Kisan Vikas Patra (KVP)

Investment Objective and Risks :
The main objective of the KVP is to double the sum deposited. The objective of doubling the investment is easy for any investor to understand. Government backing and guarantee make it a preferred route of investment for small savers.
Capital Protection :
The capital in the KVP is completely protected as the scheme is backed by the Government of India.
Inflation Protection :
The KVP is not inflation protected. This means that whenever inflation is above the current guaranteed interest rate, the deposit earns no real returns. However, when the inflation rate is under 7.70 per cent, the KVP can manage to give a positive real rate of return.
Guarantees :
The interest rate in the KVP is guaranteed. Currently, it is 7.70 per cent compounded yearly. The KVP rates will now be notified every quarter as per the prevailing government-bond rates. However, once you have made an investment, the rate will remain unchanged for you throughout the tenure. 
Liquidity :
The KVP is liquid. Liquidity is offered in the form of loans and withdrawals subject to conditions. The minimum lock-in period is 30 months, after which one can encash it. Also, it can be transferred from one person to another any number of times.
Credit Rating :
As the KVP is backed by the Government of India, it does not require any commercial rating.
Exit Option :
Premature withdrawal is permitted at a cost for investors. Tax Implications For the existing investors, there is no tax benefit on the deposit or the interest that the KVP earns. There is no tax deducted at source

Features

ELIGIBILITY
One has to be a resident Indian to purchase this product.
The main objective of the KVP is to double the sum deposited. The objective of doubling the investment is easy for any investor to understand. Government backing and guarantee make it a preferred route of investment for small savers.
ENTRY AGE :
No age limit is mentioned. The KVP can be purchased by an adult for himself or on behalf of a minor or by two adults
MINIMUM INVESTMENTS :
Minimum: `1,000 per annum & Maximum: There is no upper limit. Certificates are available in denominations of `1,000, `5,000, `10,000 and `50,000.
TENURE : 9 years and 4 months
OTHER ASPECTS :

Premature closure of the KVP is permitted wherein a pre-fixed value of the KVP is paid as indicated in the table.

The facility of pledging the KVP to borrow is allowed and one can take loans against the KVP from banks and financial institutions.

ACCOUNT-HOLDING CATEGORIES :
Individual, Joint & Minor through the guardian .
NOMINATION :
Facility is available for the existing investors

Points to Remember :

The KVP can be encashed at any post office or nationalised bank in India, provided one has obtained transfer certificate to the desired post office or bank. The KVP are transferable across post offices and designated banks for the existing investors. Interest income is taxable but no tax is deducted at the source.

TIPS AND STRATEGIES

The doubling of money in the KVP is used to accumulate funds and create an income ladder. KVPs are bought every month or quarter for appropriate denominations. These on maturity work as a steady income stream, which are twice of what one deposited. Some people use this ladder effect to create an income stream that lasts ten–15 years to create an assured income in retirement.

National Saving Certificate (NSC)

Investment Objective and Risks :
The main objective of investing in the NSC is to get tax deduction on deposits and guaranteed returns on investment. The five- and ten-year tenure is used by many to create a regular monthly income stream in retirement.
Capital Protection :
The capital in the NSC is completely protected as the scheme is backed by the Government of India.
Inflation Protection :
The NSC is not inflation protected. This means whenever inflation is above the current guaranteed interest rate, the deposit earns no real returns. However, when the inflation rate is below the guaranteed interest rate, it does manage a positive real rate of return.
Guarantees :
The interest rate on the NSC is guaranteed. Currently, the interest rate on NSC is 8 per cent on the five-year option, compounded half yearly. The ten-year option of the NSC has been discontinued. From FY2016–17 onwards, the interest rate on the NSC will be revised every quarter as per the prevailing government-bond rates. However, once you have invested in the NSC, the rate applicable that time will remain the same throughout the tenure of the investment.
Liquidity :
The NSC is liquid, despite the stipulated lock-in. You can pledge NSC certificates to obtain loans. The amount and rate at which the loan is permitted depends on the lending institution.
Exit Option :
Premature encashment is possible after three years or in case of death of the certificate holder.
Other risks :
Savings in this product are risk-free because of the governmentbacking. 
Tax Implications :
The sum invested in the NSC is eligible for tax deduction under Section 80C up to the `1.5 lakh limit stipulated in a financial year, including the accrued interest on the existing certificates. Since the interest earned on the NSC is automatically reinvested, it can be claimed as a deduction under Section 80C. But if the accrued interest is not added to the `1.5 lakh deduction under Section 80C, then the entire income is taxable on maturity.

