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Different Types of Saving Schemes in India

To choose the best savings scheme that meets your needs, it is important to know the various options available:

Tax Saving Fixed Deposits**

  • Considered one of the simplest and most reliable ways to save money, tax-saving FDs come with a mandatory lock-in period of five years, during which the funds cannot be withdrawn. 

  • The interest rates are fixed by banks and remain constant throughout the tenure. These deposits also provide tax benefits under Section 80C of the Income Tax Act, up to a limit of ₹1.5 lakh annually. 

  • For individuals who prefer low-risk, guaranteed returns and want to save taxes at the same time, tax-saving fixed deposits are often considered one of the best savings scheme options.

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Recurring Deposits (RD)

  • Recurring Deposits are designed for individuals who prefer to save small amounts regularly. In an RD account, the investor contributes a fixed sum every month for a predetermined tenure, which can range from 6 months to 10 years. 

  • At the end of the term, the investor receives the principal along with interest at a rate determined by the bank or post office. 

  • The guaranteed nature of RDs makes them a popular saving scheme choice for salaried individuals and small savers who want to cultivate the habit of regular savings. 

  • While RDs do not usually provide tax benefits, they are highly flexible and secure.

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ULIP (Unit Linked Insurance Plan)

  • A Unit Linked Insurance Plan combines both savings and insurance in a single product. You can invest in funds, such as equity, debt, or balanced options, depending on your goals and risk appetite, and enjoy life insurance cover alongside. 

  • ULIPs are market-linked and can generate good returns if held for the long term. They also qualify for tax benefits under Section 80C, and the maturity proceeds may be tax-free under Section 10(10D), subject to conditions. **

  • ULIPs encourage disciplined, long-term investment, while ensuring your family remains financially protected through life insurance. This makes them both a savings plan and a protection plan.

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Equity Linked Savings Scheme (ELSS)

  • A mutual fund product that primarily invests in equities and related instruments, ELSS is unique because it combines the growth potential of equity investments with tax-saving benefits. 

  • ELSS funds have the shortest lock-in period of just 3 years among all tax-saving options. 

  • Investors can also choose systematic investment plans (SIPs) for regular contributions. It helps in managing risk through rupee cost averaging. 

  • Returns from ELSS are market-linked. They can be considerably higher than traditional saving schemes over the long term. However, ELSS funds carry a certain level of risk. 

  • Tax deductions of up to ₹1.5 lakh under Section 80C make ELSS one of the most popular investment plans for those seeking growth with tax efficiency.**

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National Savings Certificate (NSC)

  • A government-backed savings scheme available at post offices across the country, NSC comes with a fixed tenure of 5 years. It offers an attractive fixed rate of interest, which is revised periodically by the government. 

  • NSC is particularly useful for small and medium savers who want guaranteed returns and security. 

  • Investments made in NSC are eligible for deductions under Section 80C, and the accrued interest is reinvested automatically. 

  • At maturity, investors receive a lump sum comprising both the principal and the accumulated interest. Because it is a government-backed saving scheme, NSC is one of the safest compounding interest investment schemes for risk-averse investors.

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Post Office Monthly Income Scheme (POMIS)

  • The Post Office Monthly Income Scheme is designed to provide a regular monthly income to investors. This saving scheme is particularly suitable for retirees, homemakers, and individuals looking for a steady cash flow. 

  • Under POMIS, the investor deposits a lump sum amount, which earns interest that is paid out monthly. The maturity period is 5 years, after which the investor can withdraw the principal or reinvest. 

  • POMIS is a very safe option because it is backed by the Government of India. Its returns may be lower compared to market-linked products. 

  • For individuals who value stability and require a fixed monthly income, POMIS is one of the most practical and reliable small saving schemes.

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The following table offers a quick peek into the various features of the different types of savings schemes:

 

Scheme

Lock-in / TenureReturnsRisk LevelTax Benefits**Best Suited For
Tax Saving Fixed Deposits5 yearsFixed, 6–7% (depending on the bank)Low (bank-backed)Eligible under Section 80CIndividuals seeking safe, tax-saving options with assured returns.
Unit Linked Insurance Plans (ULIPs)5 years lock-in (longer tenure recommended)Market-linked; varies with fundsMedium to HighEligible under Section 80C & 10(10D)Investors who want both life cover + investment growth in a single product.
Equity Linked Savings Scheme (ELSS)3 years (shortest among tax-saving options)Market-linked; high potential returnsHigh (equity exposure)Eligible under Section 80CInvestors comfortable with equity risk seeking long-term investment growth.
National Savings Certificate (NSC)5 yearsFixed interest (revised by Govt)Low (govt-backed)Eligible under Section 80CConservative investors preferring assured and tax-saving investments.
Recurring Deposits (RDs)Flexible, 6 months to 10 yearsFixed, based on bank ratesLowNo tax benefitSalaried individuals aiming for systematic monthly savings.
Post Office Monthly Income Scheme (POMIS)5 yearsFixed monthly interest payoutLow (govt-backed)No tax benefitRetirees or households looking for monthly income schemes with safe returns.

