Gratuity scheme

What Is Gratuity? | Gratuity Scheme | 1 Best loyalty reward scheme for employees

Table of Contents

Blog Introduction

Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on Gratuity Scheme.

Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.

Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.

In this blog post I will be explaining my analysis on  Gratuity Scheme. This will be a complete guide on Gratuity Scheme. Please read till end of the blog post to know the complete information about this Gratuity Scheme. Lets get started.

What Is Employee Gratuity Scheme?

Gratuity is a retirement and loyalty reward scheme for the salaried employees. Gratuity is a defined benefits scheme in which a lump sum amount will be paid to the employee by the employer, when he leaves the organisation after serving for certain number of years. It is more like a reward from the employer appreciating the employee’s service. Gratuity scheme is a part of employee’s salary and it is paid by the employer for the services offered by the employee.

History Of Employee Gratuity Scheme

Before 1972, it was not compulsory for an employer to provide some reward to an employee when he leaves the organisation. But, in 1972, Government of India came up with Payment of Gratuity Act. As per this Act, if the employer is having more than 10 employees, then Gratuity scheme is a compulsory benefit. Employer should pay Gratuity when the employee leaves the organisation after serving certain number of years.

How Does Employee Gratuity Scheme Work?

When an employee joins an organisation, he automatically becomes a part of employer’s Gratuity scheme. Employer specifies the gratuity scheme benefits on the Offer Letter given to the employee. Employer contributes to the Gratuity fund on his own or through a life insurance company. When the employee leaves the organisation after serving for at least 5 years, employer pays the gratuity amount as a one time lump sum amount appreciating employee’s service. If the employee leaves before 5 years, then employee will not get any gratuity benefits.

Features Of Gratuity Scheme

  • It is a retirement or resignation benefit scheme.
  • No contribution from the employee. The Employer pays the entire contribution.
  • Income tax benefits.

Eligibility Criteria for Employee Gratuity Scheme

  • An employee is eligible to receive gratuity benefits if he serves the organisation for at least 5 years of continuous service as an employee.
  • If an employee leaves the organisation before 5 years, then no gratuity will be paid.
  • In case of death or disablement of the employee before 5 years, the eligibility rules are not applicable.
  • In case of death, employee’s nominees will get the gratuity benefits.

When Will Employee Get Gratuity?

Gratuity is a one time lump sum payment and it is paid to the employee when he leaves the organisation after serving for at least 5 years of continuous service as an employee.

The reason for leaving the organisation can be one of the following.

  • Resignation.
  • Laid off by employer.
  • Voluntary retirement.
  • Retirement.
  • Disability due to accident or disease.
  • Death

How To Calculate Gratuity?

Gratuity benefit amount is calculated based on the following two things.

  • Employees covered under Gratuity Act.
  • Employees NOT covered under Gratuity Act.

Let us see the calculation details for each category.

Employees covered under Gratuity Act: For the employees covered under Gratuity Act, it is calculated using the following formula.

Gratuity = (number of years of service x last drawn monthly salary x 15) / 26.

where “number of years of service” is the total number of years of service of employee to the employer . if the employee’s service is more than 6 months, then it will be considered as 1 year. if the employee’s service is less than or equal to 6 months, then it will be ignored.

For example, if employee’s service is 8 years and 7 months, then it will be considered as 9 years. If employee’s service is 8 years and 5 months, then it will be considered as 8 years only.

Last drawn monthly salary is the amount employee received just before leaving the organisation.

Monthly salary includes Basic Pay and DA (Dearness Allowance) only.

Employees NOT covered under Gratuity Act: For the employees who are NOT covered under Gratuity Act, it is calculated using the following formula.

Gratuity = (number of completed years of service x average monthly salary x 15) / 30.

where “number of completed years of service” is the total number of completed years of service of employee to the employer. only the completed number of years will be considered. Any Service in months will be ignored.

for example, if the employee’s service is 8 years and 10 months, then only 8 years will be considered.

Average monthly salary is the average of last 10 months’ salary just before leaving the organisation.

monthly salary includes Basic Pay, DA (Dearness Allowance) and commissions, if any, only.

Limit On Gratuity Scheme Benefits

There is an upper limit on the Gratuity scheme benefit amount payable to the employees. The limit details are given below.

Employee TypeGratuity Limit
 Government employee Rs. 20 Lakhs from 01-Jan-2016.
 Before that, the limit was Rs. 10 Lakhs
 Non-Government employee Rs. 20 Lakhs from 29-Mar-2018.
 Before that, the limit was Rs. 10 Lakhs
Limit On Gratuity Benefits

Government Employees:

  • The limit is Rs. 20 Lakhs only. Earlier, the limit was Rs. 10 Lakhs. It was increased to Rs. 20 Lakhs with effective from 01-Jan-2016.
  • Based on the calculations formulas mentioned in the previous section, if the Gratuity benefit is more than Rs. 20 Lakhs, the employer can pay a maximum of Rs. 20 Lakhs only as per the law.
  • However, the employer can choose to pay the amount in excess of Rs. 20 Lakhs in the form of Bonus or other salary components.

Non-Government Employees:

  • The limit is Rs. 20 Lakhs only. Earlier, the limit was Rs. 10 Lakhs. It was increased to Rs. 20 Lakhs with effective from 29-March-2018.
  • Based on the calculations formulas mentioned in the previous section, if the Gratuity benefit is more than Rs. 20 Lakhs, the employer can pay a maximum of Rs. 20 Lakhs only as per the law.
  • However, the employer can choose to pay the amount in excess of Rs. 20 Lakhs in the form of Bonus or other salary components.

Income Tax Benefits in Gratuity Scheme

The income tax impact on Gratuity amount is based on whether the employee is Government or non-Government. The details of each category are given below.

Government Employees: The gratuity amount received is completely (100%) tax free for Government employees.

Non-Government Employees: Tax treatment for non-Government employees can be divided into the following 2 categories.

  1. Non-Government employees covered under Gratuity Act. :
  2. Non-Government employees NOT covered under Gratuity Act.

Non-Government employees covered under Gratuity Act: For the non-Government employees covered under the Payment of Gratuity Act, the Gratuity amount received will be tax free to a certain limit. That limit will be the lowest of the following 3 items.

1. actual gratuity received.
2. (number of years of service x last drawn monthly salary x 15) / 26.
3. Rs. 20 Lakhs
Gratuity Act

Any amount received more than the above mentioned limit will be added under the head “Income from Salary” and it will be taxed as per employee’s income tax slab.

 Non-Government employees NOT covered under Gratuity Act: For the non-Government employees NOT covered under the Payment of Gratuity Act, the Gratuity amount received will be tax free to a certain limit.

That limit will be the lowest of the following 3 items.

1. actual gratuity received.
2. (number of years of service x last drawn monthly salary x 15) / 30.
3. Rs. 20 Lakhs
Gratuity Act

Any amount received more than the above mentioned limit will be added under the head “Income from Salary” and it will be taxed as per employee’s income tax slab.

Death Of An Employee

  • In case of death of the employee, the eligible gratuity amount will be paid to his nominees or legal heirs.
  • In case of death of the employee, the eligibility criteria of 5 years of continuous service will not be applicable.
  • Even if the employee’s service is less than 5 years, the gratuity amount will be paid to his nominees.

Nomination facility for Gratuity Scheme

  1. Nomination facility is available in Gratuity scheme.
  2. After 1 year of service, an employee can make a nomination with his employer to pay the Gratuity benefits just in case of his death before retirement.
  3. Nomination can be made in the name of one or more family members.
  4. Nominees should be family members only. Employee can’t nominate any one outside of family.
  5. Employee can update nomination during the employment as and when family situation changes.

FAQ About Employee Gratuity Scheme

Can Employer Deny Paying Gratuity?

There are certain situations where the employer will not pay gratuity to employee even if the employee is eligible for gratuity. The Employer can choose NOT to pay gratuity to an employee if he is laid off for reasons such as misconduct, violence, moral offence, causing damage to employer’s properties, etc.

Maternity Leave For Gratuity Calculation

For female employees, the maternity leave has been increased to 26 weeks from 12 weeks. This is for the calculation of continuous service in Gratuity. This has been effective since 29-Mar-2018.

What Is Gratuity?

Gratuity is a retirement and loyalty reward scheme for the salaried employees. Gratuity is a defined benefits scheme in which a lump sum amount will be paid to the employee, by the employer, when he leaves the organisation after serving for certain number of years. It is more like a reward from the employer appreciating the employee’s service.

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Systematic Withdrawal Plan 

What is SWP? | What is Systematic Withdrawal Plan? | 1 Best Investment Idea

Table of Contents

Blog Introduction

Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on Systematic Withdrawal Plan (SWP).

Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.

Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.

In this blog post I will be explaining my analysis on Systematic Withdrawal Plan. This will be a complete guide on Systematic Withdrawal Plan (SWP). Please read till end of the blog post to know the complete information about this Systematic Withdrawal Plan. Lets get started.

What Is SWP?

SWP stands for Systematic Withdrawal Plan. SWP is a method of regularly withdrawing money from an existing Mutual Fund at pre-determined intervals. The money withdrawn can be re-invested in another fund or can be kept as cash by the investor or can be used for personal expenses depending on your needs.

