Investment Tips: 3 Government Schemes Offering Higher Returns Than Fixed Deposits

Kokila Chokkanathan
When it comes to investing, many individuals turn to Fixed Deposits (FDs) for their safety and guaranteed returns. However, there are several government-backed schemes that not only offer higher returns than traditional FDs but also come with low risk and tax benefits.

This article explores three such government investment schemes that can help you grow your savings more effectively.

1. Public Provident Fund (PPF)

The Public Provident Fund (PPF) is one of India’s most popular and safe investment options for long-term goals. The interest rate on PPF is typically higher than most fixed deposits, and the returns are tax-free.

Key Features of PPF

  • Interest Rate: Typically 7.1%–7.5% per annum (subject to change by the government)
  • Tenure: The investment has a lock-in period of 15 years, which can be extended in blocks of 5 years.
  • Tax Benefits: Contributions qualify for tax deductions under Section 80C of the Income Tax Act, and interest earned is tax-free.
  • Minimum Investment: Rs. 500 per year
  • Maximum Investment: Rs. 1.5 lakh per year
Why Choose PPF? PPF offers long-term capital appreciation, tax benefits, and low risk due to government backing. It's ideal for retirement or long-term savings.

2. National Savings Certificate (NSC)

The National Savings Certificate (NSC) is a government-backed fixed-income scheme designed for conservative investors seeking capital protection along with guaranteed returns.

Key Features of NSC

  • Interest Rate: 6.8% per annum (fixed, compounded annually)
  • Tenure: Available in 5-year and 10-year options.
  • Tax Benefits: Eligible for tax deductions under Section 80C.
  • Investment Limit: No upper limit, but a minimum of Rs. 100 for a single certificate.
  • Safety: Backed by the indian government, making it risk-free.
  • Interest Payment: The interest is compounded annually but paid at maturity.
Why Choose NSC? Ideal for conservative investors, NSC offers guaranteed returns and tax deductions while being a low-risk investment option.

3. Senior Citizens Savings Scheme (SCSS)

The Senior Citizens Savings Scheme (SCSS) is a government-backed savings program exclusively for senior citizens, offering higher returns and quarterly interest payouts.

Key Features of SCSS

  • Interest Rate: 8%–8.5% per annum (paid quarterly)
  • Tenure: 5 years, with an option to extend for another 3 years after maturity.
  • Eligibility: Only senior citizens (60 years or older) or retirees above 55 years with specific retirement benefits can apply.
  • Tax Benefits: Contributions qualify for tax deduction under Section 80C, though interest income is taxable.
  • Minimum Investment: Rs. 1,000
  • Maximum Investment: Rs. 15 lakh (joint accounts allowed, with a maximum of Rs. 30 lakh)
Why Choose SCSS? The SCSS is a great option for senior citizens looking for regular income. It offers higher interest rates than most fixed deposits, with the added advantage of quarterly payouts.

Comparison: government Schemes vs. Fixed Deposits

Scheme

Interest Rate

Tax Benefits

Risk Level

Tenure

Liquidity

Public Provident Fund (PPF)

7.1% – 7.5%

Tax deduction under Section 80C, tax-free returns

Low

15 years

Lock-in period

National Savings Certificate (NSC)

6.8%

Tax deduction under Section 80C

Low

5 or 10 years

At maturity

Senior Citizens Savings Scheme (SCSS)

8% – 8.5%

Tax deduction under Section 80C, interest taxable

Low

5 years

Quarterly payouts

Why Choose government Schemes Over Fixed Deposits?

  • Higher Returns: government schemes like SCSS and PPF often offer better returns than regular FDs, especially for long-term investments.
  • Tax Benefits: Many of these schemes offer tax deductions under Section 80C, making them more attractive than traditional fixed deposits.
  • Safety: Since these schemes are backed by the government, they carry very low risk, similar to FDs but with the added benefit of higher returns.
  • Regular Income: The SCSS offers regular quarterly payouts, making it ideal for retirees or individuals looking for a steady income.
Conclusion

If you’re looking to earn higher returns than a traditional fixed deposit, consider investing in PPF, NSC, or the Senior Citizens Savings Scheme. These government-backed schemes not only provide attractive interest rates but also come with tax benefits and low-risk features, making them ideal for long-term and secure investments.

Always evaluate your financial goals, risk tolerance, and investment horizon before choosing the right scheme.

 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.

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