The only way you can beat bank interest rates and earn better interest is by investing in small saving schemes or company fixed deposits. However, company fixed deposits are not safe, while small saving schemes are backed by the government.
Interestingly, many small savings schemes, also give you tax benefits under Sec 80C and in some cases interest earned is tax free. In the case of bank, all interest earned is fully taxable.
Here are 6 small saving schemes that you should own.
Public Provident Fund (PPF)
PPF is way better than bank deposits by a margin. While interest on bank deposits are taxed, PPF interest is tax free. On the other hand, banks give you an interest rate of 7.5 per cent, while the PPF gives you an interest rate of 8.1 per cent.
PPF qualifies for a tax rebate under Sec 80c of the Income Tax. All bank deposits do not.
This is an excellent bet, if you want to build a corpus for your retirement.
Sukanya Samriddhi Accounts
Nobody is giving you an interest rate of 8.6 per cent at the moment, except company fixed deposits. So, if you have a girl child, then you must think of investing in this scheme.
It is tax free income, and qualifies for tax rebate under Sec 80C of the Income Tax Act. There is not a single reason not to invest, if you have a girl child.
One thing we need to mention is that you can invest in the name of upto three girl children.
National Savings Certificate
Again, like most post office schemes, this scheme beats bank interest rates by a quite a bit. In fact, at 8.1 per cent interest rate, we can get at least 0.5 per cent, higher than most government banks.
Apart from this, you get tax benefits under Sec 80C of the income tax act.
The only worry is the lock-in period of 5 years. However, if you do need the money, it is the best bet.
Senior Citizens Saving Scheme
An interest rate of 8.6 per cent is pretty decent under the Senior Citizens Saving Scheme. This scheme also qualifies for tax rebate under Sec 80C of the Income Tax Act.
If you are a senior citizen, above the age of 60, you can place money in this scheme. There is a TDS that is applicable on the interest above Rs 10,000.
Monthly Income Plans
Again, the Monthly Income Plans of Post office is much better than bank interest rates. You may end-up getting only 7 to 7.3 per cent on monthly bank deposits. You get a cool 7.8 per cent under MIPs.
Kissan Vikas Patra
We do not like the Kissan Vikas Patra (KVP), because it neither offers you interest free income, nor tax benefits under Sec 80C. In fact, it should be the last of your post office investment options. Money placed under KVP doubles in 110 months (9 years & 2 months).