To make it easy if you have some lump sum amount with you, it can be invested in a fund and you can plan to withdraw some % of the interest earned every month or quarter as per your needs. The remaining outstanding balance will continue to earn interest. Hence you will get a regular income also your corpus will continue to grow.

This process is similar to Systematic Investment plan SIP , the only difference is, in SIP you used to invest money in a systematic a way to create the wealth . But in case with SWP you will be withdrawing money in a systematic way , still you will be able to create wealth. This is a very powerful investment approach for those who has some lump sum amount like a retired person or anyone who has a good corpus.

Let us take a small example with some investment and return. Suppose you have a corpus/lump sum amount of 1 Crore and you invest this in a fund with SWP mode. If we calculate at 12% interest rate (CAGR ) for 15 years with INR 70,000 monthly withdrawal After 15 years your Corpus or Principle amount will be 2 crore 13 lakhs . Is not it so amazing. Please read this complete article to understand more about Systematic Withdrawal Plan (SWP).

How Does Systematic Withdrawal Plan Work?

  • Choose an existing mutual fund scheme where you have already invested your money or invest a lump sum amount in an “Open Ended” mutual fund scheme.
  • Specify the withdrawal amount and withdrawal frequency (monthly, quarterly, etc).
  • Specify the duration (for ex. 2 years or 15 years as you wants ) during which you want to withdraw the amount.
  • You will receive the amount from mutual fund company as per your chosen withdrawal frequency.
  • At the end of the term, you can opt for extending the withdrawal further or stop there.
  • The lump sum amount in the existing mutual fund can remain invested or you can withdraw it, if any.

Features Of Systematic Withdrawal Plan

  • Provides regular income to investors from their investments.
  • Investor can choose the withdrawal amount and withdrawal frequency.
  • Option to withdraw only the appreciated amount so that the capital amount remains invested.
  • Even after your withdrawals, the remaining amount will remain invested and earns returns.
  • SWP is better than dividends in terms of Tax effect.
  • There is no TDS (Tax Deducted at Source) deducted for the withdrawn amount.

Disadvantages of Systematic Withdrawal Plan

  • Depending upon the performance of the fund, withdrawals can eat into your capital amount and you may have zero Rupees at the end. Hence you need to plan your withdrawal amount as per the market performance to save your Capital .
  • SWP is nothing but taking out money from an existing mutual fund. So, depending upon the fund and withdrawal timeline, STCG (Short Term capital Gains) tax or LTCG (Long Term capital Gains) tax may be applicable.
  • Depending upon the fund and withdrawal timelines, there may be exit load fees for withdrawing.
  • Investors are not allowed to participate both SIP and SWP in one mutual fund scheme.
  • You can’t opt for SWP facility under “Close Ended” mutual funds

Withdrawal Frequency of Systematic Withdrawal Plan

You can opt for one of the following withdrawal modes to withdraw through SWP.

  • Monthly.
  • Quarterly.

Systematic Withdrawal Plan Options

In SWP, you can opt for one of the withdrawal methods.

  • Withdraw fixed amount : In this method, you can opt for withdrawing a fixed amount every withdrawal period. For example, you may choose to withdraw Rs. 5,000/- every month or Rs. 10,000/- every quarter. This method provides a regular income but the drawback is that it can reduce your capital amount considerably over time.
  • Withdraw appreciated amount : In this method, you can opt for withdrawing only the appreciated amount during the withdrawal period. For example, let us assume that your investment will give returns of Rs. 10,000/- during a quarter. So, you will receive Rs. 10,000/- and your capital investment will remain the same and invested. Another example, let us assume that your investment doesn’t give any returns during a month or quarter, then you will not receive any amount. This method is good for those who wants to receive only the appreciated amount and wants to protect the lump sum capital amount.

Duration Of Systematic Withdrawal Plan

  • Minimum duration is 6 months in case of monthly withdrawal.
  • Minimum duration is 12 months in case of quarterly withdrawal.
  • There is no maximum duration for withdrawal. You can withdraw as long as you have funds or till the funds reaches zero Rupees.

Systematic Withdrawal Plan Calculated Amount Projection Table

Lump Sum Deposit AmountExpected Rate of Interest %Regular Monthly Withdrawal Amount Final Balance After 5 YearsFinal Balance After 10 YearsFinal Balance After 15 YearsFinal Balance After 20 Years
10,00,00012%600012,75,20517,60,21126,14,95741,21,311
15,00,00012%1000018,31,61824,16,04334,46,00152,61,137
20,00,00012%1400023,88,03130,71,87642,77,04464,00,963
25,00,00012%1800029,44,44537,27,70951,08,08875,40,788
30,00,00012%2200035,00,85843,83,54259,39,13286,80,614
35,00,00012%2600040,57,27150,39,37567,70,17698,20,440
40,00,00012%3000046,13,68556,95,20776,01,2201,09,60,265
45,00,00012%3500050,88,90861,26,76779,55,8291,11,79,261
50,00,00012%4000055,64,13265,58,32783,10,4381,13,98,256
75,00,00012%5500087,52,1461,09,58,8551,48,47,8312,17,01,536
1,00,00,00012750001,15,34,2121,42,38,0191,90,03,0512,74,00,664
SWP Calculated Amount Projection Table

FAQ About Systematic Withdrawal Plan

Is SWP A Financial Product?

No. SWP is not a financial product. It is just a method to withdraw money from Mutual Funds.

How to Strat a SWP?

First you need to choose a Mutual Funds. After that you need to visit to the respective Mutual funds company’s Website and opt for the SWP. or you can directly contact the mutual fund house to help you. For More details click here

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SIP

What is SIP? | What is Systematic Investment Plan | 1 Best Investment Idea

Table of Contents

Blog Introduction

Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on Systematic Investment Plan (SIP).

Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.

Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.

In this blog post I will be explaining my analysis on Systematic Investment Plan (SIP). This will be a complete guide on Systematic Investment Plan (SIP). Please read till end of the blog post to know the complete information about this Systematic Investment Plan (SIP). Lets get started.

What Is SIP?

SIP stands for Systematic Investment Plan. SIP is a systematic method of investing your money in Mutual Funds. A SIP is a planned approach towards investments and it helps you to develop the habit of saving and building wealth for the future.

How Does Systematic Investment Plan Work ?

  • Choose a mutual fund scheme that you want to invest.
  • Decide the investment amount and the term.
  • Decide the investment frequency (Weekly, monthly, quarterly, half-yearly or yearly).
  • As you invest, units are allocated as per ongoing market rate (called NAV or Net Asset Value).
  • You will get more units when the price is low and less units when the price is high.
  • At the end of the term, you can redeem the units and get the accumulated amount.
  • You also have the option to redeem partially and extend the investment further.

Features of Systematic Investment Plan ?

  • One of the best ways to enter equity market.
  • Helps you to invest as little as Rs. 500 every month.
  • Helps you to develop the habit of discipline and regular investments.
  • No need to time the share market.
  • Rupee-cost averaging.
  • Compounding returns – small investments every month can create a big corpus over time.
  • Flexibility in investing. You can increase or decrease your SIP amount

Disadvantages of Systematic Investment Plan ?

  • SIP returns is not guaranteed and it may vary based on market conditions.
  • SIP doesn’t work well in the rising markets as you get less and lesser units with every instalment. So, the “rupee cost average” concept may not work on rising markets. It means less returns to the investor.
  • If you opt for SIP in tax saving funds like ELSS, then each instalment will be locked for 3 years.

Rupee Cost Averaging in Systematic Investment Plan

  • In volatile markets, investors are worried about whether to invest their money or not.
  • SIP helps you to invest without timing the Share market or worrying about the volatile nature of the Share market.
  • Investors get more units when the price is low and less units when the price is high.
  • Thus, it averages out your accumulated units and this concept is known as “Rupee Cost Averaging”.

Power Of Compounding

  • Albert Einstein once told “Compound Interest is the 8th wonder of the World. Those who understand will become rich. Those who don’t understand will remain poor”.
  • If you start to invest early, then you will have more time for your money to grow.
  • Small amount invested today will become a big corpus over time.

Mode Of Systematic Investment Plan

You can opt for one of the following modes to invest in SIP schemes.

  • Weekly
  • Monthly
  • Quarterly
  • Half-yearly
  • Yearly

Systematic Investment Plan In Tax Saving Funds (ELSS)

  • You can opt for SIP in Tax savings mutual funds like ELSS (Equity Linked Savings Scheme).
  • But, note that every instalment amount of SIP will be locked for 3 years.
  • For example, if you opt to invest Rs. 1,000 for 6 months, then every investment of Rs. 1,000 will be locked for 3 years.

Earning | Returns Projection Table of Mutual Funds through SIP.

Let us take an example of Monthly investment in Mutual funds through SIP (Systematic Investment Plan) . We will consider few factors here.

