1: National Saving Certificate
National saving certificate are one of the popular investment option designed for an Indian investors where he/she can start it with Rs 100 with no maximum limit on investment but should be in denomination of Rs 500, Rs 1000, Rs 5000 and Rs 10000. It combines tax-saving with guaranteed return and that too backed by the government therefore this certificate is considered as one of the safest investment option in an Indian Market.
NSCs are available for 5 year and 10 year tenure; usually the returns for 10 year are higher than the returns which they offer for tenure of 5 year and there is an option of reinvestment on maturity.
Certificates can be bought from any head post office or general post office. These are transferable from one post office to any post office & from one person to another person before maturity. It also has feature where you can pledge it to obtain loans but the amount and rate at which the loan is permitted depends on the lending institution.
The invested amount in 5-year NSC is eligible for tax deduction under section 80 c of the Income Tax act. Interest paid on NSC is compounded half-yearly and added to the total accumulated value. Although the interest is taxable and will be added to total income under the head “Income from other source” but the best part is that the same can be claimed as deduction under section 80 c as the same has already been reinvested in the certificate.
Also the deposits are exempt from the wealth tax also.
2: Post office monthly saving scheme:
The Post Office Monthly Saving Scheme (POMIS) is the most popular saving instrument available in an Indian Market where an investor deposit a lump-sum amount with the Post office and earn a fixed rate of interest on it which is payable on a monthly basis. The main objective of POMIS is to provide the specified assured return on a monthly basis to an account holder which in turn helps them to have a guaranteed regular income.
The scheme is fully backed by the government of India that makes it totally a risk free instrument with guaranteed return, you can open it with any of head or general post office provided you should have the saving account in post office thereafter you can go ahead with a minimum investment of Rs 1500 and maximum investment of Rs 4.5 lakhs in case of Single account and 9 lakhs in case of joint account for a tenure of 5 year.
There is no tax advantage on it whatever the income you are receiving will be added to your total income of that financial year and added under the head “Income from other source”
Suppose you have deposited Rs 1 lakh into this scheme for a period of 5 year and current interest rate is 8% then Rs 667 will be payable to you starting from the month you have invested on a monthly basis for the next five year.
3: Senior Citizen Saving Scheme:
The senior citizen saving scheme was launched by the government of India in 2004 to provide the regular retired income to the senior citizen on their investment. It can be purchased with the minimum investment of Rs 1000 and maximum investment of Rs 15 lakh but it should be in multiple of Rs 1000 only.
Returns are generally higher and payable on a quarterly basis which help senior citizen to create a regular income flow.
The scheme is backed by the government of India, making it totally a risk-free with guaranteed return and you can open this scheme with any of head or general post office or at select branches of some nationalised bank.
Premature closing of the account is permitted with penalty and there is no option of pledging it as it defeats the purpose of an investment.
The amount invested in the scheme is eligible for a tax-deduction under sec 80 c of the Income tax act but the interest earned on the deposit is fully taxable and tax deducted at source (TDS) if the total interest in the year is above Rs 5000.
4: Public Provident Fund
Public provident fund or the commonly known as PPF is long-term saving instrument established by the central government with an objective of providing the old-age income security to the self-employed.
The scheme was launched by the central government in July 1968 and is fully backed by the government therefore considered as the safest investment option among the people. Tax deduction on deposits, guaranteed return and tax-free maturity are the biggest driving force which pulls the investor towards it.
PPF account can be opened with the minimum investment of Rs 500 per annum and a maximum of 12 deposits allowed in a year with an upper cap of Rs 1 lakh per annum. You can open the PPF account with Head or general post office, SBI or its branches, branches of nationalised bank permitted to collect direct taxes and with some of the private sector bank like ICICI.
5: Post Office Recurring Deposit:
Recurring Deposit is one of the saving instruments offered by the Post Office where an investor needs to deposit a fixed sum of money on a set frequency for 60 months and in return they will get a fixed rate of interest on it. It helps to build a sizeable corpus over time and considered as a good saving instrument among the small saver.
Postal Recurring deposit is one of the best way of disciplined saving as it inculcate the habit of saving in an individual because one can start it with a small amount and above that it provides higher rate of interest than the saving account. You can start the PORD account with any of the Post office provided you should have a Post office saving account with them.
The principal and interest rate on it is fully protected as the scheme is backed by the Government of India, so far as the liquidity is concerned, one can withdraw up to 50 percent of the balance after completion of one year from the date of opening an account. The premature withdrawal or closure of PORD account is permitted with penalty.
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