There are many ways of saving money, many a time due to lack of awareness and due to the ubiquitous marketing efforts for some financial instruments, people end up buying products not suited to their requirements and risk profile. It’s always wise to make an informed decision, below is the list of various financial products with zero risk and guaranteed returns.
Below is a quick comparison of all the above schemes
| PRODUCT | PPF | SSA | SCSS | KVP | NSC |
|---|---|---|---|---|---|
| ELIGIBILITY | Indian resident | In the name of girl child of upto 10 Yrs age | Senior Citizens, age 60 Yrs or more | Indian resident | Indian resident |
| MIN & MAX AMOUNT(Rs) | Rs 500 & Rs 1,50,000 | Rs 250 & Rs 1,50,000 | Rs 1000 & Rs 15,00,000 | Rs 1000 & No Max ceiling | Rs 100 & No Max ceiling |
| ROI | 7.9% | 8.4% | 8.6% | 7.6% | 7.9% |
| TENURE | 15 Years | 21 Years | 5 Years | 9 Yrs 5 months | 5 Years |
| PARTIAL WITHDRAWAL | From 7th Year | After the child attains 18 Yrs or has passed 10th standard | Not Allowed | Not Allowed | Not Allowed |
| PREMATURE WITHDRAWAL | After 5 years, penalty of 1% | Under exceptional conditions | After 1 year, penalty of 1.5% | After 2.5 Years | Only under special circumstances |
| COMPOUNDING | Yearly | Yearly | NA- interest paid quarterly | Yearly | Yearly |
| TAX TREATMENT | Exempted | Exempted | Deduction under 80C available | No Tax exemption | Deduction under 80C available |
Public Provident Fund(PPF)
It’s popularly known as PPF, a scheme introduced by the Govt. of India, a product with zero risk and guaranteed returns. Its tax-efficient and the rate of interest rate is set on a quarterly interval by the Ministry of Finance.
Eligibility: Any resident individual can open a PPF account, it can also be opened on behalf of a minor by the guardian, Joint accounts are not allowed. NRIs and foreign residents not eligible to open this account.
Tenure: The Maturity period is 15 years, however, it can be extended by the depositor in blocks of 5 years.
Minimum and Maximum Amount: Minimum of Rs 500/- and a maximum of Rs 150000/- can be deposited in the account in a financial year. Previously a total of 12 deposits in a financial year were permitted, now that has been done away with.
Rate of Interest: The rate of interest is announced quarterly by the Ministry of finance and the current interest rate is 7.6%, the interest is yearly compounding.
Best time to invest: Between 1st and 5th of every month, else you will be loosing the interest for approx 25 days, because the interest is calculated on the lowest balance between the 5th day and the end of the month.
Premature Withdrawal: Partial withdrawal is allowed from the 7th financial year which is subject to 50% of the amount standing at the end of the 4th completed financial year or the previous financial year whichever is lower. Withdrawal is allowed once in a year.
The PPF account can be prematurely closed by paying a penalty of 1% on the contracted rate of interest for medical exigencies of the depositor or his/her family and for higher education of the account holder. It can also be prematurely closed on change of residential status.
PPF defaults and Revival: The account is deactivated if the minimum deposit of Rs 500/- in a year is not made, the same can be activated by paying a penalty of Rs 50 and the minimum deposit of Rs 500/- for each year the account was inactive.
Tax Treatment: PPF falls in EEE category (Exempt, exempt, exempt) i.e. Deposits up to Rs 150000/- qualifies for tax deduction under section 80C, the interest earned every year is exempt from tax and finally the maturity amount is also exempt from tax.
Loan Facility: A PPF holder can avail loan on the corpus between 3rd and the 6th financial year of the account opening. The rate of interest is 1% above the prevailing PPF rate.
Immunity from Attachment: The deposits under PPF are immune from attachment by courts for the payment of the liabilities of the depositor. However, can be attached by Income Tax and other Govt. departments for recovery of taxes.
How to open a PPF account: Nowadays most banks provide the facility of opening the PPF account online, however any of the PSU banks or post office can be approached for opening the account.
Senior Citizen Savings Scheme(SCSS)
Senior Citizens Savings Scheme(SCSS): This scheme is especially designed for senior citizens aged 60 or above, however employees who have taken voluntary retirement after 55 and defence personnel who have retired after 50 can also opt for the scheme. The returns are better the Fixed deposit interest given by the scheduled banks and is one of the safest investments out there.
Tenure: The maturity period is 5 years and can be extended once for 3 years.
Minimum and Maximum amount: Can be opened with a minimum deposit of Rs 1000/- and the maximum amount allowed is Rs 15,00,000/-.
Rate of Interest: The rate of interest is announced quarterly by the Ministry of finance and the current interest rate is 8.60%, the interest is paid out quarterly.
Premature Withdrawal: Can be closed pre-maturely after completion of one year by paying a penalty of 1.5% on the deposit amount, however if the premature closure is done after completing two years then 1% of the deposit amount will be deducted.