  • Monthly Investment Amount
  • Expected Interest rate %
  • Number of years investment and maturity amount.
Monthly Investment AmountExpected Interest rate %for 5 years Maturityfor 10 years Maturityfor 15 years Maturityfor 20 years Maturityfor 25 years Maturityfor 30 years Maturity
500012%4,05,94611,21,36423,82,17346,04,15185,20,0341,54,21,158
500015%4,37,41113,17,20330,86,77966,46,0271,38,04,9472,82,04,091
1000012%8,11,89322,42,72847,64,34792,08,3021,70,40,0683,08,42,317
1000015%8,74,82326,34,40761,73,5581,32,92,0542,76,09,8945,64,08,182
1500012%12,17,84033,64,09271,46,5211,38,12,4532,55,60,1024,62,63,475
1500015%13,12,23539,51,61192,60,3371,99,38,0824,14,14,8418,46,12,274
2000012%16,23,78744,85,45695,28,6951,84,16,6043,40,80,1376,16,84,634
2000015%17,49,64752,68,8141,23,47,1162,65,84,1095,52,19,78811,28,16,365
2500012%20,29,73456,06,8201,19,10,8682,30,20,7554,26,00,1717,71,05,792
2500015%21,87,05965,86,0181,54,33,8953,32,30,1376,90,24,73514,10,20,456
3000012%24,35,68167,28,1851,42,93,0422,76,24,9065,11,20,2059,25,26,951
3000015%26,24,47179,03,2221,85,20,6743,98,76,1648,28,29,68216,92,24,548
Earning Projection

You can see in the above table how you can build your wealth by investing small small amount through SIP. Hence don’t delay to open your account and start your SIP today.

Open your account to start your SIP today

You can start invest in mutual funds through SIP with the following Mobile apps with Zero commission charged. Please click on the Image to open the account today with free of cost and start your first SIP today.

FAQ About SIP

Is SIP A Financial Product?

No. SIP is not a financial product. It is just a method to invest your money in Mutual Funds schemes.

What is the Duration Of SIP?

Minimum investment duration is 6 months. Maximum investment duration is as long as you want to invest. There is no maximum limit on duration. Longer the better to avail the maximum use of Power Of Compounding.

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Equity Linked Savings Scheme

What is Equity Linked Savings Scheme ? | What Is ELSS? | 1 Best Savings Scheme

Table of Contents

Blog Introduction

Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on Equity Linked Savings Scheme.

Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.

Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.

In this blog post I will be explaining my analysis on Equity Linked Savings Scheme (ELSS). This will be a complete guide on Equity Linked Savings Scheme (ELSS). Please read till end of the blog post to know the complete information about this Equity Linked Savings Scheme (ELSS). Lets get started.

What Is ELSS?

ELSS stands for Equity Linked Savings Scheme. ELSS is an open-ended equity mutual fund with income tax benefits under Section 80C of the Income Tax Act. ELSS invests majority of investments into equity and equity related assets and hence it is classified as “Equity” mutual fund. ELSS is considered under “high risk, high returns” category of investments.

How Does Equity Linked Savings Scheme Work?

  • Choose an ELSS fund from one of the Mutual Fund companies.
  • Invest the lump sum amount.
  • Your amount will be locked for 3 years.
  • After 3 years, you can withdraw the entire accumulated amount. Or, you can leave the amount and let it grow for as long as you wish.

Investment Limits in Equity Linked Savings Scheme

Minimum investment amount is Rs. 500. There is no limit on maximum investment amount. You can invest as much as you can. But the tax deduction is available up to Rs. 1.5 Lakhs in a financial year. Anything invested more than this will not get any tax deduction benefits. However, the amount will be invested and you can gain returns.

Disadvantages Of Equity Linked Savings Scheme

  • High risk investment.
  • ELSS returns is not guaranteed and it may vary based on Market conditions.
  • Investment is locked for 3 years. You can’t withdraw before 3 years. No partial withdrawal or pre-mature withdrawal options.
  • Once invested, you can’t switch to another fund during the lock-in period of 3 years.

Maturity Period of Equity Linked Savings Scheme

  • Maturity period is 3 years.
  • After 3 years, You can do one of the following.
  • withdraw the entire accumulated amount and close the account.
  • leave the amount invested and let it grow further for as long as you want. You can withdraw whenever you need either in full or in parts.

Systematic Investment Plan (SIP) In Equity Linked Savings Scheme

  • Like other mutual funds, ELSS scheme also offers SIP option.
  • You can opt for SIP route to invest in ELSS and you will get all the advantages of SIP method.
  • But, note that every instalment of SIP will get locked for 3 years.
  • For example, amount invested in Apr-2016 will be matured in Apr-2019. Amount invested in May-2016 will be matured in May-2019. Amount invested in Jun-2016 will be matured in Jun-2019 and so on.

Income Tax Benefits of Equity Linked Savings Scheme

ELSS mutual funds are the only class of mutual funds that are covered under Section 80C of the Income Tax Act, 1961. By investing in an ELSS, you are entitled to claim a tax rebate of up to Rs 1,50,000 a year. This helps you save up to Rs 46,800 a year in taxes.

Investment Options In Equity Linked Savings Scheme

When you choose a ELSS fund, you can opt for one of the following options.

  • Growth : As the name implies, growth option aims for capital appreciation over long term. The number of units that you bought will remain the same till you sell them. NAV of the scheme will increase or decrease depending upon the performance of the scheme. In these schemes, you will get money only when you sell the units. This is suitable for those who expects growth over long term and not in need of money during short term.
  • Dividend Payout : Dividends are nothing but the profits made by the Mutual Fund scheme. This option pays out dividends to investors from time to time. But, the dividend amount and the frequency of dividends are not guaranteed. The number of units will remain the same but the NAV of the scheme comes down after the dividends are declared. This is suitable for those who expect to receive income flow on a regular basis.

FAQ About ELSS

Is ELSS Returns Guaranteed?

No. ELSS returns is not guaranteed and it may vary based on Market conditions.

How many ELSS funds should I invest in?

It depends on the market knowledge you have. There is no ideal number, but it is advisable to keep it under 3 as it may turn out to be quite a task to track and manage your investments in multiple funds.

How to redeem ELSS after 3 years?

You have two ways of redeeming your investments made in mutual funds.
1. opting for a one-time lump sum withdrawal.
2. Initiate a systematic withdrawal plan or SWP. It is a process of withdrawing a fixed sum at regular intervals.

Can I withdraw ELSS after three years?

Yes, you can withdraw ELSS after the mandatory lock-in period of three years

Is ELSS better than PPF?

ELSS is a suitable tax-saving investment for investors with higher risk tolerance. It is one of the few tax-saving investments under Section 80C that invests predominantly in equities. However, PPF is a suitable investment for conservative investors and has the potential to offer inflation-beating returns over time. You can choose between ELSS and PPF based on your risk tolerance.

Do I get full money when I redeem ELSS?

You have the option of either redeeming your ELSS investment fully or partially, depending on your requirements. However, you cannot redeem those units that have not completed the mandatory lock-in period of three years.

Equity Linked Savings Scheme comes under which Section of 80C?

ELSS mutual funds provide tax deductions under Section 80C of the Income Tax Act, 1961. If you are a salaried individual, then you have to provide your proof of investment to your HR to avoid higher TDS deductions.

What is the risk in Equity Linked Savings Scheme?

Since ELSS is an equity-oriented mutual fund, it essentially carries all the risks that any other equity fund plan. All ELSS mutual funds are affected by the market risk, volatility risk and concentration risk. If you are a risk-averse investor, then you may consider investing in other Section 80C investments.

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Mutual Funds

What Is Mutual Funds? | End to End information about Mutual Funds | 1 Best Investment Idea

Table of Contents

Blog Introduction

Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on Mutual Funds investment.

Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.

Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.

In this blog post I will be explaining my analysis on Mutual Funds investment. This will be a complete guide on Mutual Funds investment. Please read till end of the blog post to know the complete information about this Mutual Funds investment. Lets get started.

What Is Mutual Funds?

A Mutual Fund is a trust that collects money from many investors and invest in various asset classes (equity, debt, liquid asset, etc). It is called Mutual because all the profit, loss, risks and dividends from the investments are shared among all the investors according to their contributions.

History Of Mutual Funds

Unit Trust of India (UTI) was the first mutual fund set up in India in the year 1963.In early 1990s, the Government allowed public sector Banks and Institutions to set up mutual funds. In the year 1992, Securities and Exchange Board of India (SEBI) Act was established. The objectives of SEBI are

  • To formulate policies and regulates the mutual funds.
  • To protect the interest of investors.
  • To promote the development of securities market.

In 1993, SEBI notified regulations for the mutual funds. After 1993, Private sector companies started to offer mutual funds. In 1996, the regulations were completely revised and updated. Thereafter, SEBI issued guidelines to Mutual Funds from time to time to protect the interest of investors.

Features Of Mutual Funds

  • Schemes managed by professional fund managers.
  • Mutual funds offer a wide variety of schemes that you can choose as per your needs and convenience.
  • Mutual funds diversify the risks by investing in a number of companies across a broad range of sectors.
  • Mutual funds have the potential to deliver higher returns over medium to long term.
  • Mutual funds are relatively less expensive to invest in equities compared to directly investing in share markets.
  • Some of the mutual funds schemes provide liquidity. It means you can take out the money whenever you want.
  • Mutual funds provides transparency in the form of disclosing the investment strategy, proportion of asset class for investment, value of your investment and periodic statements.
  • Mutual funds are regulated by SEBI.
  • Few mutual fund schemes (like ELSS) provide tax benefits.
  • Mutual fund schemes provide SIP (Systematic Investment Plan) option for investors to invest small amount of money on regular basis

Who Can Invest In Mutual Funds?