Features

ELIGIBILITY :
You need to be a resident Indian to buy the NSC.
ENTRY AGE :
No age is specified for account opening
INVESTMENTS :
Minimum: `100 per annum & Certificates are available in denominations of `100, `500, `1,000, `5,000 and `10,000
INTEREST :
8 per cent compounded half yearly as of Q1 FY17
TENURE :
Five years
ACCOUNT-HOLDING CATEGORIES :
Individual, Joint & Minor through the guardian.
NOMINATION :
Facility is available.

Points to Remember :

NSC certificates are encashable at any post office in India, provided one has obtained transfer rights. Certificates are transferable to another before maturity. z One can give the power of attorney to another person for purchase or payment. NSC certificates are transferable across post offices. Interest income is taxable (if not claimed under Section 80C) but no tax is deducted at the source.

Monthly Income Scheme

Investment Objective and Risks :
The main objective of the POMIS is to provide an assured monthly return to account holders and help them create a guaranteed regular income. Though it offers no tax incentives, it is a preferred instrument amongst small savers for the government backing that this product offers.
Capital Protection :
The capital in the POMIS is completely protected as the Scheme is backed by the Government of India, making it totally risk-free with guaranteed returns.
Inflation Protection :
The POMIS is not inflation protected, which means whenever inflation is above the current guaranteed interest rate, the return from the Scheme earns no real returns. However, when the inflation rate is below what it offers, it does manage a positive real rate of return.
Guarantees :
The interest rate for the POMIS is guaranteed and is currently 7.70 per cent per annum for the first quarter of 2016–17. The interest is paid out monthly. The interest rates will be notified every quarter in line with G-sec rates of similar maturity, with a spread of 0.25 per cent. The interest applicable to you for the duration of the deposit will be the rate at which you make the deposit.
Liquidity :
The POMIS is liquid despite the five-year stipulated lock-in. Liquidity is offered in the form of withdrawals. The facility of pledging the deposit in the POMIS account to obtain loans is not permitted as it defeats the purpose of regular income.

Premature withdrawal or closure of the POMIS account is permitted after the completion of one year from the date of opening of the account after deducting a penalty for early withdrawal or closure. The penalty varies from 1–2 per cent, depending on the completed tenure of the account.

If the account is closed on or before the completion of three years of opening the account, an amount equal to 2 per cent of the deposit is deducted and the remainder is paid to you.

If the account is closed after the completion of three years from opening the account, an amount equal to 1 per cent of the deposit is deducted and the remainder is paid to you.

Credit Rating :
As the POMIS is backed by the Government of India, it does not require any commercial rating.
Exit Option :
Premature closing of the account is permitted with penalty.
Other risks :
There are no risks associated with this investment.
Tax Implications :
There is no tax benefit on the investment or the income earned from this scheme.

Points to Remember :

Portability of the account between post offices is possible. Reinvestment on the maturity of the account is possible. Maturity proceeds not drawn are eligible to savings-account interest rate for a maximum period of two years. Interest income is taxable but there is no tax-deducted-atsource (TDS) certificate issued.

Sukanya Samriddhi Accounts

Investment Objective and Risks
The Sukanya Samriddhi Yojana is a special initiative for the girl child. The scheme aims to encourage savings for the girl child. The potential risk is that there is no inflation protection, though the capital is adequately protected.
ENTRY AGE :
: Parents or legal guardian of a girl child who is ten years or less can open an SSY account.
Minimum Investment :
The account can be opened with a minimum deposit of `1,000. Failure to make payments as per the chosen frequency can lead to the deactivation of the account. It can then be revived only after paying a penalty of `50 along with the missing payments. Deposits can be made multiple times in a year, with an upper limit of `1,50,000.
Capital Protection :
Since the scheme offers a relatively fixed rate of interest, the capital is adequately protected.
Inflation Protection :
Since the returns are linked to the government bond yield, there is no assured inflation protection.
Liquidity :
The contributions under the SSY cannot be withdrawn before the girl attains 18 years of age. Therefore, the minimum lock-in period is eight years. As of now there is no loan facility available.
Guarantees :
The interest rate for the SSY is to be 75 basis points over the ten-year government bond yield. For Q1 FY16-17, the deposit fetches an interest rate of 8.6 per cent. The rates will be revised every quarter and the new rates will be applicable to all the subscribers.
Tax Implications :
The scheme has the exempt-exempt-exempt (EEE) model, where the deposits, the interest earned as well as the maturity amount are tax-free.
Exit Options :
The account matures on the completion of 21 years from the date of opening of the account or at the time of marriage of the account holder on attaining 18 years of age, whichever is earlier. However, up to 50 per cent of the corpus can be withdrawn once the girl turns 18. The corpus continues to earn interest if the account is not closed on maturity

Points to Remember :

The depositor can open only one account in the name of one girl child and a maximum of two accounts in the name of two different children. However, the guardian can open the third account in the case of birth of twin girls as the second birth, or if the first birth itself results into three girl children.