Government Savings Scheme Options in India**

Government saving schemes are secure, reliable options supported by the Government of India to encourage savings and financial discipline among citizens. The schemes provide guaranteed returns, tax benefits, and cater to diverse needs ranging from children’s education to retirement. 

Let’s look at some of the most important government savings schemes in India:

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Employees Provident Fund (EPF)

  • It is a retirement-focused saving scheme that applies to salaried employees in organisations registered under the EPF Act. Both the employee and employer contribute a percentage of the employee’s salary each month into the fund. 

  • Over the years, this contribution grows into a sizeable corpus, along with interest, which is credited by the government. 

  • EPF is highly beneficial for long-term wealth creation and offers tax benefits under Section 80C. Withdrawals are allowed under specific conditions, such as retirement, unemployment, or medical emergencies.

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Sukanya Samriddhi Yojana (SSY)

  • The Sukanya Samriddhi Yojana is a government saving scheme specifically designed to promote the welfare of the girl child. Parents or guardians of a girl below 10 years can open an SSY account in her name and deposit a fixed amount annually. 

  • The scheme has a tenure of 21 years or until the girl’s marriage after 18 years. It offers one of the highest interest rates among small savings schemes. What’s more, the investment, interest earned, and maturity amount are all tax-free under Section 80C and Section 10(10D).

  • This makes SSY one of the best saving schemes to build a financial cushion for a daughter’s higher education or marriage expenses.

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National Pension Scheme (NPS)

  • It is a retirement-oriented saving and investment plan open to all Indian citizens. Subscribers can contribute regularly during their working years and build a retirement corpus. 

  • Upon maturity, a portion of the savings must be used to purchase an annuity from NPS (which allows for a steady pension). The remaining can be withdrawn as a lump sum. 

  • NPS is market-linked. The returns depend on the performance of underlying investments in equity, debt, and government securities. 

  • It also offers tax benefits under Section 80C and Section 80CCD. With great investment flexibility and government regulation, NPS is one of the most reliable pension-focused saving schemes available in India.

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Kisan Vikas Patra (KVP)

  • A small savings scheme designed to encourage long-term savings, Kisan Vikas Patra is available at post offices across India. It provides guaranteed returns by doubling the invested amount within a fixed period, currently set at around 115 months (subject to government revisions). 

  • While it does not offer tax benefits under Section 80C, its biggest advantage is the assurance of fixed returns irrespective of market fluctuations. This savings scheme is transferable and can be encashed after a minimum lock-in period.

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Public Provident Fund (PPF)

  • PPF is one of the most popular government savings schemes, known for its long-term benefits and tax advantages. It comes with a 15-year lock-in period, extendable in blocks of 5 years, making it highly suitable for building retirement savings. 

  • PPF offers attractive interest rates that are compounded annually, and the interest is completely tax-free. 

  • Contributions are eligible for deduction under Section 80C, and the maturity amount is exempt under Section 10(10D).

  • Being risk-free and backed by the government, PPF offers a secure saving scheme option. It combines long-term growth, tax efficiency, and guaranteed returns

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Senior Citizen Savings Scheme (SCSS)

  • Specifically designed for individuals aged 60 years or above, SCSS provides a safe investment avenue for retirees looking for regular income. 

  • The scheme has a tenure of 5 years, extendable by 3 more years, and offers one of the highest fixed interest rates among government-backed savings products. 

  • Interest is payable quarterly to ensure a steady cash flow for senior citizens on a regular basis. 

  • Investments in SCSS are eligible for tax deductions under Section 80C, although the interest earned is taxable as per income tax slabs. 

  • For retirees, SCSS is a highly practical savings scheme that ensures both the safety of capital and regular income after retirement.