Mutual Funds schemes are open to a wide range of investors including

  • Resident individuals
  • HUF (Hindu Undivided Family)
  • NRI (Non Resident Indian)
  • PIO (People of Indian Origin)
  • Companies
  • Trusts
  • Co-operative Societies, etc.

What is NAV in Mutual Funds

  • NAV stands for Net Asset Value.
  • NAV is the current market price of one unit of a mutual fund scheme.
  • NAV is calculated on a daily basis for open ended schemes and weekly basis for close ended schemes.
  • NAV is calculated after deducting all the expenses and charges incurred by the fund.
  • NAV value depends on the performance of the mutual fund scheme.

Transaction Charges In Mutual Funds

Mutual fund investments come with a cost and they are listed below. You need to know these charges before investing in mutual funds.

  • Stamp duty charges (while buying)
  • Ongoing charges (while holding)
  • Exit charges (while selling)

The details about each of the charges are given below.

  1. Stamp Duty Charges (while buying) : From 01-July-2020 onwards, investors will need to pay stamp duty charges for any type purchase of Mutual Funds. The stamp duty charge is 0.005% of the investment amount. For example, if you invest Rs. 1 lakh, then the stamp duty charge will be Rs. 5 (that is, 0.005% of Rs. 1 lakh). The stamp duty amount will be deducted before allocating the units. If you invest Rs. 1 lakh, then Rs. 5 will be deducted first. After that, the units will be allocated for the remaining Rs. 99,995.
  2. Ongoing Charges (while holding) : Ongoing (recurring) charges are collected by the mutual fund company for providing various professional fund management services to the investors. These recurring charges are calculated on daily basis and deducted from the net assets of the fund. The NAV declared every day is after deducting these recurring charges. These recurring charges is known as Expense Ratio and it varies from 1.5% to 2.5% depending upon the size of the assets of the mutual fund company and type of funds (equity or debt). For example, if a equity mutual fund generates returns of 14% and it has expense ratio of 2%, then the effective return will be 12% (14% minus 2%). The expense ratio affects the returns of the mutual fund scheme and hence you need to consider the expense ratio before investing.
  3. Exit Charges (while selling) : Exit charges are like penalty that the investor has to pay if he sells the units before the specific period applicable for a mutual fund scheme. Exit charges may vary from one scheme to another scheme. Generally, exit charges are from 1% to 3%. For example, if you are trying to sell the units of an equity mutual fund before 1 year, then 1% will be deducted from the final amount that you are going to receive. Exit charges are deducted from the scheme’s NAV and hence the NAV value will come down resulting in a lesser final amount. This is known as “Redemption NAV”. For example, you invested in an equity mutual fund and you got 1000 units. You are trying to withdraw the entire 1000 units after 10 months. The current NAV is 15. So, exit load of 1% is applied on the NAV and it is 0.15 (1% of 15). So, the redemption NAV is 14.85 (15 minus 0.15). You will now receive Rs. 14,850/- (1000 units multiplied by 14.85). Exit charge in this case is Rs. 150/-.

How To Invest In Mutual Funds?

You can invest in mutual funds through one of the following ways.

  • Direct Investment
  • Invest through Agents

The details about each type is given below.

  1. Direct Investment: You can approach the Mutual Fund Scheme office directly and invest the money by completing necessary paperwork. Some mutual fund schemes allow investment through their website and it can be made conveniently from your home. Advantage with this approach is that you will not be charged any transaction fee or commission fee and your entire amount will be invested. At the same time, it may be inconvenient to go to each and every mutual fund company if you wish to invest in various mutual fund schemes.
  2. Invest through Agents: There are many Mutual Fund Agents or Brokers and they can help you with various things on mutual funds like investment, redemption, answering your queries, completing necessary paperwork, etc. By going through the agents, you can invest in various mutual fund schemes. It is like a “one stop” for any mutual fund related things. But, agents charge you a one time fee for investments above Rs. 10,000. This will be reflected in the Mutual Fund Statement delivered to you from time to time. Refer Transaction Charges in Mutual Funds section to know more about the fees charged by the agents. These charges are as per the guidelines issued by SEBI to Mutual Funds companies and Agents office.

You can also invest in mutual funds through the following Mobile apps with Zero commission charged. Please click on the Image to open the account today with free of cost.

Types Of Mutual Funds

There are a variety of mutual funds and it causes confusion to the common people. The following list will help you to understand better.

Types of Mutual Funds by Company Size:

  • Large Cap funds : These funds invest a large portion of their corpus in companies with large market capitalisation. These funds generally offer stable and sustainable returns over a period of time. These funds are classified as less volatile, less risk, less returns type.
  • Mid-Cap funds : These funds invest a large portion of their corpus in companies with mid size market capitalisation. These funds generally offer medium returns over a period of time. These funds are classified as medium volatile, medium risk, medium returns type.
  • Small Cap funds : These funds invest a large portion of their corpus in companies with small size market capitalisation. These funds generally offer more returns over a period of time. These funds are classified as more volatile, more risk, more returns type.

Types of Mutual Funds by Structure:

  • Open ended schemes : These schemes don’t have a fixed maturity period. You can buy or sell the units at any time of the year as per NAV prices. The key feature of this scheme is liquidity. You can take out your money whenever you want. These schemes announce NAV on a daily basis.
  • Closed ended schemes : These schemes come with a fixed maturity period. You can invest in these schemes only at the time of initial issue called “New Fund Offer (NFO)”. You can sell the units only at a specified maturity date. In addition, these schemes are listed on the Stock Exchange where you can buy or sell units of the fund. These schemes announce NAV on a weekly basis.
  • Interval schemes : These schemes combine the feature of both Open ended and Close ended schemes. You can buy or sell the units at pre-determined intervals at NAV price. In addition, these schemes are listed on the Stock Exchange where you can buy or sell units of the fund.

Types of Mutual Funds By Investment Objectives

By investment objectives, mutual funds can be categorised as the following types.

  • Equity Schemes: These schemes are known as high risk, high return. These schemes generally invest a majority of their funds in equities (Shares) and hence these are high risk investments. These schemes aim to provide capital appreciation over long term and hence suitable for long term investors. These schemes are NOT suitable for those who want regular income or who need money in a short term.
  • Income or Debt Schemes: These schemes are known as less risk, less return. These schemes invest a majority of their funds in fixed income securities like Bonds, Corporate Debentures, Government Securities and money market instruments. These investments are low risk investments. These schemes aim to provide regular and steady income and hence suitable for short term investors and retired people. These schemes are NOT suitable for long term investors as there will not be much of capital appreciation.
  • Balanced Schemes: These schemes are known as medium risk, medium return. These schemes invest in both equity and fixed income instruments. These schemes aim to provide a combination of regular income and moderate capital appreciation. These schemes are suitable for investors looking for moderate growth.
  • Money Market or Liquid Schemes: These schemes provide easy liquidity. These schemes invest in safe and short term instruments such as Treasury Bills, Certificates of deposit. These schemes aim to provide capital protection and moderate income. The returns from these schemes may fluctuate based on the interest rates in the market.
  • Tax Saving Schemes: These schemes provide tax benefits to investors as per the Income Tax Act. For example, Equity Linked Savings Scheme (ELSS) and Rajiv Gandhi Equity Savings Scheme (RGESS). The aim of these schemes is to provide capital appreciation and tax benefits. These schemes come with a specific lock-in period. These schemes invest mainly in equities and hence they are high risk oriented schemes.
  • Gilt Schemes: These schemes invest exclusively in government securities. NAVs of these schemes fluctuate due to change in interest rates.
  • Index Schemes: These schemes represent the portfolio of a particular index such as BSE Index, NSE (Nifty) Index, etc. These schemes invest in the shares that represent an index. NAVs of these schemes will rise or fall according to the rise or fall in the index.
  • Sector Schemes: These schemes invest in shares that are a part of a specific sector. For example, technology sector schemes will invest in Infosys Technologies, Wipro Technologies, etc. Returns from these schemes depends on the performance of the chosen sector. These schemes are high risky compared to diversified equity funds.
  • Exchanged Traded Schemes: These schemes contain a basket of shares that represent the combination of Index like BSE Index, NSE (Nifty) Index, etc. Investors can buy or sell the funds anytime during trading hours at the traded price. This has advantage over the index funds that allows you to buy or sell based on end of the day NAV only.
  • Fund of Funds Schemes: These schemes invest in other mutual fund schemes. This helps investors to diversify the risk through one scheme. The returns depend on the performance of the target mutual fund schemes.

Types of Mutual Funds By Payout

By money payout method, mutual funds can be categorised as the following types.

