Success Mantra “Don’t depend on a single plan for your success”.
Every person wants to secure his future by investing his small earnings or savings. Investment of small amount regularly does not affect your monthly budget. However, these regular small savings can make us wealthy in long run. Major question is where to invest small savings in different types of schemes to get maximum returns. Here I am explaining various schemes which can be used smartly to get good returns.
The first thing to keep in mind is:
Start early with a small amount of investment and continue for a long term.
Investments basically depend on risk-bearing capacity of a person.
High risk: High profit and Low risk: Low profit
You should first identify your risk capacity and then invest your savings in different investment options available in the market.
1. SUKANYA SAMRIDHI YOJNA ACCOUNT (SSYA)-
Sukanya Samriddhi Yojana is a good option if you have a daughter below the age of 10 years. The Account can be opened in any post offices or banks with a minimum amount of Rs. 250 (earlier it was Rs. 1,000/-) per month to be deposited for a period of 14 years. No deposit after that is required till the date of maturity. The account can only be opened in the name of girl child and the girl child should be Indian resident. This scheme covers maximum two daughters and the total amount deposited for both girls child under this scheme could not exceed Rs. 1,50,000 per annum. Premature withdrawal facility is also allowed after the girl child turns 18. The account can be closed only after the child turns 21. This scheme is covered under triple EEE (Exempt, Exempt, Exempt). category, means that the amount which you have deposited is covered under section 80C, the interest earned thereon is tax-free and even the maturity amount is also tax-free. Now the interest rate has been increased to 8.50% w.e.f 01.10.2018, earlier it was 8.10% from 01.04.18 to 30.09.2018.
2. PUBLIC PROVIDENT FUND (PPF) -
Public Provident Fund is one of the best, trustworthy and popular investment schemes. PPF account can be opened in any bank or post office in India. It can be opened in the name of any member of the family. The applicant should be an Indian resident. The complete amount can be withdrawn after completion of lock-in period of 15 years. The same account can be extended for a further 5 years. You can make a partial withdrawal after completion of 6 years under any specific reasons like medical treatment, daughter’s marriage etc. After completion of 3 years, you can also avail loan facility. The minimum amount to be deposited annually is Rs. 500 and maximum can be up to Rs.1,50,000. There is a limitation of maximum 12 transactions in a financial year. This scheme also covered under triple EEE (Exempt, Exempt, Exempt) category, means that the amount which you have deposited is covered under section 80C, the interest earned thereon is tax-free and even the maturity amount is also tax-free. Now the interest rate has been increased to 8.00% w.e.f 01.10.2018, earlier it was 7.60% from 01.04.18 to 30.09.2018.
3. NATIONAL SAVINGS CERTIFICATES-VIII ISSUE (NSC) -
National Savings Certificate is fixed guaranteed income investment scheme. This can be purchased from any post office in India. The applicant can be Indian resident only. The Maturity period is of 5 years. No premature payment can be received exceptionally on the death of investor. Even you can invest the minimum amount of Rs. 100 and there is no maximum limit to invest in NSC. The maximum amount for deduction under section 80C is allowable up to Rs. 1,50,000. The interest earned thereon is fully taxable. The interest accrued on NSCs every year is also eligible within tax deduction limit of Rs. 1,50,.000. Now the interest rate has been increased to 8.00% w.e.f 01.10.2018, earlier it was 7.60% from 01.04.18 to 30.09.2018.
4. MUTUAL FUNDS (MF) -
Mutual Funds are a financial instrument which pools the money of different people and invest them in stocks, bonds, shares etc. There are three types of Mutual funds and mutual fund returns are market linked:
|1. Equity:||These are high risk investments and earn higher returns.|
|2. Debt:||These are low risk investments and earn low returns compared to Equity.|
|3. Balanced:||These bear moderate risk and give moderate returns as its some portion is invested in Equity and some portion in Debt.|
Mutual funds are managed by professional experts. You have to choose the right mutual funds. The best way to invest in mutual fund is to start SIP (Systematic Investment Plan) on monthly basis. SIP should be start as early you can and go for a long period as you desire. You can start investing in mutual fund schemes with a minimum amount of Rs. 500 or more. If you want to earn higher returns and having risk capacity then go to invest in Equity otherwise you have to choose invest in debt funds.
