Investment Schemes : Profitable Investments with Tax Benefits: 5 Schemes to Consider

Investment Schemes : As we approach the end of the first half of the financial year 2024-25, many individuals, particularly those with fixed incomes, are looking for ways to optimise their investments while also reducing their tax liability. The Indian government continues to offer tax relief on selected investments up to ₹1,50,000 under Section 80C of the Income Tax Act, especially for those who opt for the old tax regime. This makes certain investment schemes not only a tool for wealth creation but also a way to save on income tax.

For regular salaried individuals, especially those filing income tax returns under the old regime, this is an excellent opportunity to maximise savings while also growing their wealth. Let’s explore five key investment schemes that not only offer attractive returns but also provide income tax benefits.

1. Kisan Vikas Patra (KVP)

The Kisan Vikas Patra (KVP) is a small savings scheme managed by the Indian Postal Department. Designed to encourage long-term savings, the KVP is particularly attractive due to its relatively higher interest rates compared to other schemes. Here are some key highlights:

• Investment Tenure: The maturity period for KVP is 115 months, or 9 years and 7 months. During this period, the investment doubles, making it an attractive option for those who are willing to lock in their money for an extended period.
• Minimum and Maximum Investment: The minimum investment limit is ₹1,000, and there is no maximum limit, which means you can invest any amount in multiples of ₹100 above ₹1,000. This flexibility makes KVP suitable for both small investors and those looking to invest larger sums.
• Interest Rate: The current interest rate for KVP is 7.4%, compounded annually. This ensures that your investment grows steadily over time, effectively doubling in value by the end of the 9 years and 7 months period.
• Tax Benefits: While investments in KVP are not tax-exempt under Section 80C, the returns are secured and guaranteed by the government, making it a low-risk option. However, interest earned on KVP is taxable as per your income tax slab. Thus, this scheme is suitable for individuals who prioritise assured returns over tax exemptions.

2. National Savings Certificate (NSC)

Another popular scheme run by the Indian Postal Department, the National Savings Certificate (NSC), is designed for investors looking for a medium-term investment horizon. Like KVP, NSC is a fixed-income investment, but with a shorter tenure and tax-saving benefits under Section 80C.

• Investment Tenure: The investment period for NSC is 5 years, making it ideal for individuals looking for a shorter-term option compared to KVP.
• Minimum and Maximum Investment: The minimum investment amount is ₹1,000, and subsequent investments can be made in multiples of ₹100. There is no upper limit on investment in NSC, making it accessible to a wide range of investors.
• Interest Rate: The current interest rate on NSC is 7.7%. This is a compounded annual interest, which means your investment grows steadily each year. At the end of 5 years, ₹1,000 invested in NSC will grow to ₹1,449.
• Tax Benefits: Investments up to ₹1,50,000 in NSC qualify for tax deductions under Section 80C of the Income Tax Act. However, the interest earned is taxable, though it is reinvested each year, making it eligible for further deductions under Section 80C in the years it is reinvested. This reinvestment feature helps you maximise your tax benefits over the tenure of the investment.

NSC is particularly appealing to conservative investors who want to save taxes while earning fixed returns over a moderate time frame.

3. Senior Citizen Savings Scheme (SCSS)

The Senior Citizen Savings Scheme (SCSS) is one of the best investment options for retirees or senior citizens looking for a stable income post-retirement. It is specially designed to cater to the financial needs of senior citizens while offering an attractive interest rate and tax benefits.

• Eligibility: This scheme is available only to individuals above 60 years of age. However, individuals who are 55 years or older and have taken voluntary retirement can also invest in SCSS, provided they invest within a month of receiving their retirement benefits.
• Investment Tenure: SCSS has a 5-year maturity period, which can be extended once for an additional 3 years.
• Minimum and Maximum Investment: A minimum deposit of ₹1,000 is required, and the maximum investment limit is ₹30 lakh. This makes SCSS suitable for individuals looking to invest their retirement corpus.
• Interest Rate: Currently, SCSS offers an interest rate of 8.2%, which is the highest among the small savings schemes. Interest is paid quarterly, providing a regular income stream for retirees.
• Tax Benefits: Investments in SCSS qualify for deductions under Section 80C, up to the limit of ₹1,50,000. However, the interest earned is taxable and subject to TDS if it exceeds ₹50,000 in a financial year. Despite the taxability of the interest, SCSS remains an excellent option due to its high-interest rate and regular payouts.