  • Growth schemes : As the name implies, Growth option aims for capital appreciation over long term. The number of units that you bought will remain the same till you sell them. NAV of the scheme will increase or decrease depending upon the performance of the scheme. In these schemes, you will get money only when you sell the units. This is suitable for those who expects a growth over long term and those who is not in need of money during short term.
  • Dividend Payout schemes : Dividends are nothing but the profits made by the Mutual Fund scheme. This scheme pays out dividends to investors from time to time. But, the amount and the frequency of dividends are not guaranteed. The number units will remain the same but the NAV of the scheme comes down after the dividends are declared. This is suitable for those who expect to receive income flow on a regular basis.
  • Dividend Re-investment schemes : This scheme declares dividends but it is not paid to the investors. Instead, they are re-invested into the scheme. This way, you stay invested in the scheme. NAV gets re-adjusted after the dividends are declared and re-invested. The number of units will increase as the dividends are re-invested.

Risks Or Disadvantages of Mutual Funds

  • Mutual Fund returns is not guaranteed and it may vary based on market conditions.
  • Mutual fund companies charge investors for various professional fund management tasks. They include transaction charges, exit charges and recurring annual charges. These charges may impact the returns of the scheme. Refer Transaction Charges in Mutual Funds section to know more about various costs before investing
  • Mutual fund companies will continue to charge fees even if the fund gives negative returns.
  • You can buy or sell mutual funds units only at the end of the day. Not during trading hours.
  • Mutual fund companies keep a large amount of cash at hand to pay the investors just in case if they sell the units due to various reasons. It means that they need to invest in cash in addition to other asset classes. This may impact the returns.

Income Tax Benefits of Mutual Funds

You need to know the following things to get a good understanding of income tax benefits in mutual funds.

  • Section 80C Benefits : Effective 01-Apr-2020, Section 80C benefits will be available only on the old tax system. They are not available on the new tax system. ELSS (Equity Linked Savings Scheme) provides tax benefits under Section 80C of the Income Tax Act. Under ELSS scheme, investments up to Rs. 1.5 Lakh in a financial year will qualify for tax deduction under Section 80C. For tax on maturity or withdrawal amount, please refer to “Capital Gains Tax” section below.
  • Dividends Payout Tax : In the past, for an investor, the dividend received from a Mutual Funds company was completely tax free. But, for the Mutual Funds company, the dividends declared were taxed and it was known as Dividend Distribution Tax (DDT). The DDT rate was 10% for equity funds and 28.84% for debt funds. The Mutual Funds company was responsible for paying DDT to the Government of India. The NAV of the fund came down to the extent of DDT deducted. Effective 01-Apr-2020, DDT will be removed. It means the Mutual Funds company won’t deduct DDT while paying dividends. But, the dividends will be taxable for the investor as per their income tax slabs. So, if you receive dividends from a Mutual Funds company, then they’ll be added to your income and then they’ll be taxed as per your income tax slabs. You need to be aware of this before opting for dividends payout in mutual funds.
  • Capital Gains Tax (CGT) : The profit that you get when you sell mutual fund units is known as “Capital Gains” and the tax applied on these gains is known as “Capital Gains Tax”.
  • TDS (Tax Deducted at Source) : In the past, there was no TDS (Tax Deducted at Source) concept in Mutual Funds investments. But, effective 01-Apr-2020, there will be TDS on dividends paid to the investors. If the dividend to be paid is more than Rs. 5,000, then the Mutual Funds company will deduct 10% of the dividend amount as TDS. If excess TDS has been deducted, then you can claim it back at the time of filing your Income Tax Returns.

Who Regulates Mutual Funds?

Mutual Funds in India are regulated by a SEBI (Securities and Exchange Board of India).

The objectives of SEBI are.

  • To formulate policies and regulates the mutual funds.
  • To protect the interest of investors in share market.
  • To promote the development of securities market.

SEBI issues guidelines and revises policies from time to time to protect the interest of investors in the equity market.

What are Offer Document in Mutual Funds

Investors should read the Mutual Fund Offer Document before investment and it contains the following details.

  • Application form for investment.
  • Features of the scheme.
  • Risk Factors.
  • Initial issue expenses.
  • Recurring expenses.
  • Transaction and exit charges.
  • Track record of the scheme.
  • Educational qualification and work experience of the fund managers.
  • Performance of other schemes launched by the mutual fund.
  • Pending cases in court, if any
  • Penalties imposed.

Nomination Facility in Mutual Funds

  • Nomination facility is available in Mutual Fund schemes.
  • Nominations can be made only by individuals either singly or jointly.
  • Non-individuals like Trust, Society, Partnership Firm, Body Corporate, etc can’t nominate.
  • You can nominate up to 3 people as nominees.
  • In case of multiple nominees, you need to specify the percentage (%) of share for each nominee.
  • Total percentage of shares should be 100%.
  • You can nominate a minor as a nominee and in that case you need to provide the name, address and signature of the Parent or Guardian.
  • Nomination made by an individual will be applicable to all the schemes in the folio.
  • Nomination is not allowed for a folio that is in the name of a minor.

Earning|Returns Projection Table of Mutual Funds.

Let us take an example of Monthly investment in Mutual Funds through SIP (Systematic Investment Plan) . We will consider few factors here.

  • Monthly Investment Amount
  • Expected Interest rate %
  • Number of years investment and maturity amount.
Monthly Investment AmountExpected Interest rate %for 5 years Maturityfor 10 years Maturityfor 15 years Maturityfor 20 years Maturityfor 25 years Maturityfor 30 years Maturity
500012%4,05,94611,21,36423,82,17346,04,15185,20,0341,54,21,158
500015%4,37,41113,17,20330,86,77966,46,0271,38,04,9472,82,04,091
1000012%8,11,89322,42,72847,64,34792,08,3021,70,40,0683,08,42,317
1000015%8,74,82326,34,40761,73,5581,32,92,0542,76,09,8945,64,08,182
1500012%12,17,84033,64,09271,46,5211,38,12,4532,55,60,1024,62,63,475
1500015%13,12,23539,51,61192,60,3371,99,38,0824,14,14,8418,46,12,274
2000012%16,23,78744,85,45695,28,6951,84,16,6043,40,80,1376,16,84,634
2000015%17,49,64752,68,8141,23,47,1162,65,84,1095,52,19,78811,28,16,365
2500012%20,29,73456,06,8201,19,10,8682,30,20,7554,26,00,1717,71,05,792
2500015%21,87,05965,86,0181,54,33,8953,32,30,1376,90,24,73514,10,20,456
3000012%24,35,68167,28,1851,42,93,0422,76,24,9065,11,20,2059,25,26,951
3000015%26,24,47179,03,2221,85,20,6743,98,76,1648,28,29,68216,92,24,548
Earning Projection

FAQ about Mutual Funds

What is Exit Load in Mutual Funds?

Exit Load is the fees charged by AMCs for premature redemption of mutual funds units.

What is Expense Ratio in Mutual Funds

Mutual Funds company charge a fee for managing your funds or money. This fee referred as the expense ratio.

What is full form CAGR?

CAGR Stands for Compound annual growth rate.

How to select the right mutual fund?

Begin with setting up your goals and risk tolerance. Then keep a close eye on the expense ratio and avoid mutual funds that have a high turnover ratio
Next, you need to hire a fund manager or financial advisor who is experienced and can guide you as per your needs.

What is a new fund offer or NFO?

A New Fund Offer (NFO) refers to the introductory offer of a scheme by an AMC. An new fund offer is raised when a fund is launched, which helps the firm raise capital for purchasing securities. An investor can subscribe to an NFO only within a limited time period; hence, NFOs are functional on a first-come-first serve basis.

National Savings Certificate

What is NSC Investment Scheme ? | What is National Savings Certificate ? | 1 Best Guaranteed Returns

Table of Contents

Blog Introduction

Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on National Savings Certificate investment scheme.

Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.

Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.

In this blog post I will be explaining my analysis on National Savings Certificate investment scheme. This will be a complete guide on National Savings Certificate investment scheme. Please read till end of the blog post to know the complete information about this National Savings Certificate investment scheme. Lets get started.

What Is NSC?

NSC stands for National Savings Certificate. NSC is a savings scheme certificate that you can purchase from a Post Office.

How Does NSC Work?

  • You Need to deposit a lump sum amount and purchase NSC certificate.
  • At the end of 5 years, submit the certificate and get the maturity amount (deposit amount + interest earned)

Features of National Savings Certificate

  • This savings scheme is backed by the Government of India.
  • This is one of the best and safe investment option.
  • This provides the guaranteed returns.
  • This saving schemes helps you to invest as little as Rs. 1,000 thereby encourages the habit of investment.
  • This scheme specially designed for Income Tax assesses.
  • NSC Certificates can be kept as collateral security to get loan from banks.
  • Buy NSC every month for Five years. Re-invest on maturity and relax. Upon retirement, it will fetch you monthly pension as the NSC matures

Who Can Open The NSC Account?

  • Only Indian residents can purchase NSC certificates.
  • NSC certificate can be purchased by.
  • an adult for himself.
  • an adult on behalf of a minor or a person of unsound mind of whom he is the guardian.
  • a minor who has reached the age of 10 years.
  • joint account by up to 3 adults.
  • You can purchase any number of NSC certificates.

How Do You Open The NSC Account?

  • NSC certificate can be purchased by cash or cheque.
  • In case of cheque, the date of realisation of cheque in the account will be the date of account opening.

NSC Deposit Limits

  • Minimum deposit amount is Rs. 1,000.
  • No maximum limit on the deposit amount.
  • Deposit amount should be in multiples of Rs. 100. For example, Rs. 1,100, Rs. 1,200, Rs. 1,300, Rs. 1,400, etc.

