When you wish to invest your hard earned money, what do you exactly for in the available investment alternatives? I conducted an informal survey and the result was exactly matching my understanding about human nature. People are very smart these days. They want both their hands filled with money. But when it comes to riskiness related to the investment, most of the people especially low income group and middle income group would like to shed their hands from it. In nutshell, what people exactly look for is safety of their money and at the same time they need a high rate of return from the investment. There are few government schemes that allow people to achieve their twin objectives. These are the schemes which offer a better rate of return when compared to bank fixed deposits and are still safe enough to put your money in.
- Public Provident Fund (PPF) – The subscribers to PPF can invest a minimum of Rs. 500 to a maximum of Rs. 1,50,000 in one financial year. The maturity period of PPF is 15 years and is extendable in a block of 5 years. Rate of interest in PPF is 8.70% per annum and is compounded annually. PPF is best suitable for those who are interested in pension during their old age and who can wait for 15 years to reap the reward.
- Kisan Vikas Patra – If you invest in this scheme, then the money you invest will double in 8 years 4 months, i.e. 100 months. This means you will get an annual rate of return of 8.67%. All you need to do is invest in the denominations of Rs. 1,000, Rs. 5,000, Rs. 10,000 and Rs. 50,000. Since it is a government savings scheme, the risk factor is absolutely missing. People might argue that the rate of interest on bank term deposits has gone up to 9%. But check the statistics, you will find more fluctuations in the bank’s rate of interest than you will find in the rate of return of Kisan Vikas Patra. The lock period is 2 years and 6 months. After this period, one can get their certificates encashed. After this period, investors can redeem in interval of every 6 months.
- National Savings Certificate (NSC) – NSC VIII Issue is for 5 years and it offers an interest rate of 8.5% per annum whereas NSC IX Issue is for 10 years and if offers an interest rate of 8.8% per annum. The minimum investment in NSC is Rs. 100 and there is no cap for the maximum amount of investment. There is no tax deducted at source. Investments of maximum of Rs. 1.5 lakhs in one financial year qualifies for income tax rebate. One can also get loans by keeping NSC as collateral security. Therefore, NSC offers multiple benefits, viz. good rate of return, security of investment and income tax benefits.
- Sukanya Samriddhi Scheme – This scheme is best suited for those who have a girl child. Parents can open one account per girl child for a maximum of two girl children. The account can be opened for a girl child below the age of 10 years and one year as grace period is allowed. An account can be opened with a minimum deposit of Rs. 1,000 in one financial year and the maximum limit is Rs. 1,50,000. The rate of interest offered by this scheme is 9.2%.
- Post Office Term Deposit – The minimum investment in post office term deposit is Rs. 200 and there is no maximum limit. However, the deposit has to be in multiples of Rs. 200 only. Interest on post office term deposits are compounded quarterly but paid annually. The deposits can be made for 1, 2, 3 and 5 years. The rate of interest on these deposits varies as per the number of years for which the deposit is made. The rates are 8.2%, 8.3%, 8.4% and 8.5% for 1, 2, 3 and 5 years respectively.
- Senior Citizen Saving Scheme – One can invest minimum Rs. 1,000 and maximum Rs. 15 lakhs. All the investments are made in the multiple of Rs. 1,000. The maturity period for the deposits under this scheme is 5 years and is further extendable to 3 years. The rate of interest in this scheme is 9.2% per annum compounded quarterly. The minimum age in which one can invest in this scheme is 55 years. If the interest amount exceeds Rs. 10,000 in one financial year from investment in this scheme then the tax will be deducted at source. Investment in this scheme can be withdrawn prematurely after one year of deposit at a deduction of 1.5% and if withdrawn after 2 years then the deduction will be made at a rate of 1%.
It is important to note that certain from these schemes not only offers better returns but also offers tax benefits also.
