Most of the people toil the whole month to receive their salary on their payday. At once, we end up thinking of ways to spend that hard-earned money. We make a lot of purchases and dine out more often. Amidst all these, we tend to forget ‘A Penny Saved is a Penny Earned’. People need to realize that personal financing is as important as earning money. There are multiple instruments in the market through which one can park their hard-earned income. Apart from these instruments, there are a good number of schemes available to encourage savings among the people. One must also look to invest in the following schemes that will not only save money but also earn interest income.
- Public Provident Fund (PPF): PPF is considered to be one of the safest investment options owing to its sovereign backing. This scheme comes with a lock-in period of 15 years (which can further be extended by 5 years). Government announces the interest rates on this scheme every quarter. For the current quarter, it has been set at 7.10%. The salient feature of the PPF scheme is that the principal, interest income and redemption amount are all exempted from taxation. A maximum of Rs 1,50,000 per year is eligible for tax rebate under Section 80C.
- Kisan Vikas Patra Scheme: As the name suggests, the Kisan Vikas Patra (KVP) scheme was introduced to benefit the farmers (which was later opened to all). The maturity period for this scheme is the time taken to double the savings amount. So, this varies according to the interest rate offered on the scheme, which is revised every quarter. As of now, the maturity period is 124 months earning interest at a rate of 6.90% p.a. The risk factor is negligible, as it is guaranteed by the government. Investments can be as low as Rs. 1000, but there are no upper limits. However, there is a disadvantage of the earnings being taxed in this scheme.
- Fixed Deposits: The Fixed Deposit (FD) accounts can be opened at post offices or registered banks. The investment tenure can range from 7 days to even up to 10 years. On the basis of these tenures, interest rates vary from 3.00%-8.00%. There are Tax-Saving FDs (with a lock-in period of 5 years) which are eligible for tax rebate under Sec 80C.
- National Savings Certificate: This is a government initiative, where Indian individuals (NRIs and HUFs are excluded) can apply for this scheme at any Post Office. NSC is also considered as a low-risk investment option. The interest which gets revised every quarter is compounded on an annual basis and is paid at maturity (5 years). This earnings from this scheme too are eligible for deduction from taxable income.
Apart from these schemes, individuals must follow simple practices like budgeting, cutting avoidable expenses, staying away from impulse purchases, wisely utilizing offers & coupons etc. These steps will help one to save money easily at the household level.