Saving a part of your income is a must if you’re to build a sound financial plan for the future. A significant fund as savings will not only help you out in times of emergency but will also ensure that you can fulfil your long-term goals, like building a retirement fund, buying a house, etc.
But saving no longer means just putting aside a part of your income and locking it away somewhere safe. The government, as well as private entities, have introduced hundreds of small savings schemes over the past few years. With the help of such a saving investment plan, you can invest money regularly and watch it grow over a period of time. Interest rates of these small savings plans are also quite decent, and they’re updated periodically.
Let us look at the great benefits of small savings plans.
Benefits of Small Savings Plans
Excellent Returns Over A Long Term
You might see the return rate of small savings schemes and think they’re not high enough to be considered great returns. But do note that such schemes almost come with little or no risk at all, and the returns reflect that.
These plans are meant for long-term investment. Once you remain invested for 15 years or more, you’ll be surprised to see your accumulated corpus. The power of compounding will ensure that your money grows exponentially.
Many of these plans have a lock-in period of 5 years or more, and that is actually an advantage because the inability to withdraw that amount means its growth will continue undisturbed.
Fulfil Your Goals
Small savings plans may look suitable for small investments, but do not be fooled by the name. They have the power to accumulate wealth over time for you. Such that you can fulfil your life goals using the maturity from these plans. Whether it is building a retirement fund, buying a house, generating an inheritance fund for your family, paying for your children’s marriage and education, or anything else, small savings schemes are capable of doing that for you.
A Safety Net
Savings of any form can be a safety net whenever you’re in financial trouble. Of course, you must have an emergency fund ready for contingencies, and it is advisable to not use your savings for emergencies. But even then, knowing that you still have savings in case of further requirements can be relieving.
Tax Benefits
One of the best benefits of small savings schemes are the tax benefits associated with them. Small savings plans are eligible for a tax deduction of up to ₹1.5 lakh under Section 80C of the Income Tax Act. Some of these schemes may also be exempt from tax entirely, with maturity amount and interest both having tax exemptions.
Read more to know about Daily Savings Plans for a Better Tomorrow
Some Small Savings Schemes in India
National Savings Certificate
Interest rate: 6.8%
Lock-in period: 10 years
Minimum Investment: ₹100
Public Provident Fund
Interest rate: 7.1%
Lock-in period: 15 years, Partial withdrawals allowed from seventh year.
Minimum Investment: ₹500
ELSS Scheme
Returns: Depends on funds
Lock-in period: 3 years
Minimum Investment: ₹500
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