SAVINGS AND INVESTMENTS
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    “We must provide equal opportunities to the girl child to enroll and excel in the under-represented disciplines of science and engineering…”

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    Did you know? Bachendri Pal was the first Indian woman to climb the Mount Everest in 1984!

Saving and investing is a way to set aside money while you are busy with your life, so that you can fully obtain the rewards of your work in the future. Investing is basically about “working smarter and not harder.” Most of us work hard at our jobs, whether for somebody else or for our own business. We often work long hours, which requires sacrifice and often stress. Taking some of our hard-earned money and investing for our future needs is a way to make the most of what we earn. Here we give you an introduction to saving and investment. Be sure to find out full information before placing your money in any scheme. A few major investment options are as follows.

 

  • It is the safest and most secure long-term investment scheme. It is tax-free.
  • Under the PPF account opened in bank or post office the money gets locked for the time of 15 years and you can earn compound interest from this account. You can also extend the time frame for another five years.
  • The only drawback of this PPF account is that you are only allowed to withdraw your investment at the end of the 6th year. In case you need it, you can take a loan on the balance of PPF account.
  • A minimum yearly deposit of Rs. 500/- is required to open and maintain a PPF account and the maximum yearly deposit of Rs. 1.5 lacs is permitted.
  • Monthly Income Scheme (MIS) is an investment scheme of Indian Postal Service. The interest rate for the first quarter of 2017-2018 i.e. from 1st April 2017- 30th June 2017 is 7.6%. Interest changes with every changing year.
  • The maturity term for MIS is 5 years.
  • At the end of the term of 5 years, you can get back all the money that you had invested. Needless to say, you keep getting your fixed monthly income for this whole period.
  • However, if you have to withdraw the money before 5 years, these are the possible scenarios:
    • Withdraw the deposit within 1 year – You get your deposit back, but no interest
    • Withdraw the deposit in 1-3 years – You get your deposit back after a nominal 2% deduction (as a penalty)
    • Withdraw the deposit after 3 years - You get your deposit back after a nominal 1% deduction (as a penalty)
  • POMIS account is transferable from one post office to another.
  • For every post office deposit you make, a separate account has to be opened.
  • The maturity amount realized at the end of the term can be reinvested in POMIS.
  • The investor can also appoint a nominee for her POMIS account. So, in case of her unfortunate demise, her nominee becomes entitled to get the money.
  • There is no TDS (Tax Deduction at Source) on the capital amount, however, the interests so earned are taxable.
  • The Government of India issues 8% savings bond, with a maturity of 6 years.
  • The bonds are available at all times with specified distributors through whom you can apply to invest in them.
  • Investors can apply for ‘8% Savings GOI Bonds’ in individual capacity, joint basis or anyone or survivor.
  • Investors can apply for these bonds only offline by filling up a simple form and using the services of a distributor. The bonds, issued through banks such as SBI, Axis, ICICI and HDFC, and financial institutions, such as Stock Holding Corporation of India, are available in a physical format. Upon allotment, the certificate is couriered to investors. These bonds are not transferable.
  • Investors can earn an interest of 8% per annum on these bonds and opt for either cumulative or non-cumulative option. In case of the non-cumulative option, the interest is paid half-yearly either on February 1 or August 1. For investors who choose the cumulative option, the value of the investments at the end of six years will be Rs 1,601 for every Rs 1,000 invested.
  • You need to invest a minimum of Rs 1,000, but there is no maximum limit, but it needs to be in multiples of Rs 1,000.
  • The interest income from the bonds is taxable, as per your tax slab.
  • Fixed Deposit (FD), also called Term Deposit is an investment where the interest rate is guaranteed not to change for the nominated term, so you know exactly what your investment is worth. Generally, the longer the term of deposit, higher is the rate of interest.
  • Usually in India the interest on FDs is paid every three months from the date of the deposit. The interest is credited to the customers' Savings bank account or sent to them by cheque. This is a Simple FD.
  • The customer may choose to have the interest reinvested in the FD account. In this case, the deposit is called the Cumulative FD or compound interest FD. For such deposits, the interest is paid with the invested amount on maturity of the deposit at the end of the term.
  • Although banks can refuse to repay FDs before the expiry of the deposit, they generally don't. This is known as a premature withdrawal. In such cases, interest is paid at the rate applicable at the time of withdrawal. For example, a deposit is made for 5 years at 8%, but is withdrawn after 2 years. If the rate applicable on the date of deposit for 2 years is 5 per cent, the interest will be paid at 5%. Banks can charge a penalty for premature withdrawal.
  • Tax is deducted by the banks on FDs if interest paid to a customer at any bank exceeds Rs. 10,000 in a financial year. This is applicable to both interest payable and interest reinvested per customer.
  • For the welfare of the girl child in India, the Prime Minister launched a scheme in 2015 called Sukanya Samridhi Yojana. Under this, parents or guardians of the girl child can save money for her higher education. This savings account can be opened at the Post Office or at any authorized bank.