Tax Treatment: Deposits up to Rs 150000/- qualifies for tax deduction under section 80C, however the interest earned is taxable.
How to open an SCSS account: The SCSS account can be opened at any of the Post offices and some select branches of Nationalized and private banks.
Sukanya Samriddhi Yojana(SSY)
It’s a small deposit scheme introduced by the Govt. of India under its “Beti Bachao Beti Padhao” campaign. The scheme aims to build a good corpus for the higher education and marriage of the girl child.
Eligibility: Any resident individual can open an SSY account for his/her daughter of 10 years or less.
Tenure: The deposit period is 15 years, after 15 years deposits are not allowed, however you will keep earning interest. The maturity period is 21 years.
Minimum and Maximum Amount: Minimum of Rs 1,000/- and a maximum of Rs 1,50,000/- can be deposited in the account in a financial year. There is no limit to the number of deposits in a year.
Rate of Interest: The rate of interest is announced quarterly by the Ministry of finance and the current interest rate is 8.4%, the interest is yearly compounding.
Best time to invest: Between 1st and 10th of every month, because the interest is calculated on the lowest balance at the end of the 10th day or at the end of the month.
Premature Withdrawal: Partial withdrawal is allowed after the girl child reaches 18 years of age or has passed the 10th class. Partial withdrawal is allowed only for the higher education of the girl child. By submitting the admission offer you can withdraw 50% of the amount at the end of last year or the actual admission fees whichever is less.
For example if you have Rs 4,00,000/- at the end of the previous year and the admission fee is Rs 1,00,000/- then even though the eligibility is Rs 2,00,000/- you can only withdraw Rs 1,00,000/-.
Premature closure is allowed after the girl attains 18 years for the purpose of marriage.
SSY defaults and Revival: The account is deactivated if minimum amount of Rs 1000/- is not deposited in a financial year, it can be revived with a penalty of Rs 50/- per year with minimum amount required for deposit for that year.
Tax Treatment: SSY falls in EEE category (Exempt, exempt, exempt) i.e. Deposits up to Rs 150000/- qualifies for tax deduction under section 80C, the interest earned every year is exempt from tax and the maturity amount is also exempt from tax.
How to open an SSY account: It can be opened at any of the designated branches of Post office, nationalized and private banks. The details of the nearest designate branch can be found on the website of the bank or the post office.
Kisan Vikas Patra(KVP)
It’s a small deposit scheme introduced by the Govt. of India in the year 1988, it’s a one time lump sum deposit. Initially, it was meant for farmers from where it gets its name, now any resident Indian can invest in it. To prevent the possibilities of money laundering, pan card has been made compulsory for investments of Rs. 50,000 and above. To deposit Rs. 10 lakhs and above, one must also submit income proof.
Eligibility: Any resident individual can open KVP.
Tenure: The time taken to double the amount deposited currently 9 years and 5 months.
Minimum and Maximum Amount: Minimum of Rs 1,000/- and there is no limit on the maximum amount that can be deposited in the account in a financial year.
Rate of Interest: The rate of interest is announced quarterly by the Ministry of finance and the current interest rate is 7.6% compounded yearly. The amount invested doubles in 113 months i.e. 9 years and 5 months.
Premature Withdrawal: KVP can be closed after completion of 30 months from the date of issue.
Tax Treatment: No tax exemption, however no tax is deducted at source. It’s the responsibility of the individual to pay the tax as per his/her income tax slab.
How to open a KVP account: It can be opened at any of the post offices.
National savings Certificate(NSC)
It’s a deposit certificate issued by post office and backed by the Govt. of India. You can deposit a lump sum amount and obtain an NSC from any of the post offices.
Eligibility: Any resident individual can open an NSC in his/her name or on behalf of a minor.
Tenure: 5 years.
Minimum and Maximum Amount: Can be opened with a minimum of Rs 100/- and there is no limit on the maximum amount that can be deposited in the account in a financial year, however deduction is only up to Rs 1,50,000/- under section 80C of IT act.
Rate of Interest: The rate of interest is announced quarterly by the Ministry of finance and the current interest rate is 7.6% compounded yearly. The amount invested doubles in 113 months i.e. 9 years and 5 months.
Premature Withdrawal: KVP can be closed after completion of 30 months from the date of issue.
Tax Treatment: Deduction up to Rs 1,50,000/- under section 80C of IT act available. The yearly interest accrued is deemed to be reinvested under section 80C and hence becomes tax free till the 4th year, the interest earned in the 5th year is taxable as the same is not reinvested. Please remember the maximum limit of deduction one can claim under 80C is Rs 1,50,000/- only. There is no TDS deducted by post office.
How to open an NSC account: It can be opened at any of the post offices.
The above is a list of financial products with zero risk and guaranteed returns, go ahead and pick your choice based on your requirement.