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Here’s a comparison table highlighting the key points of the different government savings schemes:

 

Scheme

Lock-in / TenureReturns/ MaturityTax Benefits**Best Suited For
National Savings Certificate (NSC)5 yearsFixed interest (revised periodically), reinvested annuallyEligible under Section 80CConservative investors looking for safe, medium-term savings with tax benefits.
Employees Provident Fund (EPF)Till retirement (withdrawal allowed in specific cases)Interest credited yearly by the governmentEligible under Section 80CSalaried employees building a retirement corpus.
Sukanya Samriddhi Yojana (SSY)Till 21 years of the girl child or marriage after 18 yearsHigh fixed interest rate, tax-free maturityEligible under Section 80C & Section 10(10D)Parents planning for a daughter’s education or marriage.
National Pension Scheme (NPS)Till 60 years (partial withdrawals allowed)Market-linked; corpus split between annuity & lump sumEligible under Section 80C & 80CCDIndividuals planning for retirement income through annuity from NPS.
Public Provident Fund (PPF)15 years (extendable by 5 years)Fixed, compounded annually; tax-free maturityEligible under Section 80C & Section 10(10D)Individuals looking for long-term, tax-efficient, risk-free savings.
Senior Citizen Savings Scheme (SCSS)5 years (extendable by 3 years)High fixed interest, payable quarterlyEligible under Section 80C (interest taxable)Retirees seeking safe investment + a regular income.
Kisan Vikas Patra (KVP)Matures in 115 months (9 years 7 months)Amount doubles at maturity, fixed by the governmentNo tax benefit under Section 80CRural / small investors who want assured returns without market risk.

Why Are Saving Schemes Important?

Saving schemes play a crucial role in helping individuals and families build financial security. 

Long-Term Goals

 
  • Saving schemes allow individuals to accumulate funds (in a structured manner) for important life milestones, such as buying a home, paying for children’s higher education, marriage, and more. By investing regularly in secure saving schemes, people can steadily grow their wealth and meet these goals without financial strain.
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Planning for Retirement

  • Pension-focused saving schemes such as the National Pension Scheme (NPS) or other monthly income schemes help individuals create a retirement corpus. A strong retirement plan ensures a steady flow of income even after leaving active employment. It reduces dependence on family members or unpredictable sources of money.
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Financial Safety

 
  • A savings plan can act as a financial cushion during emergencies like medical needs, job loss, or unforeseen expenses. Many schemes are designed to provide both safety and liquidity. It can ensure the invested money is accessible when most needed.
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Better Handle on Personal Finances

 
  • Regular contributions to a savings plan can instil discipline in money management. Instead of spending on unnecessary items, individuals learn the importance of systematic savings. This can improve overall financial health and long-term stability.
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Tax Savings**

 
  • Several saving schemes provide tax benefits under Section 80C. This can help individuals reduce their taxable income while simultaneously growing their wealth. For example, investments in PPF, ELSS, and NSC qualify for tax deductions.
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Dual Benefits

 
  • Many saving schemes come with an additional feature, such as insurance protection. For instance, an endowment plan is a financial product which provides a savings element and life insurance protection under one belt. Hence, you can buy a life insurance policy and enjoy the benefits of a savings plan as well. 
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Suitability Across Goals and Investors

 
  • Saving schemes cater to a wide range of investors and goals. From conservative individuals preferring guaranteed returns to those seeking long-term investments with market exposure, there is a suitable savings scheme option for everyone. 
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Easy Access

 
  • With schemes offered through post offices, banks, and government-backed institutions, access is convenient even in rural areas. Many saving schemes can now be managed online as well, making them easier to track and contribute to.
  • Saving schemes are vital for achieving financial independence, serving as a pension plan for the future, and ensuring security against life’s uncertainties.
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Saving Schemes vs Investment Plans vs Saving Plans

While all three - saving schemes, investment plans, and saving plans - are ways to save money for the future in a structured manner, each differs from the other in certain ways.

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Saving Schemes

These are typically government-backed or bank-offered schemes that focus on safety and assured returns. Options like PPF, NSC, and RDs fall under this category. Saving schemes are designed for low-risk investors who prefer capital protection along with steady returns.

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Investment Plans

Unlike saving schemes, investment plans aim to grow wealth over time by investing in market-linked instruments. These include mutual funds, stocks, or ULIPs. They come with a higher risk but also offer the possibility of higher returns.

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Saving Plans

These are usually offered by insurance companies and combine protection with disciplined savings. They include traditional life insurance options that offer the features of a saving plan, such as guaranteed returns and bonuses, along with insurance coverage. The plans are ideal for individuals who want financial security for their family while also growing savings.