  • The interest rate of Sukanya Samriddhi Yojana is one of the highest in the country - 8.4% for first quarter 2017-2018 (i.e. from 1st April 2017- 30th June 2017).
  • Investments made under the Sukanya Samriddhi Scheme are exempt from income tax.
  • A minimum sum of Rs. 1,000 has to be deposited in the account annually, and failing to do so will lead to a fine of Rs. 50 that will be deducted from the account whereas the maximum amount that can be deposited in an account, under this scheme is Rs.1,50,000.
  • Once the girl child attains the age of 18 years, partial withdrawals on account of marriage or higher studies are allowed.
  • The account can be opened by the parent or guardian of the girl child and can be operated on her behalf until she reaches the age of 18.
  • Sukanya Samriddhi Scheme can be availed for any girl child who is 10 years old or less.
  • Birth certificate of the girl child is the main document that is required to open the Sukanya Samriddhi Account.
  • The maturity period of the account is 21 years from the date of opening the account.
  • The Sukanya Samriddhi scheme is a transferable deposit scheme and as such it can be transferred from one authorized bank to another and from post office to any authorized bank and vice -versa.
  • Sukanya Samriddhi Account can be closed only when the girl child attains 21 years of age. If the account is not closed and the money is not withdrawn even after the child turns 21 then the account continues to earn interest.
  • National Saving Certificate is a combination of interest rate, safe investment and tax benefits. NSCs are issued by the post office and can be taken from any branch of the Indian Postal Service.
  • One has to buy an NSC worth a specific amount which is considered your investment. The purchase of the certificates can be done as decided by investor but in denominations designated by the government.
  • Once the investment has been made, it earns an interest rate based on the rates associated with the type of certificate bought.
  • The maturity date for these certificates is 5 or 10 years from the date of purchase but the interest is calculated on a yearly basis. This interest will not be paid to the certificate holder till such time as the investment matures. The interest that is earned is also be reinvested in the NSC itself.
  • There are two types of NSC certificates that are available at the post office.
    • NSC Issue VIII: this provides an investment opportunity for people looking for a way to invest in safe instruments and gain tax benefits at the same time. These certificates come in denominations ranging from Rs. 100 to Rs. 10,000 but have an interest rate that is slightly lower than the once offered for Issue IX. They come with a maturity period of 5 years.
    • NSC Issue IX: The Issue IX certificates also come in denominations ranging from Rs. 100 to Rs. 10,000 but with an interest that is slightly higher than Issue VIII. They have with a maturity period upto 10 years. As is also the case with Issue VIII, there no limit on the amount that can be invested but there is a minimum investment of Rs. 100.
  • Apart from the two versions that are available under NSC, there are also different modes under which these certificates can be held. These are:
    • Single Holder Type certificate: This is issued to an individual and can be held only by one person. She can appoint nominees for the certificates but they will be the only ones taking decisions about them. This certificate can be provided for an adult or to an adult on behalf of a minor.
    • Joint ‘A’ Type Certificate: This is issues to two adult holders and is payable to both when the certificates mature. It can be operated by either of the holders and both the holders signatures will be needed in case it is to be transferred or cancelled, or nomination needs to be changed.
    • Joint ‘B’ Type Certificate: This is the same as the Joint ‘A’ Type Certificate in that, it too can be issued to two adults who can hold and operate the certificates. However, unlike the Joint ‘A’ Type Certificate, this pays the maturity value to any one of the two holders.
  • It is available through certified banks as well as the network Post Offices across India
  • This saving scheme is designated for individuals above the age of 60 years. In certain conditions, individuals in the age group of 55 years and above can also apply successfully.
  • Only one deposit is permitted per SCSS account. The deposit must be in multiples of Rs.1,000 with a maximum permissible investment of Rs.15 lakhs.
  • Interest on the money accumulated in the SCSS account is payable on 31st March/30th September/31st December in the first instance and thereafter interest is payable as of 31st March, 30th June, 30th September and 31st December of each year.
  • Maximum tenure of this saving scheme is 5 years. However, after maturity, the tenure can be extended for a further 3 years.
  • An applicant can operate multiple accounts simultaneously, individually or with a joint account holder who is the spouse.
  • Cash is an acceptable medium of investment (is this still true after demonetization? Check a recent source) if the initial amount is less that Rs.1 lakh. If this amount is larger than Rs.1 lakh, then a cheque must be used.
  • Account can be transferred from one bank/post office onto another.
  • SCSS provides nomination facility that can be availed at the time of opening the account or after said account has been in operation for a set duration of time.
  • If the depositor chooses to terminate the account prematurely then the following penalty applies - 1.5% of deposit amount after one year and 1% of the deposit amount after two years. Premature closure of the senior citizen saving scheme account is only possible after the account has been in operation for a minimum of one year.
  • In case of joint accounts, the primary account holder is deemed the investor while the second stakeholder must be the primary account holder’s spouse.
  • Tax is deducted at source if the accumulate interest on the invested amount exceeds Rs.10,000 per annum.