NSC Maturity Period

NSC Maturity period is 5 years. Earlier, there used to be 10 years NSC as well. But, it has been dis-continued since 20-Dec-2015.

What is the current Interest Rate (%) of NSC?

  • Current annual interest rate is 6.80%.
  • Interest rate (on the day of account opening) will remain the same throughout the tenure of NSC. It will not change even if there are changes to the interest rate thereafter.
  • From 01-Apr-2016, the interest rate of this scheme has been announced on a quarterly basis. Note that this used to be on a yearly basis earlier.

Compounding Frequency of NSC Account

From 01-Apr-2016 onwards, yearly compounding frequency has been followed in this scheme. It used to be on half-yearly compounding frequency earlier.

NSC In Passbook Mode

  • Before 01-July-2016, when you invest in NSC, you used to get physical Certificate.
  • From 01-July-2016 onwards, Government has decided to discontinue the physical certificates.
  • Instead, you will be given the option to keep NSC in Passbook format.
  • This is similar to the passbook of the Savings Bank (SB) account.
  • After purchasing NSC, the entries will be made (either printed or manually) in the passbook.

Loss Of your National Savings Certificate

  • If you lose or lost the certificates that you purchased before 01-July-2016, you can apply for duplicate certificate.
  • But, instead of a certificate, you will get Passbook and it will have the certificate number of the old lost certificate.
  • If you lose the NSC Passbook that you purchased after 01-July-2016, you can apply for and get duplicate Passbook by paying required fees.

Pre-Mature Closure of your National Savings Certificate account

  • You can close NSC pre-maturely before the maturity period.
  • But, it is allowed only in the following special circumstances.
  • death of the account holder or holders in case of joint holding.
  • when ordered by Court of Law.
  • Earlier, you had to surrender the physical certificate to close your NSC pre-maturely.
  • For the NSC purchased after 01-July-2016, you have to surrender the NSC Passbook to close your NSC pre-maturely.
  • Post Office will collect the Passbook and make an entry for delivering the final amount to you.

Loan Facility from National Savings Certificate account

  • You can use NSC certificate as a collateral security to get Loan from the Banks.
  • Earlier, you had to submit or pledge the certificate in the Bank to get the Loan.
  • But, for the NSC purchased after 01-July-2016, you have to submit the Passbook.

Account Transfer of National Savings Certificate account

  • NSC certificates can be transferred from one Post Office to another Post Office.
  • NSC certificates can be transferred from one person to another person. But, it can be done only once from date of issue to the date of maturity.
  • Earlier, the physical certificate of the old owner used to be given to the new owner during the transfer process.
  • But, to transfer the NSC purchased after 01-July-2016, the old owner should submit the Passbook.
  • Post Office will strike out the entries belonged to the old owner and issue the same Passbook to the new owner in his name.

Returns Projection Table From NSC Account

Lump Sum Deposited AmountInterest Rate %TermsTotal Interest EarnedMaturity Amount
5,00,0006.80%5 Years1,94,7466,94,746
8,00,0006.80%5 Years3,11,59411,11,594
10,00,0006.80%5 Years3,89,49213,89,492
15,00,0006.80%5 Years5,84,23920,84,239
20,00,0006.80%5 Years7,78,98527,78,985
25,00,0006.80%5 Years9,73,73234,73,732
30,00,0006.80%5 Years11,68,47841,68,478
Projection Table

How to show National Savings Certificate interest in income tax?

You can show the NSC interest earned in one of the following ways while filing ITR:

  • You can show the interest earned from NSC under Income from Other Sources.
  • You can claim deduction for interest earned from NSC, but you don’t show it as income. In this case, you can consider the entire interest income you have earned over the years as income in the last year.
  • Don’t claim the interest earned as deduction or income. In this case, all the interest earned will be counted as ‘Income from Other Sources’ in the last year. Only the first four years’ interest will be counted as deduction.
  • It is important that you stick to one of the methods mentioned above throughout the NSC tenure. Experts prefer that you choose Method 1 as the interest and income will be distributed throughout the tenure and does not accumulate to the last year.

How to encash/redeem NSC certificates after maturity?

Upon maturity, the NSC can be encashed at any Post Office branch and not necessarily at the branch where the account is held. If you want to withdraw the money from a branch that is not your account’s home branch, you will have to submit an application with details, such as serial number, issue date, full name, registered and current address.

When you want to encash the maturity amount, you have to carry the following documents with you:

  • Original NSC certificate .
  • Identity proof.
  • NSC encashment form.
  • The person entitled to receive the encashment must sign behind the certificate after receiving the payment.

FAQ About National Savings Certificate account

Nomination facility available for NSC accounts

Nomination facility is available. You can nominate either at the time of buying the certificate or after buying the certificate (but before maturity).

I am a NRI can I open NSC account

NRI (Non Resident Indians), Trust and HUF (Hindu Undivided Family) can not open the account.

What is Income Tax Benefits of National Savings Certificate account

Investments of up to Rs 1.5 lakh in the National Savings Certificate can earn the subscriber a tax rebate under Section 80C. Furthermore, the interest earned on the certificates is also added back to the initial investment and qualify for a tax break as well.
For instance, if you purchase certificates worth Rs 1,000, you are eligible for a tax rebate on that initial investment amount in the first year. But in the second year, you can claim a tax deduction on the NSC investment(s) that year as well as the interest earned in the first year. This is because the interest is added to the original investment and compounded annually.

How to buy NSC online?

As of today, you cannot subscribe to NSC online. You will be required to visit the nearest Post Office to fill out the NSC application form and submit it to the executive in order to open an NSC account.

Where can I Open NSC Accounts?

You can open NSC accounts only in Post Office.

How to buy NSC?

Step 1: Visit the nearest Post Office branch and submit the duly filled NSC application form.
Step 2: Attach self-attested copies of the documents and proofs as required by the Post Office. Carry the original documents as well for verification.
Step 3: Make the payment of your investment in the form of cash, cheque, or demand draft.
Step 4: Upon processing your application, an acknowledgement of the same will be provided marking the initiation of your NSC account.

How to open NSC in the Post Office?

Step 1: Visit the nearest Post Office branch.
Step 2: Fill up the application form and submit it with the necessary documents.
Step 3: Make the payment towards the NSC account in cash, cheque, or DD.
Step 4: Once the processing is done, an acknowledgement for the same will be given.

How to get an NSC certificate?

When you submit the application form to open the NSC account along with the KYC documents, you will have to make the payment towards the same. Once this is processed, the Post Office branch will provide you with the NSC certificate.

My Recent Post in this blog.

  1. SCSS complete end to end information
  2. KVP complete end to end information

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Post Office Time Deposit

What Is POTD Investment Scheme ? | POTD | Post Office Time Deposit | 1 Best Guaranteed Returns

Table of Contents

Blog Introduction

Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on Post Office Time Deposit investment scheme.

Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.

Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.

In this blog post I will be explaining my analysis on Post Office Time Deposit investment scheme. This will be a complete guide on Post Office Time Deposit investment scheme. Please read till end of the blog post to know the complete information about this Post Office Time Deposit investment scheme. Lets get started.

What is Post Office Time Deposit ?

POTD or Post office Time deposit is type of fixed deposit or term deposit account. In this scheme the interest is paid annually.

How Does Post Office Time Deposit Work?

  • You need to deposit a lump sum amount for specific tenure.
  • You will receive interest every year till the end of the tenure.
  • At the end of the tenure, you will get your deposit amount back.

Features of Post Office Time Deposit

  • This scheme is backed by the Government of India.
  • This is very safe investment option.
  • This scheme gives you a guaranteed returns.

Who Can Open The Account?

  • Only Indian residents can open the TD account.
  • TD account can be opened by.
  • An adult for himself.
  • An adult on behalf of a minor or a person of unsound mind of whom he is the guardian.
  • A minor who has reached the age of 10 years.
  • Joint account by up to 3 adults.
  • You can open more than one account in your name or jointly with another person.

How Do You Open The Account?

  • You can open the account by cash or cheque.
  • In case of cheque, the date of realisation of cheque in the account will be the date of account opening.
  • Any number of accounts can be opened in any Post Office.

Deposit Limits of Post Office Time Deposit

  • Minimum deposit amount is Rs. 1,000.
  • No maximum limit for deposit.
  • Deposit amount should be in multiples of Rs. 100.

Term of Post Office Time Deposit

You can choose one of the following 4 options.

  • 1 year.
  • 2 years.
  • 3 years.
  • 5 years

Interest rate % of Post Office Time Deposit.

The current annual interest rate for various tenure are given below.

  • 1 year 5.50%
  • 2 years 5.50%
  • 3 years 5.50%
  • 5 years 6.70%

Interest is paid on an yearly basis. Interest rate (on the day of account opening) will remain the same throughout the tenure of Time Deposit. It will not change even if there are changes to the interest rate thereafter. From 01-Apr-2016, the interest rates of this scheme have been announced on a quarterly basis.

Compounding Frequency of POTD

Quarterly compounding frequency is followed in this scheme. But, interest amount will be paid to you on a yearly basis.

