Interest rates in the economy have fallen so sharply, it's difficult to believe that the best interest rate offered by State Bank of India on its deposits is 6.25 per cent. For senior citizens the best interest rate that SBI offers is 6.75 per cent. A better option than investing in bank deposits are the deposits of small saving schemes, also called post office saving schemes.
They are extremely safe, because they are backed by the government and also because their interest rates are way higher than bank deposits. Here are 5 small saving schemes of post office that you should invest in.
National Savings Certificate
If you are looking to invest for a period of 5-years than the National Saving Certificate (NSC) is a good bet. The interest rate on the same is 7.9 per cent, which is almost 1.65 per cent more than the SBI deposit.
Apart from this the NSC also offers you tax benefit under Sec80C of the Income Tax Act. A sum of Rs 100 grows to Rs 146.25 after a period of 5 years, which is not bad at all. One can transfer the NSC from one person to another. This is a good bet for those looking to build a corpus for the medium to long term.
Post Office Recurring Deposit
Post Office Recurring Deposit is for those who are looking at investing small amounts every month. One can invest a small sum of Rs 100 every month, which receives an interest rate of 7.2 per cent. The interest rate is pretty attractive when compared to interest rates offered by banks in the country.
Nomination facility is available and one can transfer the accounts from one post office to the other. The account can also be opened in the name of a minor.
Senior Citizen Savings Scheme
The Senior Citizen Savings Scheme is for senior citizens only and offers an interest rate of 8.6 per cent per annum, which is not bad at all. An individual of the age of 60 years or more can open the account.
A depositor may operate more than one account in individual capacity or jointly with spouse (husband/wife). Premature closure is allowed after one year on deduction of an amount equal to1.5% of the deposit & after 2 years 1% of the deposit.
15-years Public Provident Fund Account
This is a 15-year account, which offers an interest rate of 7.9 per cent. The PPF scheme as it is popularly called has many benefits including the fact that the interest earned is exempt from tax. Apart from this, the PPF also qualifies for tax exemption under Sec80C of the Income Tax Act.
Withdrawal is permitted after 7-years of opening the account. Loan facility is available from the third year onwards.
Kisan Vikas Patra
Under the Kisan Vikas Patra the amount invested doubles after 113 months. So, if you have deposited Rs 1 lakh it doubles to rs 2 lakhs after 9 years and 5 months. The interest rate which enables such doubling is 7.6 per cent per annum, which is compounded annually.
This is a good scheme for those looking at safety and returns which are much better than bank deposits.