A plethora of options have flooded the savings & investment scene. But the benefits of the small savings schemes & traditional investments are abundant. Some of these options may seem unattractive to the young under 30s. But if you want a safe & secure investment and stable returns, don’t overlook them.
PPF
A tax-free interest of 8.7% makes PPF a very attractive option. Tax deduction under Section 80C is available on the deposits you make. So you get a tax deduction on investment, your returns are tax free and withdrawals are also exempt from tax. It’s a clear win. A lot of banks allow online access of your PPF account and you can even make deposits through online transfers. A maximum of Rs 1,50,000 can be deposited each year. You can do a lump sum deposit or spread it over 12 transfers. Deposit whenever you have funds to spare in your savings account. A minimum of Rs 500 must be deposited each year to keep your PPF active. These funds add up to a large & significant corpus at the end of their 15-year term. This is one investment you won’t regret.
NSCs
NSCs continue to offer tax benefits, but have dropped on a young investor’s list. Deduction is allowed under section 80C on the value of certificates you purchase. The interest earned on NSCs is taxable. But since it is reinvested it can be included as part of Section 80C deductions during the term of the NSC. There is no limit on how much you can invest in NSCs. These also come with an assured return similar to PPF and have a lock-in of 5 years or 10 years. NSCs can be purchased in the form of physical certificates from your nearby post office.
Post Office Time Deposits
Post offices have deposit schemes ranging from 1 to 5 years, which offer interest rates higher than 8%. These investments are also allowed as a deduction under section 80C. Interest earned is fully taxable. There is no maximum limit for investment. It also offers auto-renewal if you do not withdraw, similar to fixed deposits in banks. These have no lock-in period too and can be withdrawn with minimal penal interest. When compared against fixed deposits, these are certainly more attractive.
A visit to your nearby post office is all you need to get yourself started. They have revamped themselves and the options are very attractive to ignore. Consider them as you plan for your taxes for the financial year 2015-16.
(The writer is CEO & co-founder at www.cleartax.in)
