Government Investment Schemes


Government Investment Schemes


Welcome to the Chapter on Government Investment Schemes.

Today, we take a look at some Government-backed Schemes that help you build your wealth.

We look at National Savings Certificate, Kisan Vikas Patra, Sukanya Samriddhi Yojana and Senior Citizen Savings Scheme. We also quickly look at some offerings from the Indian Post Office such as Post Office Monthly Income Account, Post Office Time Deposit (or Fixed Deposit) Account and Post Office Recurring Deposit Account.

Since we are covering quite a few of these schemes, let’s dive in straight away.


National Savings Certificate


The National Savings Certificate or NSC is a saving investment from the Government of India for Indian citizens. It can be purchased from any post office in the country.  

Amount Invested


The Minimum Amount for opening an account is Rs. 1,000 and you can invest in multiples of Rs. 100. There is no maximum limit on the amount you can invest but the tax benefits you get is limited to Rs. 1.5 lakh which is the overall limit for any eligible investments under section 80C of the Income Tax Act.

This means the interest you earn each year except for the last year qualifies for deduction as it is reinvested into your NSC. The interest you receive in the last year, i.e. 5th year is subject to income tax.

You get the whole amount after maturity but without any TDS being deduced, which you need to deduct after you receive the amount.

Where to Buy?


The buyer can visit the nearest post office and deposit the money which she wants to invest. You need to fill out the application form and show the documents for KYC.

You can also buy from one of our vetted brokers online.

Who Can Buy?


The buyer can be:

  • An adult individual who can buy for herself or on behalf of a minor
  • A maximum of 3 adults who can either open what is called a Joint A Account or a Joint B Account. In a Joint A account, the maturity amount is payable to each of the joint certificate holders. In a Joint B Account, the maturity amount is payable to only one of the joint certificate holders
  • Minor above 10 years of age
  • A guardian on behalf of a person of unsound mind

The certificate cannot be purchased by HUFs or trusts. However, the Karta of a HUF can make the investment in his own name.

The person must be an Indian citizen who is a resident which means she should have stayed in India for at least 182 days in the previous financial year. This makes her a resident. Anyone who stays less than that is not eligible. The same goes for Non-Resident Indians or NRIs. They cannot buy an NSC unless they bought the certificate when they are Indian residents.

Time Period and Interest Rate


The certificate is available for 5 Years and right now has a 6.8% interest rate which is compounded annually but payment is only made at maturity. This means the interest for each year is reinvested into your account.

Why Choose this Investment Option?


  • Backed by the Government and so all NSC investments are risk-free
  • Keeps the money returns stable even though in real terms it may not grow
  • Very low investment threshold: Rs. 1,000
  • No cap on larger investments
  • Tax benefits on the amount you invest in the NSC
  • Can be easily purchased by visiting the nearest Post Office or bank branch

Kisan Vikas Patra


The Kisan Vikas Patra or KVP is a small saving investment certificate scheme from the Government of India for Indian citizens. It is similar to the NSC in many respects. For instance, it can be purchased from any post office in the country just like the NSC but unlike the NSC, the KVP can also be purchased from select banks.

Amount Invested


The minimum amount for opening an account is Rs. 1,000 and you can invest in multiples of Rs. 100. There is no maximum limit on the amount you can invest just like National Savings Certificates.

The biggest factor that makes KVP different from NSC is that there are no tax benefits for KVP. The interest you get is taxable on an accrual basis under the head “Income from Other Sources”.

Also, no tax is deducted at source. This makes the KVP a better alternative for people who are economically weaker and do not have to pay any tax. Those who pay tax can opt for something else if they wish.

Investors get a digital certificate.

Where to Buy?


As an investor, you can visit the nearest post office or branch of any nationalised bank or one of the bigger Indian private sector banks and deposit the money which you want to invest. You need to fill the application form and show the documents for KYC.

Who Can Buy?


The buyer can be like the NSC:

  • An adult individual who can buy for herself or on behalf of a minor
  • A maximum of 3 adults who can either open what is called a Joint A Account or a Joint B Account. As i had mentioned in a Joint A account, the maturity amount is payable to each of the joint certificate holders. In a Joint B Account, the maturity amount is payable to only one of the joint certificate holders
  • Minor above 10 years of age
  • A guardian on behalf of a person of unsound mind

The certificate cannot be purchased by HUFs or NRIs like the National Savings Certificate, but unlike the NSC can be purchased by trusts.

