National Savings Scheme

Introduction

A National Savings Scheme (NSS) is a government-sponsored savings instrument. Typically, a licensed financial institution operates this scheme. The main goal of such financial options is to mobilise savings and allow individuals to build up a sizeable wealth with small savings and low risk. Moreover, the returns of such schemes are frequently revised, but centralised backing makes them a safe investment option. 

Types of National Savings Scheme 2022

National Savings Schemes are known for their safety and assured returns due to government backing. It also comes with tax benefits in most cases. Typically, its classification is according to their beneficiary categories, like regular schemes for all, schemes for senior citizens, or a girl child. Each program has pre-determined eligibility criteria and offers different features and tax benefits. The targeted beneficiaries classify it into the following categories.

1.    Regular NSS Schemes

a.    Post Office Savings Account

The post office national savings scheme is a savings account with the Post Office instead of a bank. A tax benefit of up to Rs. 1,000 is provided in a financial year on the investment amount. This scheme does not have a defined maturity period.

b.    National Savings Recurring Deposit Account 

In this scheme, investors have to deposit a pre-determined monthly amount for at least five years, which can go up to 10 years. The primary advantage of this scheme is that there is no upper limit on the investment amount, whereas you can start as small as Rs. 100.

c.    National Savings Time Deposit Account

The Post Office alternative to fixed deposits in banks is known as the National Savings Time Deposit Account. The minimum required deposit is Rs. 1,000 and its multiples thereof with no cap on the upper limit. 

The maturity period can range between 1 to 5 years. The rate of interest is calculated every quarter but is payable annually. A tax rate is applicable in 5 year TD account under section 80C of the Income Tax Act.

d.    National Savings (Monthly Income Account) Scheme 

It is an alternate savings account for Indian residents. It generates a fixed income that accrues on the individual’s total investment over a tenure of 5 years. The government pre-determines the annual interest rate. 

You can start investing as small as Rs. 1,500 and go up to Rs. 4.5 lakh in an individual account, and with a joint account, the full corpus can go up to Rs. 9 lakhs. The interest is paid monthly in this scheme. This account can be prematurely closed after a year of account opening.

e.    Public Provident Fund 

It is an easy way to start your safe small savings. You must open a PPF account at the offering financial institution or a post office. You can invest tax-free as small as Rs. 500 up to a maximum of 1.5 lakhs in a financial year. The PPF tenure ranges between 15 to 20 years. You can avail of a loan against up to 25% of your deposits between the 3rd and 5th year of their account.

f.    Kisan Vikas Patra 

Also known as the KVP scheme, it is available through the Post Office issuance certificates and can help you generate significant earnings throughout your tenure. The maturity period is variable—the money doubles at maturity.  

The initial idea of this plan was to help farmers build a financial discipline. Indian citizens aged 18 years and above or trusts can benefit from the scheme by investing individually or collectively in the National Savings Scheme. This scheme excludes the NRIs and HUFs. 

Individuals can also invest in this savings plan on behalf of minors. There is a 30-month lock-in period, and early withdrawal is possible under certain conditions. You can use the Kisan Vikas Patra scheme as collateral to obtain secured loans from financial institutions.

g.    National Savings Certificate (VIII issue) 

National Savings Certificate or NSC is a fixed-income investment that can be opened individually or jointly with three adults at any post office. The NSC scheme encourages small and medium-income earners to mobilise their savings through investment while felicitating tax savings. 

Investment options have no maximum investment limit and can be started with a minimum amount of Rs. 1,000 and multiples of 100. It has a maturity of 5 years. You can use NSCs as collateral to avail of large loans from financial institutions. However, NRIs, HUFS, and trusts are ineligible to invest in this scheme. Tax rebate is available under section 80C of the Income Tax Act.

2.    For Senior Citizens

a.    Senior Citizens Savings Scheme (SCSS)

This scheme ensures post-retirement financial independence as it is one of the highest return-generating government schemes. Any Indian resident over 60 can avail of this scheme for a maturity period of up to 5 years. It can be closed prematurely. The deposit can start with a minimum investment of Rs. 1,000 with up to Rs. 15 lakhs. The interest is payable quarterly in SCSS. An income tax rebate is applicable under section 80C of the Income Tax Act.

b.    Pradhan Mantri Vaya Vandana Yojana (PMVVY)

This scheme provides a periodic income to senior citizens through a monthly pension. Individuals above 60 years can avail of this National Savings Scheme, which has a maturity of 10 years. There is a lock-in period of 30 days and a nominal stamp charge attached to the PMVVY scheme. This investment scheme can get you a secured loan for three years. However, it provides no tax benefits.

3.    For Girl Child

a.    Sukanya Samriddhi Yojana 

This national savings scheme is for Indian girls aged ten and below. Sukanya Samriddhi Yojna is one of the most affordable savings schemes, as individuals can open an account with as little as Rs. 250. However, an individual can invest only up to Rs 1.5 lakhs in a particular financial year. 

In particular, the girl's parents or guardians can open such an account at the nearest post office or licensed financial institution and contribute under the scheme for 21 years. Investors can withdraw 50% of the balance after the age of 18 years for higher education or after passing the 10th standard, whichever is earlier. 

The importance of his NSS in building resilient funds is undeniable, so investors should exercise caution when choosing the right savings plan. Additionally, individuals should consider eligibility criteria, financial requirements, and investment options to get the most out of these national savings plans.
 

A Gist of Some of the Most Popular National Savings Schemes 2022

Below are the most popular national savings scheme with their most defining features-