SCSS is a safe, government-backed scheme that offers a steady income to senior citizens, making it a preferred choice for retirees seeking stable returns with tax-saving benefits.

4. Sukanya Samriddhi Yojana (SSA)

The Sukanya Samriddhi Yojana (SSA) is a government-backed savings scheme aimed at encouraging parents to save for their daughters’ education and marriage.

Also Read : Best 4 Mutual Funds : Want to Enjoy retirement? 4 Best Mutual Funds for Senior Citizens

The scheme is designed specifically for Indian residents who have daughters below the age of 10.

• Eligibility: Parents or legal guardians can open a Sukanya Samriddhi account for a girl child under the age of 10. A maximum of two accounts can be opened per family—one for each daughter. In the case of twins or triplets, a third account can be opened.
• Investment Limits: The minimum deposit required to open an account is ₹250, and the maximum deposit limit is ₹1,50,000 per financial year. Contributions can be made for up to 15 years from the date of account opening.
• Interest Rate: The current interest rate for SSA is 8.2%, making it one of the most attractive small savings schemes in terms of returns. The interest is compounded annually, ensuring the corpus grows significantly over time.
• Tax Benefits: Sukanya Samriddhi Yojana falls under the EEE category (Exempt, Exempt, Exempt), which means the investment, the interest earned, and the maturity amount are all tax-free. Contributions made towards SSA are eligible for deductions under Section 80C up to ₹1,50,000, and the maturity proceeds, including the interest, are completely exempt from tax.

SSA is an excellent long-term investment option for parents looking to secure their daughters’ future. With attractive returns and full tax exemption, it provides a powerful tool for wealth creation while fulfilling a social objective.

5. Public Provident Fund (PPF)

The Public Provident Fund (PPF) is one of the most popular and long-standing savings schemes in India. Known for its combination of safety, attractive returns, and tax benefits, PPF is ideal for risk-averse investors looking for long-term wealth creation.

• Investment Tenure: PPF has a tenure of 15 years, making it a long-term savings option. However, investors have the flexibility to extend the account in blocks of 5 years after the initial 15-year period.
• Minimum and Maximum Investment: The minimum deposit required per financial year is ₹500, and the maximum amount you can invest annually is ₹1,50,000. You can deposit in the account either as a lump sum or in instalments (up to 12 times a year).
• Interest Rate: The current interest rate for PPF is 7.1%, compounded annually. Although the interest rate is slightly lower compared to other small savings schemes like SCSS and SSA, the safety and tax benefits make PPF a highly attractive option.
• Tax Benefits: Like Sukanya Samriddhi Yojana, PPF falls under the EEE category, making it one of the most tax-efficient investment options. Contributions made towards PPF are eligible for tax deductions under Section 80C up to ₹1,50,000 per year. The interest earned and the maturity proceeds are fully exempt from tax, offering significant tax savings over the long term.

PPF is a must-have in the portfolio of any long-term, risk-averse investor. Its combination of safety, government backing, and tax efficiency makes it a reliable option for building a retirement corpus or meeting long-term financial goals.

Investment Schemes – Conclusion

For taxpayers looking to maximise their savings while also reducing their tax liability, these five investment schemes offer an excellent blend of security, returns, and tax benefits. Whether you’re a senior citizen looking for a stable income, a parent saving for your child’s future, or simply someone looking for a long-term, tax-efficient investment, these schemes provide a range of options to suit different financial needs and goals.

Buy Now : Beginner to Advanced Option Trading Strategy 2024

Each scheme has its unique advantages, and the choice of investment should depend on factors such as your financial goals, risk tolerance, and time horizon. By carefully selecting the right mix of these schemes, you can not only grow your wealth but also save significantly on income tax, making your investments doubly profitable.

Keywords : Investment Schemes – Investment Schemes 2024 – Investment Schemes 2025 – Investment Schemes New