of us do not understand how to manage them. Also, most people do not have enough money to live a pleasant life. All of this has been taken into account by the Indian government, which has developed numerous saving schemes. These schemes assist individuals in saving a portion of their earnings for future usage. Some of these schemes also assist individuals to make their lives simpler.


    Investment in savings schemes assists in paying for a person’s children’s education and marriage. Aside from being a disciplined approach to saving money, investment in such systems may also give extra income. There are also numerous minor savings schemes where the contribution is little but, the total contribution accrued over time is massive.

    Because most savings schemes get started by the government, the risks of investing in them are comparatively low. Contributions to savings schemes are safe and secure and offer attractive returns. The government sets the interest rates for savings plans, which change every three months to a year.

    But, firstly, what are these saving schemes?

    Savings schemes are investment solutions that help people meet their financial objectives over time. The Government of India, private/public sector banks, and financial institutions launch these initiatives. The interest rate for these savings schemes gets set by the government or banks and is adjusted regularly. You can utilize the money you save through these schemes for emergencies, retirement, further education, children’s education, marriage, job loss, debt repayment, and other purposes.

    Why is it critical for you to invest in these savings schemes?

    Saving schemes are crucial for individuals in a country and, consequently, for an economy for the following reasons:

    • Safety: Saving your hard-earned money in savings plans can help you safeguard it for future requirements. Keeping liquid money on hand may not be safe.
    • Retirement Funds: Saving money in long-term savings plans regularly will help you develop a retirement corpus. When you start saving at an early age, you will get rewarded with a large corpus that you may utilize after retirement to live a comfortable life.
    • Long-Term Benefits: Because most schemes employ compound interest to calculate interest, long-term investments may yield incredible profits. These plans have a minimum lock-in time of five years and a maximum lock-in length of 60 years. Compounding returns with long-term investments will yield interest on interest, resulting in a large sum at maturity.
    • Tax Savings: Many savings plans include one or more types of tax benefits, such as tax deductions, exemptions, or both. Section 80C of the Income Tax Act allows for a tax deduction on investments of up to Rs.1.5 lakh in particular schemes. Another set of schemes exempts the investment, interest earned, and maturity amount.
    • Prevent Unwanted Costs: When you have all your money at your disposal, you may wind yourself spending it on things you don’t need. Investing the surplus that exists after meeting the essential costs in a proper saving program, on the other hand, will assist prevent spending on unneeded products and services.

    The Various Types of Saving Schemes In India For You To Invest In?

    When looking for savings schemes in India, you have various choices. Many get sponsored by the government, while others by the RBI and SEBI. A handful of these schemes also offer income tax exemptions or deductions. Below is a list of some of these savings plans:

    • Public Provident Fund (PPF): The Public Provident Fund (PPF) plan is one of the country’s most popular and secure investing alternatives. Donations to the plan, as well as the interest earned by the contributions, are tax-deductible under Section 80C of the Income Tax Act. The plan may be created at post offices and banks, and it lasts for 15 years. Individuals may extend the scheme’s tenure by an additional 5 years. The interest rate for the fiscal year 2018-2019 is 8% per annum, compounded annually. Individuals must make a bare payment of Rs.500 and a max contribution of Rs.1.5 lakh to the plan each year.
    • Employees’ Provident Fund (EPF): The Employees’ Provident Fund Organisation (EPFO) established the EPF plan to assist employees in saving money for retirement. Companies with more than 20 workers are required to contribute to the EPF system. The employee and the employer contribute 12% of the employee’s DA and basic income to the program. Employees can withdraw cash from the program for medical crises, home building, home purchase or land purchase, home loan repayment, and so on. The scheme’s interest rate for the fiscal year 2018-2019 is 8.65% per annum. The EPFO determines the interest rate on an annual basis.
    • National Pension System (NPS): The Central Government established the NPS to provide citizens with a monthly income after retirement. Employees can take advantage of the plan by paying a nominal extra. Employees will get a lump sum payment at the time of retirement, and a portion is given back as a monthly pension following retirement.
    • Sukanya Samriddhi Yojana Account (SSY): Prime Minister Narendra Modi established the Sukanya Samriddhi Yojana (SSY) initiative to assist in safeguarding the future of a girl child. The plan now offers an 8.5% interest rate. An SSY account can get created through post offices or banks. The minimum and maximum deposits that may be made into the plan in a year are Rs.1,000 and Rs.1.5 lakh. The account holder must contribute to the plan for 14 years, and the scheme has a maturity term of 21 years. Individuals can move their SSY accounts from one bank to another.
    • Atal Pension Yojana (APY): The scheme’s principal goal is to assist those living in poverty. The initiative also assists persons who work in the informal sector and seek government assistance. Individuals contribute a small amount to the system and get a pension upon retirement. Individuals must, however, have active savings account to profit from the plan. The Atal Pension Yojana plan is open to citizens between 18 and 40. Contributions must get made to the plan for a minimum of 20 years. Individuals must make minimal contributions to the system. But, if contributions are significant, the pension received will be high. Individuals who choose the Atal Pension Yojana program cannot participate in any other savings scheme. 
    • Voluntary Provident Fund (VPF): Employees might voluntarily choose to participate in the VPF program. Employees can contribute their full basic income to the VPF plan, unlike the EPF system, which allows just 12% of the basic salary to be donated. Contributions to the VPF program influence the EPF scheme and vice versa. For the fiscal year 2018-2019, the rate of interest earned by contributions to the plan is 8.65% per annum.
    • Kisan Vikas Patra (KVP): The Kisan Vikas Patra certificate system is provided by Indian post offices. The current rate of interest given by the plan is 7.7%, compounded annually. The minimum contribution required for the plan is Rs.1,000, with no upper limit. The amount invested in the plan doubles over 112 months. Individuals can add nominees to the system, and the certificate can be moved from one person to another and from one post office to another. Individuals may also encash the certificate after 30 months from the day it was issued.
    • Post Office Time Deposit: This is similar to a bank fixed deposit (FD). A Post Office Time Deposit Account (POTD) requires a minimum deposit of Rs 200 and has no maximum limit. The interest rates are as follows:


    Tenure Rate from 1st October to 31st December 
    1 year 5.5%
    2 year 5.7%
    3 year 5.8%
    5 year 6.7%

    Source: Paaisabazaar

    1. Interest rate: 5.5% – 6.7%
    2. Tenure: 1-5 years
    3. Minimum Investment: Rs 200
    4. Maximum Investment: None
    5. Deduction on Principal: No (except tax-saver deposit with post office)
    6. Tax on interest: Yes
    • Senior Citizens Savings Scheme (SCSS): The SCSS was established to assist people aged 60 and up. Individuals between the ages of 55 and 60 who have selected the Voluntary Retirement Scheme (VRS) can also benefit from the SCSS. The SCSS has a 5-year term and an interest rate of 8.7% per year. Individuals must deposit a minimum of Rs.1,000 in the plan, with a maximum investment of Rs.15 lakh permitted. They can also move their SCSS accounts from the post office to the bank and vice versa. Tax deductions are allowed for investments made towards the plan under Section 80C of the Income Tax Act.
    • National Savings Certificate (NSC): The NSC plan is one of the most well-known in India. Because the plan is supported by the Indian government, it offers guaranteed returns and tax breaks. Individuals can engage in the plan at post offices for five years. The scheme’s interest rates are set by the Indian government quarterly. The scheme’s interest rate for the fiscal year 2018-2019 is 8.0%. The interest earned is aggregated yearly. The minimum contribution required for the plan is Rs.100, and there is no restriction on the amount that can be contributed. Individuals are entitled to tax advantages on their contributions to the plan under Section 80C of the Income Tax Act. Individuals may also transfer the certificate to the name of another individual. It, however, can only be done once.
    • Tax-Saving FDs: Tax-saving FDs are eligible for a deduction under Section 80 C of the Income Tax Act for annual investments up to Rs 1.5 lakh. For example, if you put Rs 1 lakh in a tax-saving FD and your tax bracket is 20%, you will save Rs 20,000 (20% of Rs 1 lakh). These FDs have a 5-year minimum lock-in duration and can be opened at any public or private sector bank or post office. The interest paid on tax-saving FDs is taxed at your marginal rate. It is an appropriate investment choice for people seeking assured profits with minimum risk. Tax-saving FDs require a minimum investment of Rs 100. Although there is no upper limit, tax deductions are only available for donations of up to Rs 1.5 lakh per year.
    1. The interest rate varies from bank to bank. Currently, it ranges between 6.50% and 7.25%.
    2. 5 years tenure
    3. Rs 100 is the minimum investment.
    4. No maximum investment
    5. Yes, there is a principal deduction.
    6. Interest is taxed at a flat rate.

    Table for interest rates of Tax-saving Bank FDs

    Banks Tax-Saver FD interest rates
    General Senior Citizens
    SBI 5.40% 6.20%
    HDFC Bank 5.30% 5.80%
    ICICI Bank 5.35% 5.85%
    Kotak Mahindra Bank 5.30% 5.80%
    Bank of Baroda 5.25% 5.75%

    Data as of 4th April 2021, Source: Bank Websites


    • Post Office Savings Scheme: The numerous savings schemes offered by India Post are popular since the risks are relatively low and most give guaranteed returns. Opening a savings program account at the post office is a straightforward and quick process. The schemes’ numerous appealing aspects contribute to their popularity. India Post provides the following savings programs:
    1. Post Office Savings Account
    2. National Savings Time Deposit Account
    3. Senior Citizens Savings Scheme Account
    4. National Savings Certificate Account
    5. Sukanya Samriddhi Account
    6. National Savings Recurring Deposit Account
    7. National Savings Monthly Income Account
    8. Public Provident Fund Account
    9. Kisan Vikas Patra Account

    Table of Saving Schemes Available In India


    Savings Scheme Rate Tax Deduction on principal? Interest Taxable?
    Post Office Savings Account 4.0% No Yes
    Post Office Recurring Deposit 5.8% No Yes
    Post Office Monthly Income Scheme 6.7% No Yes
    Post Office Time Deposit (1 year) 5.5% No Yes
    Post Office Time Deposit (2 years) 5.7% No Yes
    Post Office Time Deposit (3 years) 5.8% No Yes
    Post Office Time Deposit (5 years)* 6.7% Yes Yes
    Kisan Vikas Patra (KVP) 7% No Yes
    Public Provident Fund (PPF) 7.1% Yes No
    Sukanya Samriddhi Yojana 7.6% Yes No
    National Savings Certificate 6.8% Yes No
    ELSS (Equity Linked Savings Scheme) Market Linked Yes Yes#
    NPS (National Pension Scheme) Market Linked Yes Yes**
    Tax Saving FDs 6.75%* Yes Yes
    Senior Citizens’ Saving Scheme (SCSS) 7.6% Yes Yes

    Source: Paisabazaar


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