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Saving SchemesInvestment PlansSaving Plans
Risk LevelLow; capital protection guaranteedMedium to High – depends on market performanceLow to Medium – depends on the product
ReturnsFixed or government-declaredMarket-linked (potential for higher returns)Guaranteed or bonus-based with insurance cover
Lock-in PeriodVaries (PPF – 15 yrs, NSC – 5 yrs, RD – flexible)Varies (mutual funds – flexible, ULIPs – 5 yrs)Usually long-term, aligned with policy tenure
Tax Benefits**Eligible under Section 80CEligible under Section 80C, some under Section 10(10D)Eligible under Section 80C & 10(10D)
Best Suited ForRisk-averse investors looking for safe, steady growthInvestors seeking long-term wealth creationIndividuals wanting disciplined savings with protection features of insurance
ExamplesPPF, NSC, RDs, SCSSMutual Funds, Stocks, BondsEndowment plans, money back plans, Unit-linked products

How to Choose the Best Savings Scheme for Investment?

Selecting the best saving scheme for your needs is an important step in the investment process.

  • Know Your Purpose

    Decide if your goal is tax savings, retirement security, children’s education, or creating a steady income. Your purpose will guide you toward the right product.

  • Match Goals to Schemes

    Next, determine what your goals are, and choose the best saving scheme that can meet those goals.

    1. Low risk: PPF, NSC, RD

    2. High growth: ELSS, ULIP

    3. Regular income: SCSS, Post Office Monthly Income Scheme

  • Check Growth Potential

    Check whether you prefer stability from fixed-income saving schemes or higher wealth creation from market-linked plans like ELSS. You can also balance both for steady growth and safety.

  • Assess Risk Appetite

    Conservative investors may choose government-backed schemes. Those comfortable with risk can consider equity-oriented savings plans.

  • Check Liquidity Needs

    Some saving schemes (PPF, NSC) have long lock-ins, while others (RD, NPS Tier II) allow easier withdrawals. Select on the basis of your financial flexibility.

  • Tax Efficiency**

    Many schemes provide tax benefits under Section 80C. Certain insurance-linked savings plans (such as an endowment plan) also qualify under Section 10(10D).

  • Ease of Access

    Saving schemes that allow digital access can make contributions and tracking simpler. It can make it easier to manage the saving plan in the long run.

    By applying this checklist, investors can select the best saving scheme that aligns with their financial goals, risk tolerance, and long-term objectives.

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FAQs

View All FAQ

What is a small saving scheme?

Answer

A small savings scheme refers to simple savings options that require smaller contributions from individuals but offer attractive returns and safety. Examples include Post Office Savings Accounts, Recurring Deposits, and Kisan Vikas Patra. 

These saving schemes are designed to encourage saving habits among people across all income levels, especially in rural and semi-urban areas. They ensure that even modest investments grow at a steady pace, even as the investor’s money stays safe.

What is a government saving scheme?

Answer

A government saving scheme is a financial product backed by the Government of India, to promote savings and provide secure returns. These schemes, such as PPF, NSC, or Sukanya Samriddhi Yojana, offer safety, fixed interest, and in many cases, tax benefits. Individuals who prefer low-risk investments with guaranteed outcomes and the assurance of the government should go for these schemes.

Which is the best saving scheme for me?

Answer

The best saving scheme depends on your financial goals, risk appetite, and investment horizon. For individuals looking for guaranteed returns and security, PPF or NSC are reliable options. Those seeking higher growth can explore ELSS or ULIPs. Additionally, combining saving schemes with life insurance ensures not just wealth creation but also protection for your family. Such individuals can opt for endowment plans. It is important to align your choice with long-term financial needs like retirement, education, or emergency security.

Which saving scheme gives higher returns?

Answer

Schemes that are linked to the market, such as Equity Linked Savings Scheme (ELSS) or Unit Linked Insurance Plans (ULIPs), generally offer higher returns compared to fixed-income saving schemes like PPF or NSC. While these returns are not guaranteed, they have the potential to beat inflation and build long-term wealth. However, they come with the risks associated with market fluctuations. 

On the other hand, government-backed fixed-return schemes provide stability, but with lower returns. Choosing between them depends on what is important to you - growth or security. 

Which scheme has the highest interest?

Answer

Among fixed-return products, saving schemes like the Senior Citizen Savings Scheme (SCSS) and Sukanya Samriddhi Yojana often offer the highest government-declared interest rates. The interest rates for FDs can be high as well, depending on the provider. 

However, market-linked options such as ELSS or ULIPs can potentially yield much higher returns over the long run, depending on performance. 

To choose the best saving scheme from the various options, it is important to look beyond the returns. Investors should also consider their premium payment terms (for life insurance-oriented plans), liquidity needs, and risk appetite to ensure the chosen savings scheme fits their financial goals.

** Tax exemptions are as per applicable tax laws from time to time.

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