5. RECURRING DEPOSITS (RD) -
Recurring Deposit Schemes aim to develop regular habit of saving among peoples. This is a special kind of medium term deposit which is offered by banks, post offices in India. Under this scheme you can invest regularly on monthly basis a fixed amount for a fixed period. Minimum period is 6 months and maximum is 10 years. Minimum amount that can be invested varies from bank to bank. Money deposited under this scheme should be deposited before the due date otherwise fine will be charged. The interest rate is equivalent to fixed deposits. You can also avail loan facilities against these deposits. The Recurring Deposit can be funded by standing instructions given by the customer to bank/post office to withdraw certain amount every month from your saving/current account. Average rate of interest varies between 6% to 8% subject to the conditions. It can vary from bank to bank and tenure of deposits. Premature withdrawal facility can also be availed under these deposits. Recurring deposits are best saving opportunity to create a big amount after an interval of time. This returned big amount can be invested in FDs and MIS Schemes to earn more interest thereon.
6. KISAN VIKAS PATRA (KVP) -
Kisan Vikas Patra is also fixed guaranteed income investment scheme. This option can be availed by:
- An individual Indian Resident
- or Two resident individual jointly
- or Trusts
The KVPs can be purchased from any post office in India. These can be transferred from one person to another. Now, the maturity period is 112 months w.e.f. 01.10.2018, earlier it was 118 months from 01.04.2018 to 30.09.2018. Premature withdrawal is allowed only after completion of 30 months. You can invest the minimum amount of Rs. 1000 and there is no maximum limit to invest in KVP. The interest earned thereon is fully taxable. The investment in KVP is not eligible for tax deduction limit. Now the interest rate has been increased to 7.70% w.e.f 01.10.2018, earlier it was 7.30% from 01.04.18 to 30.09.2018. which is less than National Saving Certificates.
7. MONTHLY INCOME SCHEME (MIS) -
Monthly Income Scheme is available in all post offices in India. In this scheme a fixed amount multiples of Rs. 1,500 can be invested. Maximum investment limit is Rs. 4, 50,000/- in single account and Rs. 9, 00,000/- in joint account. An individual can invest individual or jointly maximum up to Rs. 4,50,000. Interest is received on monthly basis. Icing on this cake is that monthly interest income can be further invested in Recurring Deposits to give you double profit. Principal amount is payable on maturity i.e. after completion of 5 years. Prematurely en-cashed can be done after one year or before 3 years at a discount of 2% of deposit amount and after 3 years at a discount of 1% of deposit amount. Interest received under this scheme is fully taxable. Investment under this scheme is not eligible for tax deduction limit. Now the interest rate has been increased to 7.70% w.e.f 01.10.2018, earlier it was 7.30% from 01.04.18 to 30.09.2018.
8. FIXED DEPOSIT RECEIPTS(FDR) -
Fixed Deposits are highly yielding Term deposit and offered by all banks in India. FDRs are one of the most common savings used by many individuals. The main purpose of fixed deposit account is to enable the individuals to earn a higher rate of interest on their surplus funds. These are risk free and offer guaranteed returns. Under this scheme interest rate is higher than offered on normal saving accounts. Interest rate varies from bank to bank and period to period. Interest rate for senior citizens is higher than non senior citizens. Average rate of Interest received on FDRs vary between 5% to 9% subject to the conditions. Loan facilities can be taken against FDRs. Prematurely en-cashed can be done any time but the applicable rate of interest for the term the deposit has run. FDRs can be auto renewed after completion of tenure. The tenure can be from 15 days to 10 years. Tax saver fixed deposits (FD) is a type of fixed deposit, by investing in which, you can get tax deduction under section 80C of Income Tax up to maximum of Rs. 1, 50,000. Lock-in period of tax saver fixed deposits is 5 years. Interest received on FDRs is fully taxable. On maturity the funds can be used to purchase of assets.
Brief chart for small savings are as under: -
|Schemes||Interest Rate||Compounded frequency||Minimum Deposit||Maximum Deposit||Tenure|
|Sukanya Samriddhi Yojna||8.50%||Yearly||1,000||1,50,000||21Years|
|Public Provident Fund||8.00%||Yearly||500||1,50,000||15 Years|
|National Saving Certificate- VIII Issue||8.00%||Yearly||100||No Limit||5 Years|
|Kisan Vikas Patra||7.70%||Yearly||1,000||No Limit||112 Months|
|Monthly Income Scheme||7.70%||Monthly and Paid||1,500||4,50,000 Single Account or 9,00,000 Joint Account||5 Years|
|Recurring Deposit||6% to 8%||Quarterly||10||No Limit||1 Year to 5 Years|
|Fixed Deposit Receipts||5% to 9%||Quarterly||200||No Limit||15 Days to 10 Years|
The above interest rates are effective w.e.f. 01.10.2018
We can combine various schemes smartly to get more returns from the same amount of money.
* MIS interest can be further invested in RD to yield more returns.
* Similarly amount received after maturity of a RD can be further invested in the purchase of MIS, FDR, or NSC.
But don’t forget the success mantra i.e. Don’t’ depend on a single plan for your success.
Tags :Income Tax