Senior Citizen Savings Scheme (SCSS) Account

Investment Objective and Risks
The main objective of the SCSS is to provide an assured return paid every quarter to senior citizens, which helps them create a guaranteed regular income flow.
Capital Protection :
The capital in the SCSS is completely protected as the scheme is backed by the Government of India.
Inflation Protection :
The SCSS is not inflation protected, which means whenever inflation is above the current interest rate, the deposit earns no real returns. However, when the inflation rate is below the current interest rate, it does manage a positive real rate of return.
Liquidity :
The SCSS is liquid, despite the five-year lock-in. One can make withdrawals subject to conditions and penalties.
Credit Rating :
As the SCSS is backed by the Government of India, it does not require any commercial rating. Exit Option Premature closing of the account is permitted with penalty.
The facility of pledging the deposit in the SCSS account to obtain loans is not permitted as it defeats the purpose of regular income. Premature withdrawal or closure of the SCSS account is permitted after completion of one year from the date of opening the account after deducting a penalty for early withdrawal or closure. The penalty varies from 1–1.5 per cent, depending on the completed tenure of the account.

If the account is closed after the first year and before the end of the second year, an amount equal to 1.5 per cent of the deposit is deducted as penalty.

If the account is closed on or after the second year, an amount equal to 1 per cent of the deposit is deducted.

Other Risks :
There is no risk associated with this investment.
Tax Implications :
The sum invested in the SCSS on or after April 1, 2007, is eligible for tax deduction under Section 80C of the Income Tax Act. However, the interest earned on the deposit is fully taxable and tax is deducted at the source (TDS) only if the total interest in a year is above `10,000. However, if the income is not taxable, one has to provide Form 15H or Form 15G so that no tax is deducted at the source.

Points to Remember :

Portability of the account from one bank to another is available. ECS transfer of interest to the savings account can be done. There is penalty in the case of early closure of the account.

Public Provident Fund Account

Investment Objective and Risks
The primary objective of saving in the PPF account is to avail tax deduction on deposits, guaranteed returns on investment and tax-free withdrawal on maturity.
Capital Protection :
The capital in a PPF account is completely protected as the scheme is backed by the Government of India, making it fully risk-free with guaranteed returns.
Inflation Protection :
The PPF account is not inflation protected, which means whenever inflation is above the latest guaranteed interest rate, the deposit earns no real returns. However, when the inflation rate is below the guaranteed rate, it does manage a positive real rate of return.
Guarantees :Interest rates are aligned with G-sec rates of similar maturity, with a spread of 0.25 per cent. The government has decided to review the PPF rates quarterly. For the first quarter of FY16–17, the rate has been set as 8 per cent compounded annually.
Liquidity :
The PPF is liquid, despite the 15-year lock-in stipulated with this account. Liquidity is offered in the form of loans against the PPF from the third year and withdrawals subject to conditions from the seventh year.

Loans against the PPF are available from the third year of opening the account to the sixth year, wherein the loan amount will be up to a maximum of 25 per cent of the balance in the account at the end of the first financial year. However, the loan has to be repaid with interest within 36 months. For loans before December 1, 2011, the interest rate is 1 per cent and for loans thereafter, it is 2 per cent.

In a financial year, one withdrawal of up to 50 per cent of the balance at the end of the fourth year or at the end of the preceding year, whichever is lower, can be withdrawn. However, this withdrawal can be made seventh year onwards. For example, if the account is opened in 2010-11 and the first withdrawal is made during 2017-18, the amount one can withdraw is limited to 50 per cent of the balance on March 31, 2014, or March 31, 2017, whichever is lower. Thereafter, one withdrawal every year is permissible.

Credit Rating :
As the PPF is backed by the Government of India, it does not require any commercial rating.
Exit Option : Premature closure of a PPF account is not permissible except in the case of the death of the account holder.
Other Risks :
Savings in this product are completely risk-free because of the government backing.
Tax Implications :
The sum invested in the PPF account is eligible for tax deduction under Section 80C subject to a maximum of `1.5 lakh in a financial year. On maturity, the entire amount, including the interest, is tax free. The deposit is also exempt from wealth tax.

Points to Remember :

There is a minimum sum needed to start an account In the case of loans, interest is charged at 2 percentage points more than the rate of interest.

TIPS AND STRATEGIES

IExhaust the full investment permissible to avail tax deduction on the first day of each financial year. This will ensure that your yearly investment earns interest for the complete year, enjoys the compounding effect and accumulates a significant sum over the long term. Investing the full sum (see the table ‘Making the Most of PPF’) each year in PPF will accumulate `36.81 lakh at the end of the 15-year PPF tenure, of which the investment contribution is only `18.5 lakh; the rest is the advantage of compounding.

Deposit the PPF contribution between the first and the fifth of the month to earn interest for the whole month.