Time Period and Interest Rate


The certificate matures after 124 months at the end of which it doubles your investment. The current interest rate is 6.9% which is compounded annually. If required, you can encash the Kisan Vikas Patra after 2 & ½ years from the date of issue.

Why Choose this Investment Option?


  • Backed by the Government and so all KVP investments are risk-free
  • Keeps the money returns stable even though in real terms it may not grow, especially since it is not exempt from tax and the interest rate is only marginally higher than the 10-year or 20-year average inflation rate of 6-7%
  • Like the NSC, it has a very low investment threshold of Rs. 1,000
  • There is no cap on larger investments
  • Can be easily purchased by visiting the nearest Post Office or one of the braches of any nationalised bank or one of the bigger Indian private sector banks

Sukanya Samriddhi Yojana


The Sukanya Samriddhi Yojana or SSY is a small saving investment scheme started by the Government of India to help Indians save for the future of their girl child. It is a part of the “Beti Bachao, Beti Padhao” campaign to end the systemic bias in the country against women.

The corpus is meant to be used for your daughter’s education and marriage. But in reality, it can be used to pay for large expenses that your child needs for her education, career, to financially secure her future or even for marriage. For example, she can use it to pay for her educational expenses in India and abroad, make property investments in her name or even use it to travel and see the world, and of course to pay for her marriage if she wants to do so.

The Sukanya Samriddhi Yojana can be opened for girls who are below 10 years of age and is an Indian resident. The account has a tenure of 21 years or until the girl gets married after 18 years, whichever is earlier.

Each girl can have one account and she can operate her own account after she is 18 years old.

Amount Invested


The minimum amount needed for opening an account is Rs. 250 and you can invest anything from Rs. 250 to Rs. 1.5 lakh in a financial year. You need to invest up to 15 years and not the full tenure of 21 years.

One thing to note here is that you have to invest the minimum amount in a year or else you have to pay a penalty of Rs. 50 for each year of default.

The corpus that is built will be payable to the girl after it matures. She can also choose to withdraw 50% of the corpus when she reaches the age of 18 years to pay for her higher education.

This is one of the few schemes where everything from the investment you make to the interest your daughter receives and the maturity amount are eligible for tax deductions. A maximum of Rs. 1.5 lakh can be claimed as deduction under Section 80C of the Indian Income Tax Act.

Where to Buy?


You can visit the nearest branch of the authorised bank or post office, deposit the money and open an account. You need to fill the application form and show the documents for KYC.

Who Can Buy?


The scheme can be opened by the parents or legal guardian of a girl who is below 10 years of age.

Time Period and Interest Rate


The scheme can be opened by the parents or legal guardians of a girl who is below 10 years of age. The account has a tenure of 21 years or until the girl gets married after 18 years, whichever is earlier.

This means that if you open a Sukanya Samriddhi account when your child is 5 years old, then it will mature after she is 26 years old. If you open it when she is 9 years old, it will mature when she is 30 years old.

The current interest rate is 7.6% which is compounded annually. The interest is credited to the account at the end of the financial year.

Why Choose this Investment Option?


  • Backed by the Government
  • Offers the highest interest rate among all government schemes including Public Provident Fund
  • Keeps the money returns stable
  • Has one of the lowest investment thresholds of Rs. 250
  • Tax benefits on the amount invested, on the interest and on the maturity amount
  • Can be easily purchased by visiting the nearest bank branch or Post Office and filling the form and showing the KYC details

Senior Citizen Savings Scheme


The Senior Citizen Savings Scheme is a small saving investment scheme to help Indians above the age of 60 years to get a steady and secure source of income after retirement. The scheme was started by the Government of India in 2004.

It has a maturity period of 5 years but can be extended by another 3 years.

The investor gets the interest on a quarterly basis based on the amount she has invested. This amount is credited to the Senior Citizen’s savings account.

