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National Saving Scheme in India

The national saving scheme in India is a scheme regulated by the Ministry of Finance and operated and managed by the Department of Post, India. The national saving scheme is safer than other investment options because it is backed by the Central Government of India. The interest rates are monitored and revised periodically based on the bond rates in the country.

The major goal of NSS is to encourage people to save and eventually develop a sizeable savings account. Each scheme under the national saving scheme is designed for every category of investor. It is suitable for investors seeking regular savings, fixed income, retirement planning, securing the future of a girl child, etc. Along with tax deductions, each scheme provides multiple benefits such as loan against the deposit, premature withdrawal, low minimum investment amount, nominee facility, ease of transaction, etc.

Comparison of National Saving Schemes

SchemesTenureInvestment AmountInterest RateTax DeductionPremature WithdrawalEligibility
Post Office Saving AccountNAMinimum Amount- Rs 500Maximum Amount- No Limit4%Interest Earned- U/S 80TTANAAdult, residentGuardian on behalf of minor and person of unsound mind Joint Account 
National Savings Recurring Deposit AccountNAMinimum Amount- Rs 100 per monthMaximum Amount- No Limit5.8% p.a. Compounded quarterlyNilAvailable after 3 yearsAdult, residentGuardian on behalf of minor and person of unsound mind Joint Account
National Savings Time Deposit Account1 year, 2 year, 3 year, 5 yearMinimum Amount- Rs 1,000Maximum Amount- No Limit1 year- 5.5%2 year- 5.5%3 year- 5.5%5 year- 6.7%5 year TD- U/S 80C upto Rs 1.5 lakhsAvailable after 6 monthsAdult, residentGuardian on behalf of minor and person of unsound mind Joint Account
National Savings (Monthly Income Account) Scheme5 yearMinimum Amount- Rs 1,000Maximum Amount- Rs 4.5 lakhs, single accountMaximum Amount- Rs 9 lakhs, joint account 6​.6​ % per annum payable monthlyNilAvailable after 6 monthsAdult, residentGuardian on behalf of minor and person of unsound mind Joint Account
Senior Citizen Savings Scheme5 yearMinimum Amount- Rs 1,000Maximum Amount- Rs 15 lakhs7.4 ​% per annum, payable from the date of depositU/S 80C up to Rs 1.5 lakhsAnytime after account opening(penalty applicable)Individual more than 60 years of ageRetired Civilian Employees above 55 years of age and less than 60 years of ageRetired Defense Employees above 50 years of age and below 60 years of age
Public Provident Fund Scheme15 yearMinimum Amount- Rs 500Maximum Amount- Rs 1.5 lakhs7.1 % per annum (compounded yearly)U/S 80C up to Rs 1.5 lakhs1 withdrawal during a financial after five years
Premature withdrawal after 5 years
Single adult by a resident IndianGuardian on behalf of minor/ person of unsound mind
Sukanya Samriddhi Account21 years from the date of account opening
On the marriage of girl child
Minimum Amount- Rs 250Maximum Amount- Rs 1.5 lakhs7.6​​% Per Annum, Yearly compounded.U/S 80C up to Rs 1.5 lakhsAfter 5 years of account opening (subject to conditions)Guardian in the name of girl child below the age of 10 years
National Saving Certificate (VIII issue)5 YearsMinimum Amount- Rs 1,000Maximum Amount- No Limit6.8 % compounded annually but payable at maturityU/S 80C up to Rs 1.5 lakhsAllowed subject to conditionsAdult, residentGuardian on behalf of minor and person of unsound mind Joint Account
Kisan Vikas PatraAs prescribed by the Ministry of Finance from time to timeMinimum Amount- Rs 1,000Maximum Amount- No Limit6.9 % per annum compounded annuallyNilAny time before maturityAdult, residentGuardian on behalf of minor and person of unsound mind Joint Account

Features of a National Saving Scheme

  • The interest rate is reviewed quarterly. Since the interest rate is prefixed it does not account for inflation rates.
  • Premature withdrawal is subject to fulfilment of conditions such as emergency conditions, minimum duration, etc
  • Only residents of India can invest in any of the national savings schemes
  • An investor can invest directly through a post office or with any of the participating public or private banks in India

Benefits of Investing in a National Saving Scheme

  1. The NSS schemes returns are guaranteed and announced before they are invested. Furthermore, because they are not connected to market risks, investors can expect set returns. 
  2. Except for a few, most of the schemes are eligible for a tax deduction under section 80C of the Income Tax Act 1961. You can claim a tax deduction of up to Rs 1.5 lakhs in a financial year. Many investors are attracted to this tax benefit. 
  3. Since the schemes are regulated by the Ministry of Finance, Central Government of India, the schemes are safer to invest in.
  4. A loan facility is available against the deposits.
  5. The national savings schemes are more suitable for conservative investors who want to invest in retirement planning.

Check Out Government Schemes for Girl Child

Frequently Asked Question

Which is the best savings scheme in India?

The best savings schemes in India are PPF, SSA, SCSS, NSC, POMIS, and so on. Moreover, the selection of the best savings schemes depends on the investor’s investment objectives and preferences w.r.t. Maturity and withdrawal. For example, PPF and SCSS are more suitable for an investor looking for retirement planning. On the other hand, SSY is suitable to secure the future of a girl child. Hence, you must consider your investment goals and preferences before investing.

Why should I invest in national savings schemes?

The national savings schemes are products of the Ministry of Finance, Government of India, and are backed by a sovereign guarantee. This makes them completely secure and safe. In comparison to other financial market programs, the interest rates offered on NSS are relatively attractive. The crucial feature is that 100 percent of the money collected in the state is invested in securities floated by the state government as a long-term loan from the government of India. Such funds are used by the state government for development projects in the state.

Which saving scheme is giving the highest interest rate?

The highest interest rate is provided by SCSS, PPF, and SSY. Senior citizen savings scheme SCSS provides 7.4 ​% per annum, payable from the date of deposit. Sukanya Samriddhi Account provides 7.6​​% Per Annum, yearly compounded. The public provident fund PPF provides 7.1 % per annum (compounded yearly).

Do NSS Schemes offer tax benefits?

The deposit in NSS schemes provides the tax deduction under Income Tax Act, 1961. National Savings Time Deposit, Senior Citizen Savings Scheme, Public Provident Fund Scheme, Sukanya Samriddhi Account, and National Saving certificate (VIII issue) are eligible. The maximum tax deduction available is up to Rs 1.5 lakhs in a financial year.

Whether NRI(s) can invest in the National Savings Schemes?

No, an NRI can invest in the National Savings Schemes.

Is nomination facility available in National Savings Products?

Yes. You can nominate one or more persons as the nominee. Moreover, you must mention the share of the nominee in case of more than one nominee.

Is NSC a good investment?

Yes, NSC is a good investment option. It provides fixed and guaranteed interest income along with capital appreciation. The government has made NSC widely available to potential investors by placing it at post office offices across the country. However, the investment decision must depend on your investment goals. There are other investment alternatives as well that provide higher returns like mutual funds. If you are a conservative investor then NSC is more suitable. However, if you understand the risk associated with mutual funds and wish to earn higher returns then you must invest in other options like mutual funds.

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