Taxation on small savings schemes

12 Apr, 2016

One way of easily saving all that loose change that you have had at the bottom of your bag or wallet is by investing in the small saving schemes. Relatively easy and much cheaper than the premiums you will pay for higher insurance and savings, small saving schemes are used by all. Starting from just Rs.10 and with a maximum limit in six digits, you can pay a premium that you can afford.

Although you have good investment and savings opportunities available in different banks now, it is crucial to still have a small savings scheme for the save and secure investment along with good returns. There are many taxation benefits on the different type of small savings schemes that are available.

Check them out to make an informed decision:


This is a great way to ensure that you get a good sum in the end of your term. PPF is offered by the companies that you work in and the investment as well as the withdrawals is exempt from tax under Section 80C. Along with your PPF amount being deposited each month, you can also transfer the rest of your savings. With an 8.7% interest that is tax-free, it adds up to an extremely significant amount when it matures after the 15-year term. You can decide if you want to deposit a large sum or spread it over the year. It requires minimal maintenance and you need to deposit just five hundred rupees every year to make sure that your PPF account is active.

Post Office Time Deposits

These deposits are more favourable for you investment wise when you compare them with fixed deposits that are offered by almost all the banks. Without a lock-in period and with minimal penal interest, you can be sure that your investment is safe and ready to aid you in case of any emergency. It does not have a maximum limit on investment as well and you do not have to worry about renewing it because of the auto-renewal system in place. Your policy renews if you have not made any withdrawing from your savings scheme. The interest rates are higher than 8% but while your investments are not taxable, your interest is. You can easily start a savings scheme by visiting the closest post office.


Although it is not an investor’s first choice, NSCs still offer pretty competitive rates and have the lure of tax benefits. Similar to the post office time deposits, the investment is not taxable, however your interest is. The good news is, you can reinvest this money and it will come under Section 80C and cannot be deemed taxable any longer. It has similar lock in periods like your PPF along with the assured returns. NSCs are easily available and you can purchase on right away from your post office as a certificate.

One of the huge advantages of small saving schemes is the tax benefits that it entails. So, if you are looking to invest your savings but are not sure if you can afford the tax, opt for the small savings scheme instead. 

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