‘Savings’ – the traditional Indian take on financial security for the future but the need of the hour is demands focus on the latter, more significant part of the buzz-term, best savings schemes.
India has the highest amount of household savings at about 30% of the entire world but we still face the wrath of financial crises when it comes to funding our goals or managing personal finance, such as taking care of our children’s education, buying a house, saving for retirement, etc. Why? Because of the lack of investment of that massive sum of household savings, undoubtedly!
Of a population of over a billion, only 18 million people invest in the market, according to SEBI data as reported by Business Today in 2010.
Best Savings Schemes in India 2018
With basic prudence and knowledge of the pros and cons of various investment schemes, you can not only save enough but outrun your moderate financial planning endeavors. Here we’re discussing 3 best savings schemes to help you meet your future financial needs.
Personal Provident Fund (PPF)
PPF is one of the safest and the most popular investment options in India, given the fact that it is a government-backed long-term saving scheme and is completely tax-free. Section 80C of the Income Tax Act exempts the amount invested in PPF from taxation. Moreover, the interest earned on PPF is exempted from income tax. PPF is the best savings plan when it comes to security.
A PPF account can be opened in any bank or a post office. Your money gets invested for 15 years, which you can extend for another 5 years. The lock-in period for the investment is 5 years. PPF investment earns you an interest of about 8.0% as on October 1, 2018.
Investing in the stock market has always been riskier, albeit the high returns can’t be ignored. Investing in mutual funds, rather in the stock market through mutual funds, helps you minimize the risk while tapping on the benefits of high returns at the same time. Mutual funds enable you to invest in equities and debts and balance the risk and return in accordance with your preference.
Lower risk with increased return makes Mutual Funds the best savings plan available. The best part about mutual funds is the systematic investment plan (SIP), which lets you make small regular investments. Rs. 5,000 invested in DSP Blackrock Micro Cap Fund in 2012 would give returns (CAGR) worth 31.55% over the period of 5 years until today. Not a small gain, is it?
Equity Linked Savings Scheme (ELSS)
As evident from the name, this scheme helps you invest in the equity funds for increased returns. ELSS is a tax-saving mutual fund that enables you to save up to Rs. 1.5 lakh on income tax u/s 80C of the Income Tax Act, 1961. With tax-exempted investment and high interests combined, ELSS makes to our list of top 3 best savings plans in India.
Despite the high-risk factor due to investment in equity, you can always beat inflation due to high returns on ELSS. Investment can be as low as Rs. 500 to no upper limit on the maximum. It is always advisable to choose a combination of these best savings plans and spread the risk over safer options like PPF and riskier options like ELSS. Subsequently, you also distribute the percentage of interests earned for the better.
It is always advisable to choose a combination of these best savings plans and spread the risk over safer options like PPF and riskier options like ELSS. Subsequently, you also distribute the percentage of interests earned for the better.
When it comes to investment, the choice is entirely yours. However, you can certainly explore and discuss various investment instruments with one or more financial experts. In this article, we have provided you with three best savings schemes in India. Based on your risk appetite, choose the right option for you.