Amount Invested


The amount invested has to be a lump sum amount. The minimum amount needed for opening an account is Rs. 1,000. The senior citizen can increase this amount in multiples of Rs. 1,000. The maximum one can invest is Rs. 15 lakh or amount received on retirement, whichever is lower.

An individual can have multiple accounts but the total deposit cannot exceed the lower amount between Rs. 15 lakh and the retirement benefit.

There are penalties for early closure.

  • If closed within a year, then the penalty is equal to the quarterly interest payment
  • If closed between 1 and 2 years, 1.5% of the deposited amount will be deducted as penalty
  • If account closure takes place after completion of 2 years but before 5 years, 1% of the deposited amount is levied as a penalty

But in case the account was extended beyond 5 years then an individual can close their account after the first year without any penalty.

Investments made under the scheme are eligible for tax deduction up to Rs. 1.5 lakh under section 80C of the Income Tax Act.

But the interest received is taxable.

According to the current rules, if the total interest from the scheme is more than Rs. 50,000 in a financial year, then you are liable to pay the TDS (Tax Deducted at Source) for the interest you have earned.

Where to Buy?


You can visit the nearest branch of the authorised bank or post office and fill in the required form (Form A for the first 5 years and Form B for extension of 3 years). You also need to provide the KYC documents and proof of age, and deposit the money to open the account.

Who Can Buy?


The scheme can be opened individually or jointly with spouse. In terms of age, the following people can buy:

  • Individuals who are at least 60 years of age
  • Individuals who are of 55 years of age but have retired early under a superannuation or Voluntary Retirement Scheme or VRS
  • Retired defence personnel who are at least 50 years old

Other individuals such as Non-Resident Indians or NRIs, Persons of Indian Origin or PIOs, or members of a Hindu Undivided Family cannot open an account under the scheme.

Time Period and Interest Rate


The Senior Citizen Savings Scheme has a maturity period of 5 years but can be extended by another 3 years after the first 5 years are over.

The current interest rate is 7.4% which is compounded quarterly and disbursed quarterly on the first date of April, July, October and January in a financial year.

The interest rate declared during the time of investment remains fixed throughout the maturity tenure and is not affected by any alterations made later. But if the scheme is extended then the interest rate applicable in the quarter when it was extended will apply.

Why Choose this Investment Option?


  • Backed by the Government
  • Offers one the highest interest rate among all government schemes including Public Provident Fund
  • Keeps the money returns stable
  • Has a low investment threshold of Rs. 1,000
  • Offer tax benefits for the investment amount
  • Can be easily purchased by visiting the nearest bank branch or Post Office, and filling the form, showing the KYC details and proof of age, and making the deposit

Post Office Investment Schemes

There are a few more government schemes that most of us don’t know about. Let’s quickly look at three of them.


National Savings Monthly Income Scheme


The National Savings Monthly Income Scheme, also called the Post Office Monthly Income Scheme, is a Government of India-backed scheme that allows individuals to earn a regular monthly interest income from their deposit for a period of 5 years.

The scheme can be purchased at your nearest post office.

Amount Invested


The account can be opened with a minimum deposit of Rs. 1,000 and in multiples of Rs. 100. The maximum limit for the account is Rs. 4.5 lakh for an individual and Rs. 9 lakh for a joint account.

An individual can have more than one account provided the total deposit for all the accounts does not cross the specified limit.

An account can be closed prematurely after one year on payment of a penalty. If closed before the expiry of three years, then 2% of the deposit is deducted. If closed after three years, 1% of the deposit is deducted.

Where to Buy?


The Monthly Income Scheme can be purchased from your nearest Post Office. You will have to simply fill the application form, complete the KYC formalities and make the deposit.

Who Can Buy?


The scheme can be opened individually or jointly. In terms of ownership, the different types of accounts can be:

  • An individual account opened by an adult
  • A joint account with a maximum of three adults
  • An account opened by a minor above 10 years of age
  • An account operated by parents or legal guardian for a minor below 10 years of age
  • An account operated by parents or legal guardian for a person of unsound mind

Time Period and Interest Rate


The account has a maturity period of 5 years and a lock-in period of 1 year.

It provides an interest rate of 6.6% per annum.

Why Choose this Investment Option?


