Top Saving Schemes with Higher Returns in India

Most of the investors want to get maximum returns from their investments that too as fast as possible and without the risk of losing the principal amount. For this reason, a lot of them are always on a lookout of best investment plans that can help them double their money within a few months or years with a little or no risk involved.

But most of the investment schemes that offer higher returns usually come with a certain level of risk. The risk involved and the returns offered are directly related, so the higher the risk, the higher the returns and vice versa. Therefore, it is important to evaluate your own risk profile with the risks associated before making the investment.

Some investment schemes involve high risk appetite but can offer inflation beating returns in the long term in comparison to the other asset classes. There are other investment options that have lower-risk quotient because they are low-return schemes.

Basically, your investment schemes fall under two categories- financial and non-financial assets. Financial assets can be divided into fixed income products such as Bank Fixed Deposits, Public Provident Funds, and market-linked products such as Mutual Funds and Stocks. Then there are non-financial assets in which most Indians invest- this includes Real Estate and Gold.

1. Put Your Money in Fixed Deposits (FDs)

Fixed Deposits are also known as term deposits. It is one of the most popular ways to save money in India. It is a safe investment scheme, offers good returns, and is easy to open. In an FD, you invest a lump sum in your bank for a specific duration at an agreed interest rate. You receive the invested amount at the end of the tenure with the compound interest.

Basically, you can put a portion of money that is lying idle in your savings account in to a fixed deposit account. Because fd interest rates are higher than what your bank savings account has to offer. Even a short-term fixed deposit of a few months can help you get better returns if you have left your money in your Savings Account.

Just like a normal FD Account, you can also park your money in tax saving FDs that have a lock-in period of only five years. You can easily withdraw the amount after the maturity date or it will automatically get credited into your bank savings account.

FDs are recommended are for investors with low-risk appetite as there is no tax deduction on the interest earned. The interest rate may vary on the tenure of your interest and the bank 6.5% fixed deposit interest rates every year.

FD Interest rates are fixed when you open the deposit depending on the term that you have opted for and the amount deposited. For instance, HDFC FD rates for a one year fixed deposit of less than Rs. 2 Crore is 6.30 % and for a 5-year investment between Rs. 2 and 5 Crore is 6.10%. This rate may tend to vary, so you can go to the bank website to check the current FD interest rates. Even if the interest rates change after you open an FD, it will continue to get returns on the pre-determined interest rate unlike equities.

Salient Features of bank fixed deposits:

• FDs make an easy investment with good returns
• It offers flexibility and security
• Senior citizens get a higher rate of interest on their deposits. If it 6% for general investors, it will be 6.5 for an investor older than 60 years.
• The convenience of opening a fixed deposit through Net Banking
• It promotes the habit of saving
• No risk involved from market fluctuations

2. Public Provident Fund (PPF)

There is a lot of flexibility given to customers on opening a PPF account. It can be opened from your bank account or post office. A lot of private banks have made it convenient for their customers, as they can now open a PPF account online and manage their investments easily. The PPF provision is for 15 years, which can be increased in the blocks of five years.

This scheme was introduced by the National Savings Institute, under the Finance Ministry of India, in 1968. It is an effective savings instrument, specifically for tax savings. Any Indian citizen of at least 18 years of age is eligible to open a PPF account. There is no maximum age limit. Adults can open a Public Provident Fund account for minors.

Below are some of the features of a PPF Savings Scheme:

• The interest rate is 7.9% annually (as of Oct 2019), which is then compounded every year
• The minimum annual investment can be Rs. 500 and a maximum of Rs. 1.5 lakh
• The minimum maturity period is 15 years. If required it can be extended further up to 5 years
• The money can be invested in a lump sum or in maximum of 12 deposits in a year
• There is flexibility to move it from one bank or post office to another
• PPF is not applicable on joint accounts
• It offers tax benefits* to investors under Section 80C and the interest accrued is tax-free
• From the third-year onwards, the accumulated savings can be used as a collateral against loans for banks and financial institutions

3. Employees Provident Fund (EPF)

EPF is a savings scheme that was launched under the Employees’ Provident Fund and Miscellaneous Act, 1952.  Employees Provident Fund is also a beneficial tax-saving investment scheme that helps employees save tax on their annual income.

Every organization that has more than 20 members is entitled to open an EPF Account for their employees. The EPF contribution is calculated every month on the basic pay. It helps in tax saving and there is a good amount of money that is accumulated till the end of the term.

In EPF, both the employer’s and employee contribute to the EPF Account every month. The Employee’s contribution towards EPF is 12% of the basic salary plus THE dearness allowance. And the Employer’s contribution is 8.33% towards EPS and 3.67% towards EPF.

Below are some of the features of an EPF Savings Scheme:

• The contribution is from both the employee and the employer
• The interest gets credited into the employee’s account on 1st April of every fiscal year.
• The annual rate of interest on the funds accumulated in the EPF account is decided by the government, which usually ranges from 8% to 12%.
• The online services can be availed with the help of a UAN number that is allotted by EPFO to every EPF Account Holder

4. National Pension System (NPS)

NPS is a government sponsored pension scheme that is managed by the Pension Fund Regulatory and Development Authority (PFRDA). It is a great investment scheme for those who want to invest regularly in a pension scheme during their course of employment. Post retirement you can take out a portion of the corpus and receive the rest of it in the form of monthly pension.

Moreover, it offers you tax benefits* under Section 80C and 80CCD. It is a good investment scheme for those who have a low-risk appetite and want to secure their post-retirement years.

NPS is a mix of equity, corporate bonds, liquid funds, fixed deposits, and government funds, among others. You can choose how much money would be invested in equities based on your risk appetite. And the expected interest rate on the invested amount can range around 8% to 10%.

5. Senior Citizens' Saving Scheme (SCSS)

For senior citizens, a Senior Citizens' Saving Scheme (SCSS) makes a perfect addition in their investment portfolios. Anyone above the age of 60 years can start this scheme with a bank or a post office. The tenure of this scheme is five, which can be extended further by three years upon maturity.

The maximum investment limit is Rs. 15 lakhs and can be opened in more than one account. The annual interest earned on SCSS as of July 2019 is 8.6% for the July to Sept. quarter. It is taxable and is paid every quarter.

What You Should Do?

So, some of the investments mentioned were fixed-income and some were market-linked. It is suggested that you invest after considering your long-term goals, investment horizon, risk-appetite, and time horizon.  Once you invest in any of the above-mentioned investment schemes, you would know how much savings you made and what will work best for you.