We plan for expenses and investments based on our current income profiles. However, emergency expenses are unplanned, and it triggers a personal loan.
Personal loan interest rates differ as per the credit profile of individuals, and so does the personal loan eligibility criterion.
However, a few government schemes may help you with urgent needs. To enable individuals to take care of their personal needs and to inculcate the habit of savings, many schemes are introduced by the Government.
Most of the schemes are long term and allow people to enjoy the taxation benefits (in the old scheme of income tax) under Chapter VI-A of the Income Tax Act, 1961.
- Public Provident Fund (PPF):
The old-age famous investment scheme is still one of the best government schemes offered by the Government of India. Due to the long term nature of the investment, it is also considered a retirement scheme. Interest rate is a factor for risk-free nominal return, credit risk and liquidity risk. In PPF, there is no credit risk & liquidity risk.
The good part of the PPF investment scheme is that the amount invested, the interest income earned, and the amount withdrawn will never get taxed. The current interest rate is 7.1% per annum – investments up to Rs. 1,50,000 are available as deduction under section 80C of the Income Tax Act, 1961. The holding period is 15 years.
However, premature withdrawals are allowed after five years. The amount is locked in for the said period, and this is where the compounding of return comes into play. However, the interest rate is revised every quarter. The minimum deposit amount starts with Rs. 500 and one can invest up to Rs. 1.5 lakhs.
- National Savings Certificate (NSC):
NSC is introduced with the intent to teach savings amongst individuals. The intention is not to build a retirement corpus. The minimum investment amount starts with Rs. 100 with no limit on the amount of savings, and it reflects the savings intent of the Government.
However, the maximum deduction to be claimed for taxation benefits is limited up to Rs. 1.5 lakhs. The present rate of interest is 6.8% per annum with annual compounding. The interest is accrued annually, but it can be withdrawn at the time of maturity. The frequency of change in the rate of interest is annual. Kindly note that NSC is made only for residents in India.
- National Pension Scheme (NPS):
With the scheme’s name, the Government intends the public to plan for your retirement right when you are earning enough – gone are those days when people used to plan their retirement after their 40s. With the increase in per-capita income and increase in earning avenues, individuals are planning their retirement immediately after having a secured source of earnings in their 30s.
This scheme is applicable for the citizens of India, with mandatory applicability to government employees. Thus, you can observe a deduction from the monthly salary income of government employees. The age limit for investment is from 18 to 60 years.
The best thing about NPS is that it provides flexibility to allocate funds in bonds, equity and government securities. However, the amount invested up to Rs. 150,000 is available as deduction under section 80C and a further Rs. 50,000 is available as deduction under section 80 CCD(1B).
- Sukanya Samriddhi Yojana (SSY):
With the Beti Bachao, Beti Padhao Yojana of the Government of India led by Prime Minister Mr Narendra Modi, the Government also ensured that the future of the daughters of India is secured. This scheme was launched in 2015 to teach goal-based savings.
The focus of the scheme is the welfare of the minor girl child. The account has to be opened mandatorily in the name of the girl child. The entry age into this scheme is from her birth until 10 years. The maturity period is 21 years, with an interest rate of 7.6% per annum.
- The Senior Citizens Saving Scheme:
When it comes to regular income with high safety, the senior citizen savings scheme ranks first in the queue. It is applicable for individuals above the age of 60 years. The interest rate is 7.4% per annum, a little higher than the fixed deposit interest rates. The maturity period is five years with an extendible period of 3 years. The minimum deposit amount is Rs. 1000.
Further investments can be made in multiples of Rs. 1000 but not exceeding Rs. 15 lacs. It can be operated through a Joint account as well. You may choose to close the account after one year. However, premature charges of 1.5% are levied. You may choose to close the account after two years, with early charges levied at 1%.
It’s never too late to start with your investment journey with the best in class government-backed schemes.
So the best time to start investing is today.
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