  • Backed by the Government and so risk-free
  • The only Government Scheme that offers a monthly income
  • Has a low investment threshold of Rs. 1,000
  • Can be easily purchased by visiting the nearest Post Office, and filling the form and showing the KYC details, and making the deposit

National Savings Time Deposit Account


The National Savings Time Deposit Account or Post Office Time Deposit Account is a Government of India-backed Fixed Deposit scheme. The scheme comes in different maturity periods: 1 year, 2 years, 3 years and 5 years.

Amount Invested


The account can be opened with a minimum deposit of Rs. 1,000 and in multiples of Rs. 100. It does not have any maximum limit.

The investment you make under the 5-year Time Deposit qualifies for Section 80C benefits under the Income Tax Act.

The accounts have a lock-in period of 6 months. If the Time Deposit is closed between 6 and 12 months, then Post Office Saving Accounts interest rate will be payable and not the higher interest rate for the Time Deposit.

Where to Buy?


The Post Office Time Deposit Account can be opened at your nearest Post Office. You will have to simply fill the application form, complete the KYC formalities and make the deposit.

You can also open the account online using internet banking or mobile banking.

Who Can Buy?


The scheme can be opened individually or jointly. In terms of ownership, the different types of accounts can be:

  • An individual account opened by an adult
  • A joint account with a maximum of three adults
  • An account opened by a minor above 10 years of age
  • An account operated by parents or legal guardian for a minor below 10 years of age
  • An account operated by parents or legal guardian for a person of unsound mind

Time Period and Interest Rate


The scheme comes in different maturity periods: 1 year, 2 years, 3 years and 5 years. The account can be extended by giving an application in the post office where you opened the account.

The interest rates are the same for the 1 year, 2 years and 3 years fixed deposits and currently stands at 5.5%. The interest rate for the 5-year scheme is higher at 6.7%.

Why Choose this Investment Option?


  • Backed by the Government and so risk-free
  • The fixed deposit scheme from the Government
  • Has a low investment threshold of Rs. 1,000
  • The investments in the 5-year Time Deposit is eligible for income tax deductions under section 80C
  • Can be easily purchased by visiting the nearest Post Office, and filling the form and showing the KYC details, and making the deposit. You can also open the account online

National Savings Recurring Deposit Account


The National Savings Recurring Deposit Account or Post Office Recurring Deposit Account is a Government of India-backed Recurring Deposit scheme with a maturity period of 5 years.

Amount Invested


The account can be opened with a minimum deposit of Rs. 100 and in multiples of Rs. 10. It does not have any maximum limit.

It offers a flexible investment schedule. The subsequent deposits for any account opened up to the 15th of a month can be made up to the 15th of upcoming months, and investments in accounts opened after the 15th and up to the 30th of a month can be made up to last working day of upcoming months.

The Post Office offers a ​ rebate on advance deposit of at least 6 instalments. It offers a rebate of Rs. 10 for an advance payment for 6 months and Rs. 40 for an advance payment for 12 months.

The account has a lock-in period of 3 years. If the Recurring Deposit is closed before 3 years, then the Post Office Saving Accounts interest rate will be payable and not the higher interest rate for the Recurring Deposit.

Where to Buy?


The Post Office Time Deposit Account can be opened at your nearest Post Office. You will have to simply fill the application form, complete the KYC formalities and make the deposit.

You can also open the account online using internet banking or mobile banking.

Who Can Buy?


The scheme can be opened individually or jointly. In terms of ownership, the different types of accounts can be:

  • An individual account opened by an adult
  • A joint account with a maximum of three adults
  • An account opened by a minor above 10 years of age
  • An account operated by parents or legal guardian for a minor below 10 years of age
  • An account operated by parents or legal guardian for a person of unsound mind

Time Period and Interest Rate


The scheme has a maturity period of 5 years. The account can be extended for a further period of 5 years by giving an application in the post office where you opened the account.

The interest rate for the recurring deposit currently stands at 5.8%.

Why Choose this Investment Option?


  • Backed by the Government and so risk-free
  • The only recurring deposit scheme from the Government
  • Has a very low investment threshold of Rs. 100
  • Can be easily purchased by visiting the nearest Post Office, and filling the form and showing the KYC details, and making the deposit. You can also open the account online