Introduction to small savings schemes

There are various investment options available out there, of which, individuals should choose an appropriate one as per their profile and portfolio. Small savings schemes are designed to provide safe and attractive investment options with a fixed rate of returns to people, who are conservative & risk-averse. These schemes are operated through post offices and public sector banks across the country. These are investment vehicles for people, who prefer to invest small amounts over a period of time and receive tax-efficient benefits.  

What are its benefits?  

• Government-sponsored: Since all these schemes are controlled by the government-run post offices and public sector banks, the safety of investments, timely payments and repayment of principal on maturity is safe.  

• Ease for small investors: Some of these schemes have a lower minimum investment amount, which makes it easy for anyone to invest in the schemes.  

• Tax benefits: For people with high taxable incomes, the tax benefits offered by these schemes are very attractive and represent a tool for asset allocation. Various tax benefits are available u/s 80C. 

• Liquidity: Access to your investments is very easy. Most of the schemes provide for premature withdrawals and a few of them also offer loans based on the investment made. These schemes can be shifted from one post office to another in the entire country and hence, they are suitable for persons having transferrable jobs.  

The attraction of small savings schemes lies in many factors: Returns linked with yields of government securities. The returns are updated periodically. You can use the savings that you make through these schemes for retirement, higher education, children’s education, marriage, at the time of job loss, to reduce debts, and more. Therefore, these are most suitable for investors, who are conservative as well as for those, who want tax-efficient benefits.  

The following table depicts the current rate of the small savings scheme: