Best Money Saving Schemes Available in India

With persistently changing financial market scenario and increasing number of banks, financial institutions, online resources that give ample opportunities for savings, many people in India are unable to decide the right place to save their surpluses to meet future financial obligations. Hence, people are seeking advise on the most suitable and workable saving methods from the numerous schemes made available by the banks, so as to manage their personal finances in a better way.

Following are some best places to save money in India. These avenues provide guaranteed returns, better interest rates, financial security, tax savings under various sections of Income Tax Act and other benefits that can help you save money. Let us now discuss on the diverse savings schemes that are available in India.

Savings deposit
Savings accounts in banks are one of the best schemes to save money in India. They provide security to money as well as earn some interest over time. Savings deposits are best avenues for liquid cash, hence, it is advisable to choose savings deposits for maintaining emergency cash. These deposits do not charge any penalty on money withdrawal. There is also a flexibility of accessing the account by two or more people in case it is a joint savings account.

Recently, the Reserve Bank of India allowed banks to determine their interest rates on savings deposits. This decision by the central bank is expected to boost savings deposits growth and spread financial inclusion across the country. Moreover, the Indian government in its 2012-13 budget has allowed for tax exemption on interest up to Rs. 10,000 on savings deposits, which would facilitate maintaining of higher balances in savings deposits.

Recurring deposit (RD)
Recurring deposits allow you to invest some specific amount of money on monthly basis for a fixed rate of return. These deposits have a fixed tenure and at the time of maturity of the deposits, the principal sum and the interest earned during that period is returned to you. It also provides liquidity to access savings at any time, but, penalty is charged for premature withdrawal.

Apart from these regular RD, you can also find variable recurring deposits or variable RD. These deposits offers the option of varying monthly instalment. The minimum amount of monthly deposit varies from bank to bank. In most banks, one can invest the minimum monthly instalment of Rs.100 in RD in India. Interest rates of recurring deposits vary from bank to bank. Mostly, the rate of interest varies between 7%-10% depending on the tenure of the deposit. Tax Deduction at Source (TDS) is not applicable on recurring deposits in India.

In India, one can open recurring deposit with banks and post office. NRIs cannot open RD in post office but can create NRE account with banks and other financial institutions.

Fixed deposit (FD)
Fixed deposit or term deposit is the most common method of investing money. It is suitable for someone who has a lump sum and wants to invest in a single deposit for a specific period of time. Interest rates of these deposits depend on the tenure of the investment. Longer the tenure, greater the interest rate. Premature and partial withdrawals are available, but with a penalty, which vary from bank to bank.

Fixed deposits are offered by public sector/nationalized banks, co-operative banks, Indian private sector banks and foreign banks. Currently, there are 19 public sector banks, 15 private sector banks, 6 foreign banks and 3 cooperative banks offering fixed deposits in India.

The period of investment varies from less than 15 days to more than five years. In most banks, the minimum opening deposit is Rs.1,000 and maximum deposit is above Rs.1 crore. You can choose the period of investment along with the interest payments (monthly, quarterly, annually). The interest rate is guaranteed and does not change for the nominated term.

Moreover in India, many banks offer NRO fixed deposit accounts and NRE fixed deposit accounts where interest on NRE Fixed deposits are tax free but NRO account is taxable in India.

Post office savings
The post office savings scheme is offered by the Department of Posts in India. It is the oldest banking service institution in India. It operates on behalf of Ministry of finance and Government of India. Currently, there are more than 20 crores post office savings accounts and these are being operated in more than 1 lakh post offices across the country.

The Indian postal sector offers many post office savings schemes. The savings schemes include saving account schemes, recurring deposit schemes, time deposit schemes, Monthly Income Schemes (MIS), Public Provident Fund Schemes (PPF), National Savings Certificate (NSC) and many more. With RBI deregulating interest rates on savings deposits, the Government of India also hiked the interest rate on post office savings scheme to 4% from 3.5%.

Systematic investment plan (SIP)

Systematic investment plan is one of the popular method of investing money in India. It allows a common investor to invest in mutual funds by buying units of mutual fund scheme. It is an approach to invest money with the help of professional management. It inculcates a habit of disciplined savings where an investor can invest regularly rather than investing a large sum at a time. The minimum investment in SIP starts from Rs. 500 and there is no maximum limit. In India, tax benefit is available up to Rs. 1 lakh, if SIP is done into Equity Linked Savings Scheme (ELSS).

Thus, all the schemes help your money grow within a period of time. Depending on your goal – short or long term and your need – one time savings or regular savings, you need to select the right savings product that suits you the best.

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