Auto-Renewal Facility of POTD

  • In CBS (Core Banking Solution) Post Offices, when the TD account is matured, it will be automatically renewed for the period for which it was initially opened.
  • For example, 2 Years TD account will be automatically renewed for 2 Years. 1 year TD account will be automatically renewed for 1 year.
  • Interest rate for the auto renewed TD account will be the interest rate on the day of maturity.

Pre-Mature Closure of POTD

If the TD account is closed before 1 year, then the Savings Bank (SB) account interest rate will be paid for the duration for which TD account was kept.

Account Conversions of POTD

  • Single account can be converted into joint account and vice versa.
  • Minor, after attaining majority, has to apply for conversion of the account in his name.

Income Tax Benefits of POTD

The investment on 5 year Time Deposit qualifies for the benefit of section 80C of Income Tax Act, 1961.

Post Office Time Deposit vs Bank Fixed Deposits

ParticularsPost Office Time DepositBank Fixed Deposit
Rate Of Interest5.5% to 6.7%5.5% to 6.5% (Average)
Additional Interest for Senior citizensNo0.25% to 0.50%
Interest Payment FrequencyYearlyMonthly, Quarterly, Yearly
Lock-in Period1 to 5 Years7 days to 10 Years
Auto renewal Only after prior application or in case post offices with core banking solutionsYes
Loan Against The DepositNAAvailable from some banks
Premature WithdrawalAfter 6 MonthsAvailable anytime with certain financial institutions.
Applicability of Tax Deducted at source (TDS)No Yes
POTD VS Bank’s FD

POTD Returns Projection Table

Amount In INRMaturity after 1 yearMaturity after 2 YearsMaturity after 3 YearsMaturity after 5 Years
1000001,05,6141,11,2281,16,8431,34,351
3000003,16,8433,33,6863,50,5304,03,053
5000005,28,0725,56,144584,2176,71,755
8000008,44,9158,89,8319,34,74710,74,808
100000010,56,14411,12,28911,68,43413,43,511
120000012,67,37313,34,74714,02,12116,12,213
150000015,84,21716,68,43417,52,65120,15,266
20000001,12,28922,24,57923,36,86826,87,022
250000026,40.36127,80,72329,21,08533,58,777
300000031,68,43433,36,86835,05,30240,30,533
POTD Returns

FAQ About Post Office Time Deposit

What happens to my Post Office Time Deposit account if I have to move from one city to another due to work?

POTD Account can be transferred from one Post Office to another Post Office.

Is there any Nomination Facility Available for Post Office Time Deposit?

Nomination facility is available. You can nominate either at the time of account opening or after opening the account (but before maturity).

Can NRI and HUF Open This Post Office Time Deposit Account?

NRI (Non Resident Indians) and HUF (Hindu Undivided Family) can not open the account.

My Recent Post in this blog.

  1. SCSS complete end to end information
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Monthly Income Scheme

What is Monthly Income Scheme ? | MIS | Post Office Monthly Income Scheme | POMIS | 1 Best Guaranteed Monthly Returns

Blog Introduction

Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on Monthly Income Scheme.

Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.

Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.

In this blog post I will be explaining my analysis on Monthly Income Scheme. This will be a complete guide on Monthly Income Scheme. Please read till end of the blog post to know the complete information about this Monthly Income Scheme. Lets get started.

Table of Contents

What is Monthly Income Scheme ?

Monthly income scheme (MIS) is a scheme which provides a regular monthly income. This is suitable for those who expect to receive regular and guaranteed income on a monthly basis. We also call this scheme as POMIS ( Post Office Monthly Income Scheme ).

Features Of Monthly Income Scheme (MIS) ?

  • This scheme is backed by the Government of India.
  • This scheme is a safe investment option.
  • This scheme gives you the guaranteed returns.
  • Through this scheme you can earn a regular monthly income.

How Does Monthly Income Scheme (MIS) Work?

You need to deposit a lump sum amount. Every month you will receive interest till the end of the tenure. At the end of the tenure, you will get your deposit amount back.

Eligibility : Who Can Open The MIS Account?

  • Only Indian residents can open the account.
  • Account can be opened by an individual adult.
  • Joint account can be opened by two or three adults. All joint account holders have equal share in each joint account.
  • A Guardian or Parent can open an account in the name of minor.
  • You can open an account on the behalf of a minor who is aged 10 years and above. They can avail the fund when they become 18 years old.
  • A minor, after attaining majority, has to apply for conversion of the account in his/her name.

Deposit Limits in MIS.

  • Minimum deposit amount is Rs. 1,000.
  • For a single account, maximum deposit limit is Rs. 4.5 lakhs.
  • For a joint account, maximum deposit limit is Rs. 9 lakhs.
  • Deposit amount should be in multiples of Rs. 1,000.
  • An individual can invest a maximum of Rs. 4.5 lakhs in MIS (including his/her share in joint accounts).

MIS Term/Maturity Period

MIS Maturity period is 5 years .

MIS Interest Rate (%).

  • Current annual interest rate is 6.60%.
  • Interest amount is paid on a monthly basis.
  • Interest rate (on the day of account opening) will remain the same throughout the tenure of MIS. It will not change even if there are changes to the interest rate thereafter.
  • From 01-Apr-2016, the interest rate of this scheme has been announced on a quarterly basis. previously that it used to be on a yearly basis earlier.

MIS Compounding Frequency

Compound interest is not applicable for this scheme. Simple interest calculation is followed in this scheme.

MIS Interest Credit Method

  • You can receive monthly interest through auto-credit facility into savings account present at the same post office.
  • In case of MIS accounts present at CBS (Core Banking Solution) Post offices, monthly interest can be credited into savings account present at any CBS Post offices.

Pre-Mature Closure of MIS account

  1. Account can be closed pre-maturely after one year of opening the account.
  2. If you close the account before 3 years, 2% of deposit amount will be deducted and you will get the remaining amount.
  3. If you close the account after 3 years, 1% of deposit amount will be deducted and you will get the remaining amount.

For an Example.

  • If you close the account having a deposit of Rs. 1 lakh before 3 years, then Rs. 2,000 (2% of Rs. 1 lakh) will be deducted and you will receive the remaining amount Rs. 98,000 (Rs. 1 Lakh minus Rs. 2,000).
  • If you close the account having a deposit of Rs. 1 lakh after 3 years, then Rs. 1,000 (1% of Rs. 1 lakh) will be deducted and you will receive the remaining amount Rs. 99,000 (Rs. 1 Lakh minus Rs. 1,000).

Income Tax Benefits of Monthly Income Scheme

  • No income tax benefits.
  • No tax deduction for the deposit amount under Section 80C of Income Tax Act.
  • No TDS (Tax Deducted at Source) under this scheme by the Post Office.
  • Interest received under this scheme is taxable. You need to declare the interest income under “Income from Other Sources” during tax returns and pay the income tax as per your income tax slab.

MIS Account Conversions

  • Single account can be converted into Joint account and Vice Versa.
  • Minor after attaining majority has to apply for conversion of the account in his name.

MIS Account Transfer

MIS Account can be transferred from one Post Office to another.

MIS Nomination Facility

Nomination facility is available. You can nominate either at the time of account opening or after opening the account (but before maturity).

MIS Monthly Earning Projection Table

Deposited Amount In INR Interest Rate (%) TenureMonthly Income in INR
1000006.60%5500
2000006.60%51100
3000006.60%51650
4500006.60%52475
Single Account
Deposited Amount In INR Interest Rate (%) TenureMonthly Income in INR
5000006.60%52750
6000006.60%53300
7000006.60%53850
8000006.60%54400
9000006.60%54950
Joint Account

FAQ About Monthly Income Scheme (MIS)

Can NRI and HUF Open This MIS Account?

No. NRI (Non Resident Indians) and HUF (Hindu Undivided Family) can NOT open the account.

Is this Monthly Income Scheme suitable for senior citizens?

Yes. This is a favourable scheme for senior citizens as they can deposit their life savings in the account and earn interest for their monthly expenses which is risk free and guaranteed income.

What happens to my MIS account if I have to move from one city to another due to work?

In the event of shifting from one city to another, you can easily transfer your MIS account to the Post Office in the current city at free of cost.

My Recent Post in this blog.

  1. SCSS complete end to end information
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Kisan Vikas Patra

What Is Kisan Vikas Patra Investment Scheme? | Double Return Investment Plan | KVP | 1 Best Guaranteed Returns

Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on Kisan Vikas Patra.

Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.

Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.

In this blog post I will be explaining my analysis on Kisan Vikas Patra. This will be a complete guide on Kisan Vikas Patra. Please read till end of the blog post to know the complete information about this Kisan Vikas Patra. Lets get started.

Table of Contents

What is Kisan Vikas Patra (KVP) ?

Kisan vikas patra is a savings scheme certificate that you can purchase from a Bank or Post Office. In this scheme, the deposit amount gets doubled in 10 years and 4 months. So if you want to double your money without any risk then this is the best investment scheme for you. Please read till the end to know more about the Kisan vikas Patra saving scheme.

What are the features of the Kisan Vikas Patra?

  • KVP savings scheme is backed by Government of India.
  • KVP savings scheme is Safe investment option.
  • KVP savings scheme gives you the Guaranteed returns
  • KVP certificate can be pledged as a security to get loan from Banks

How Does Kisan Vikas Patra Work?

