Savings plans in India were introduced with an intent to cultivate healthy saving and investing habits. Earlier, people kept their money at home, which caused poor cash circulation and stagnation of wealth. However, with the introduction of new savings plans and schemes in the country, people today feel encouraged to invest their money to attract good interest rates and reap various financial benefits. Let us take a look at the different money-saving plans available in India.
Different Types of Savings Plans in India
1. Life Insurance Savings Plan
Life Insurance Savings Plan is a type of life insurance plan which offers you the benefits of a life insurance cover along with privileges of investment and saving. So, apart from securing your life and that of your family, the Life Insurance Savings Plan also allows you to create a corpus which can support you at different stages of your life.
There are different types of life insurance return plans which you can choose as per your financial requirements. Guaranteed return insurance plans offer you guaranteed returns after a certain period of time, while some provide regular income to you. Money-back term insurance plans are highly suitable for individuals who are about to reach their retirement age and would soon require the support of a steady income.
2. Fixed Deposit
For individuals who are looking for low-risk savings options with guaranteed returns, a fixed deposit (FD) is one of the smartest choices. When you invest in an FD, you deposit money in the bank for a fixed tenure on which you earn interest at a fixed rate.
For example, you have a short term savings plan, and you decide to deposit ₹50,000 in an FD with an interest rate of 8% for a year, the interest earned would be ₹4000. Also, in case of an emergency, you can consider breaking your FD prematurely. After your FD matures, you can also consider reinvesting the interest.
3. Public Provident Fund
Public Provident Fund (also known as PPF) is one saving option that is famous across multiple generations in India. Secure investment and tax benefits are two of the primary benefits and reasons for the popularity of PPF. As per Section 80C of the Income Tax Act, the interest earned over PPF is not taxable.
You can open a PPF account with a bank or post office where you will have to invest money for a period of 15 years. The minimum investment amount is ₹500, whereas the maximum amount you can invest is ₹1.5 lakhs each year with an interest rate of 7.10% p.a.
4. National Savings Certificate (NSC)
National Savings Certificate (NSC) is yet another popular saving scheme by the government. You can open an NSC account with a post office and invest money for 5 years. The minimum yearly amount you can invest is ₹500 with no upper limit. The best part is, you can claim tax benefits, and the maximum limit for tax deduction is ₹1.5 lakhs.
The rate of interest is decided by the government and reviewed quarterly; however, it does not change during the tenure of your NSC.
5. Equity Linked Savings Scheme (ELSS)
As the name suggests, the Equity Linked Savings Scheme (ELSS) is a type of mutual fund scheme that allows you to park your finances in equity. ELSS, too, allows tax benefits with maximum deduction up to ₹1.5 lakhs. The minimum amount you can invest in ELSS is ₹500 each year, with no upper limit.
Although ELSS investments are made in the equity market and can assist you in beating inflation, they are also subject to various market risks.
It would be best if you choose a combination of the various savings plans to minimise your risk and maximise your gains. By not putting all your investment eggs in the same basket, you ensure the monetary well-being of your loved ones and yourself, while being in a better position to deal with any financial emergency.