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What Is Small Savings?

Small savings schemes are designed to provide safe and attractive investment options to the public. These schemes are primarily meant for small urban and rural investors and institutions are not eligible to invest in major small savings schemes. Non-Resident Indians (NRIs) are also not eligible to invest in small savings schemes including Public Provident Fund (PPF) and Deposit Schemes for Retiring Employees.

Types of Small Saving Schemes

  • Public Provident Fund Agency Scheme
  • National Savings Certificate
  • Post Office savings

Public Provident Fund (PPF)

Investors who desire for long-term investment with steady returns opt for investment in a PPF. The fund provides 8-9% per annum. The scheme is distributed over 15 years and an investor is required to pay annual contributions every year for ensuring the commitment towards the scheme.

The minimum amount to be contributed is Rs. 500 per year. Withdrawals are permitted only after 6 years from the end of the financial year in which the first deposit was made. The amount available on such withdrawal shall be equivalent to the amount reflected as the balance in the PPF account over the years in which contributions were made.

The amount you invest is eligible for tax deduction under Sec. 80C. Therefore, investing in PPF allows you to avail a tax benefit.

National Savings Certificate (NSC)

National savings certificate (NSC) provides 8% rate of interest (compounded half yearly). The tenure for investment is 6 years and the investment is locked for such time, which eliminates pre-mature encashment. The certificates can also be used in case of pledge as a security against a loan and for encashment of certificates through banks. Deposits are exempted from Wealth tax too.

Investments in NSC gets the benefit under the Sec. 80C.

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