  • You need to deposit a lump sum amount and purchase KVP certificate from bank or post office.
  • Your deposited amount will get doubled in 10 years and 4 months.
  • At the end of 10 years and 4 months, submit the certificate to the bank or post office from where you purchased the certificate and get the maturity amount (doubled amount).

Who Can Open The KVP Account?

  • Only Indian residents can purchase KVP certificates.
  • KVP certificate can be purchased by an adult for himself.
  • An adult on behalf of a minor or a person of unsound mind of whom he is the guardian.
  • Joint account by up to 3 adults.
  • You can purchase any number of KVP certificates.

Where Do You Open The Kisan Vikas Patra Account?

You can buy KVP certificate from the following.

  • Post Office.
  • Nationalised Banks.
  • Few commercialised Banks.

How Do You Open The Kisan Vikas Patra Account?

  • KVP certificate can be purchased by cash or cheque.
  • In case of cheque, the date of realisation of cheque in the account will be the date of account opening.
  • You need not have a Savings Bank (SB) account to buy this certificate.
  • But, you need to have a Savings Bank (SB) Account to receive the maturity amount.

What is the deposit limit for Kisan Vikas Patra savings scheme?

  • Minimum Deposit amount is Rs. 1,000.
  • No maximum limit on the deposit amount. That means you can invest as much as you can.
  • Deposit amount should be in multiples of Rs. 100. For example, Rs. 1,100, Rs. 1,200, Rs. 1,300, Rs. 1,400 and so on.

Income Tax Benefits of Kisan Vikas Patra savings scheme

  • No income tax benefits.
  • Deposit amount is not eligible for tax deduction under Section 80C of Income Tax Act.
  • Interest received upon maturity is taxable. You need to declare the interest income under “Income from Other Sources” during tax returns and pay the income tax as per your income tax slab.
  • No TDS (Tax Deducted from Source) during maturity from Post Office or Bank in this Scheme.

Maturity Period of Kisan Vikas Patra Savings scheme

Currently, the maturity period is 10 years and 4 months. The maturity period is not fixed and it changes from time to time based on the announcement from the Government.

KVP Interest Rate %

Current annual interest rate is 6.90%. Interest rate (on the day of account opening) will remain the same throughout the tenure of KVP. It will not change even if there are changes to the interest rate thereafter. From 01-Apr-2016 onwards, the interest rate of this scheme has been announced on a quarterly basis. Note that this used to be on a yearly basis earlier.

Compounding Frequency of KVP savings scheme

This scheme follows yearly compounding frequency from 01-Apr-2016 onwards. Note that it used to be on half-yearly compounding frequency earlier.

Process of KVP In Online Or Passbook Mode

  • Before 01-July-2016, when you invest in KVP, you used to get physical certificate.
  • From 01-July-2016 onwards, the Government has decided to discontinue the physical certificates. Instead, you will be given the option to keep KVP in the following formats.
  1. e-mode (Online Mode).
  2. Passbook mode.

The details are given below.

  1. e-mode (Online): After purchasing KVP, you can view the details of your purchase through Online. For this facility, you have to have a Savings Bank (SB) Account and Internet Banking facility. Note that you can only view the certificates that you purchased. It means that you can’t purchase certificates through online Banking. You still need to go to Bank or Post Office for the purchase or investment.
  2. Passbook Mode: This is similar to the passbook of the Savings Bank (SB) account. After purchasing KVP, the entries will be made (either printed or manually) in the passbook.

Your Options: You can choose either Online or Passbook mode or both. The choice is yours. If you opt for Passbook initially and later on you want to switch to Online mode, it is possible. In that case, you have to surrender your Passbook.

Pre-Mature Closure process of KVP Savings scheme

  • KVP certificate can be closed pre-maturely after two and a half years (2.5 years or 30 months) from the date of issue.
  • Earlier, you had to surrender the physical certificate to close your KVP pre-maturely.
  • For the KVP purchased after 01-July-2016, you have to surrender the KVP Passbook to close your KVP pre-maturely.
  • The concerned Bank or Post Office will collect the Passbook and make an entry for delivering the final amount to you.
  • If you had opted for Online mode for viewing KVP purchases, your online access will be removed.

Account Transfer of KVP Savings Scheme

  • KVP certificate can be transferred from one person to another person. It can be done as many times as possible.
  • KVP certificate can be transferred from Post Office to Bank and vice versa.
  • Earlier, the physical certificate of the old owner used to be given to the new owner during the transfer process.
  • But, to transfer the KVP purchased after 01-July-2016, the new owner will receive the mode that the old owner had opted for.
  • For example, if the old owner had online access, then his access will be removed and new owner will get online access to the KVP.
  • If the old owner had Passbook mode, then old owner should submit the Passbook. The concerned Bank or Post Office will strike out the entries belonged to the old owner and issue the same Passbook to the new owner in his name.

FAQ about Kisan Vikas Patra

What will happen in case Loss Of Kisan Vikas Patra Certificate?

If you lose or lost the certificates that you purchased before 01-July-2016, then you can apply for the duplicate certificate. But, instead of a certificate, you will get Passbook and it will have the certificate number of the old lost certificate. If you lose the KVP Passbook that you purchased after 01-July-2016, then you can apply for and get duplicate Passbook by paying required fees.

Is there any Loan Facility available from Kisan Vikas Patra Saving Scheme?

You can use KVP certificate as a collateral security to get Loan from the Banks. Earlier, you had to submit or pledge the certificate in the Bank to get the Loan. But, for the KVP purchased after 01-July-2016, you can submit in Passbook mode only. The online mode will not help in this case.

Is there any Nomination Facility available in Kisan Vikas Patra Saving Scheme?

Yes Nomination facility is available. You can nominate either at the time of buying the certificate or after buying the certificate (but before maturity).

Can NRIs invest in the KVP scheme?

No, KVP scheme is open only for resident individuals.

Where can one encash a Kisan Vikas Patra (KVP)?

A kisan Vikas Patra can be encashed by the certificate holder at the bank or post office where the certificate was issued.

How will the maturity amount be paid?

On maturity of the scheme, the payable amount shall be credit directly to the bank/post office savings account of the certificate holder. Therefore, it is important that the certificate holder have a savings account when they are looking to encash their certificate.

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Senior citizens savings scheme

What is Senior Citizens Savings Scheme | Best Senior Citizen Investment scheme | 1 Best Guaranteed Returns

Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on Senior Citizens Savings Scheme.

Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.

Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.

In this blog post I will be explaining my analysis on Senior Citizens Savings Scheme. This will be a complete guide on Senior Citizens Savings Scheme. Please read till end of the blog post to know the complete information about this Senior Citizens Savings Scheme. Lets get started.

Table of Contents

What is Senior Citizens Savings Scheme (SCSS)?

This scheme is exclusively for Senior Citizens (aged 60 years or more). This scheme provides regular income on a quarterly basis. If you are a retired person and having some lumpsum amount with you then this is the best and risk free saving scheme for you to earn a regular quarterly income for yourself.

How does Senior Citizens Savings Schemes works ?

  • You need to deposit a lump sum amount into your SCSS account.
  • Every Quarter means every 3 months you will start receiving the interest till the end of your tenure.
  • You will get back your deposited amount back at the end of your tenure.

Features of Senior Citizens Saving Scheme ?

  • This Scheme is exclusively for Senior Citizens of India only.
  • This scheme is Backed by the Government of India.
  • This scheme provides Guaranteed returns.
  • This scheme is a Safe investment option for eery senior citizens.
  • This scheme gives you a regular quarterly income.
  • You will have a peace of mind during your retirement life.
  • You will be also getting lots of income tax benefits.

Where do you open the SCSS account ?

Senior Citizen saving scheme account can be opened in

  • Post Office
  • Nationalized banks
  • Also in private sectors bank

Who can open the SCSS account ?

  • Only Indian residents can open the account. An individual of the age of 60 years or more can open the account.
  • An individual of the age of 55 years or more but less than 60 years and who has retired on superannuation or under VRS can also open account.
  • The retired personnel of Defence Services (excluding civilian Defence employees) of the age of 50 years or more can open the account.
  • Joint account can be opened with spouse only. First depositor in joint account is the investor.
  • A depositor can open more than one account either individually or jointly with spouse.
  • Any number of accounts can be opened. But, total investment in all the accounts should not exceed the maximum investment limit of Rs. 15 Lakhs.

What is the deposit limits of senior citizens savings scheme account?

  • Minimum deposit amount is Rs. 1,000.
  • Deposit amount should be in multiples of Rs. 1,000.
  • Maximum deposit limit is Rs. 15 Lakhs.

What is the maturity period of senior citizens savings scheme?

  • Maturity Period for this scheme is 5 Years.

Extension Period of SCSS

  • After maturity, the account can be extended for further 3 years.
  • Account can be extended within one year of maturity by giving application.
  • During the extension period, account can be closed at any time after one year of extension without any deduction.

What is the interest rate for senior citizens savings scheme ?

  • Current annual interest rate is 7.40%.
  • Interest amount is paid on a quarterly basis. That means interest is paid at the end of Calendar quarter (31st March, 30th June, 30th Sept and 31st December).
  • