There are several savings plans available in the market, from low-risk to high-risk involvement, depending upon the requirement and financial condition of the individual. Here are some savings and income plans available for Indians:
ULIPs (Unit Linked Insurance Plans)
A ULIP is a type of life insurance product that combines the safety of insurance protection with wealth creation opportunities. A part of the investment goes towards providing life cover, and the residual portion is invested in a fund that invests in stocks or bonds. ULIPs are the easiest and best investment plans in India for a person to enter the stock market with the added advantage of life cover. As these products provide tax benefits and market-linked returns, they are one of the investment options for the long term.
ULIPs offer many investment funds to choose from, which allow the flexibility to shift between equity and debt based on the market conditions and one’s risk profile. ULIPs are structured in such a way that the protection and the savings elements are easily distinguishable and hence, can be managed according to one’s specific needs. This way, ULIPs offer unprecedented flexibility and transparency.
Money-back life insurance policies are popular as they offer the dual benefit of insurance and redemption of money at regular intervals. These plans are meant for individuals who require money at certain intervals in their lifetime to meet fixed short-term and long-term financial requirements such as buying a car or house.
A portion of the sum assured is paid out at regular intervals in a money-back policy. If the policyholder survives the term, he gets the balance sum assured in the best saving plan. In case of death over the policy term, the beneficiary gets the full sum assured irrespective of the payouts already made. The bonus is also calculated on the full sum assured and not the balance money left. Because of these two reasons, premiums on money-back plans are higher than the endowment plans.
Endowment plans are regular saving plans which help build a corpus and give guaranteed maturity benefits along with bonuses. The product is the best saving plan in India as they give returns that are equivalent to a fixed yield or deposit. In addition, they also combine insurance risk cover with add-on riders to primarily build a safety cushion in case something goes wrong. They are clearly among the best investment options available to people looking for insurance cover as well as investment and saving plans in India.
An endowment policy covers risk for a specified period at the end of which the insured receives the sum assured plus all accrued bonuses. They are considered highly expensive (considering the annual premium payment) as compared to a term or whole life plan. If the policyholder dies during the policy term, then a payout of the sum insured along with the bonus is issued immediately to the beneficiary.
National Savings Certificate (NSC)
The National Savings Certificate is a government-initiated savings scheme, which is a fixed income investment plan that can be opened with any post office. Along with the benefit of wealth accumulation, the investments made towards NSC up to the maximum limit of Rs.1.5 lakhs are eligible for tax exemption U/S 80 C of Income Tax Act.
National Savings Certificate is best suited for mid-income investors who have a low-risk appetite. NSC is similar to other fixed-income investment options such as Public Provident Fund (PPF) and Post-Office Fixed Deposits.
National Savings Scheme (NSS)
National Savings Scheme is a government-backed savings scheme wherein a total sum assured amount is paid after the completion of its maturity tenure. Moreover, the applicable interest rate is compounded annually. The interest rates offered by NSS are updated and revised on a quarterly basis, and it also provides the flexibility to increase the scheme’s tenure as per the investment objectives. Along with the benefit of creating a financial cushion for the future, the investors can also avail the advantage of tax exemption under Section 80C of the Income Tax Act.
Public Provident Fund (PPF)
Public Provident Fund is a long-term savings scheme introduced by the National Saving Organization, which offers a term period of 15 years. As one of the safest options of investment, PPF offers a fixed interest rate of 7.9%. The interest earned on PPF is tax exempted, and the contribution made towards the PPF account up to the maximum limit of Rs.1.5 lakhs is tax exempted under section 80C of the IT Act. PPF also offers flexibility as it can move from one bank and post office to others. One can make a minimum contribution of Rs.500 and can invest up to a maximum of Rs.1.5 lakhs.
Post Office Savings Scheme
As one of the most reliable and secured saving plans, it is best suited for investors who have a low-risk appetite. Along with the benefit of higher return, the post-office savings scheme is easy to access and hassle-free. One can also open a POSS account in the name of the minor. With an interest rate of 4%, this saving plan is best suited for individuals who do not have a high-risk appetite.
Senior Citizen Savings Scheme (SCSS)
A senior citizen savings scheme is specifically introduced, keeping in mind the needs of the senior citizens in India. This saving scheme can be availed by an individual at least 60 years of age. However, individuals whose age ranges from 55 years-60 years and those who have opted for voluntary retirement schemes can also open senior citizen savings schemes. Along with the benefit of financial security after retirement, the SCSS also offers the benefit of tax exemption under section 80C of the Income Tax Act.
Sukanya Samriddhi Yojana (SSY)
Sukanya Samriddhi Yojana is a savings scheme introduced by the Indian Ministry of Finance. This scheme was specifically introduced with an objective to secure the financial future of the girl child so that she can achieve the future milestones of life.
Sukanya Samriddhi Yojana offers an annual interest rate of 8.1% on the principal amount. One can open an SSY scheme at any post office or authorized bank in India. One can make a minimum investment of Rs.1000 and can invest up to a maximum of Rs.1,50,000 in a financial year.
Atal Pension Yojana
This is a government-initiated savings scheme that is specifically designed to provide benefits to the weaker section of society. Individuals who are working in unorganized sectors and those who need financial support from the government-sponsored welfare program can invest in Ata Pension Yojana. Individuals between the age group of 18 years- 40 years are eligible to apply for this savings plan. The premium rate of this saving plan is very low, and the pension is provided to the individual post-retirement years.
Employee Provident Fund (EPF)
Introduced by the Employee Provident Fund Organization (EPFO), Employee Provident Fund is a savings scheme wherein the salaried individuals are obligated to make a financial contribution to the Provident Fund (PF) account. With the help of EPF, individuals can plan to make smart retirement planning and ensure they have a financially secure future after retirement. In EPF, the employer and the employee make an equal contribution toward the scheme. 12% of the employees’ basic salary is contributed to the scheme, and a similar amount is contributed by the employers towards the EPF account. The annual interest rate applicable to the contribution made towards the EPF account is between 8%-12%.
National Pension System (NPS)
National Pension System is a savings scheme that focuses on providing a secure source of monthly income after retirement. In order to avail of the benefits offered by the NPS scheme, the employees have to make a small contribution as a premium payment towards the scheme while being employed. The lump-sum fund accumulated throughout the entire tenure of the scheme is broken down as annuities and is paid to the applicant every month post-retirement.