- Date : 08/03/2023
- Read: 3 mins
Small savings schemes are low-risk investment instruments. Learn how investing in senior citizen savings schemes and monthly income account schemes can be beneficial.
Savings provide a sense of security by making you financially secure. A money-saving plan gives financial gains over a period. Various institutions like public or private sector banks, the Government of India, and other financial entities offer small savings schemes, making it easier for individuals to save money and earn guaranteed returns.
The rate of interest on small savings schemes is determined by the banks or the government and updated periodically. Investors can use the returns acquired from these saving schemes for emergencies, children’s education, retirement, and more. Find out more about why you should invest in these schemes.
Small savings schemes encourage savings
If you hold onto liquid money, it is quite likely that you will spend it. Small savings schemes serve as an important source of household savings as you deposit the extra money from your hard-earned income.
In the Union Budget 2023, the finance minister suggested increasing the deposit limits for Senior Citizen Savings Scheme (SCSS) and Monthly Income Account Scheme (MIS). Investors can now deposit a maximum of Rs 30 lakhs in SCSS, Rs 9 lakh for a single account and Rs 15 lakh for a joint account in MIS. This raise is an effective way to increase your savings in these investment instruments.
Small savings schemes offer guaranteed returns
Money-saving schemes can help you earn a quarterly or regular monthly income through interest. The government offers an 8% interest rate on SCSS, paid quarterly. For MIS, you can get a 7.1% interest per annum, paid monthly.
An attractive interest rate of 8% and a lock-in period of five years on SCSS can help senior citizens reap benefits in the form of a strong retirement corpus. After retirement, you can lead a comfortable life with these accumulated savings. The minimum investment amount in an SCSS is Rs 1,000, with a maximum deposit limit of Rs 30 lakhs.
The budget also introduced a new small savings scheme, namely Mahila Samman Savings Certificate, for the benefit of women. It offers a maximum deposit limit of Rs 2 lakh for a tenor of two years. The scheme also offers a 7.5% interest and has a partial withdrawal facility.
Small savings schemes offer tax benefits
Many small saving schemes offer tax benefits like tax exemption and deduction, or both. PPF, for instance, is an Exempt-Exempt-Exempt (EEE) investment instrument. There are no taxes on the investment, the returns, and the maturity value. Similarly, investments in SCSS offer tax benefits under Section 80C of the Income Tax Act, 1961.
Small savings schemes are attractive for investors due to their low-risk environment and guaranteed returns. When most other fixed-income instruments, such as fixed deposits and bonds, saw a decline in interest rates, small savings schemes' interest rates remained attractive. Some of these schemes also come with tax benefits. Consequently, investors can lower their taxable income by investing in eligible tax-saving instruments.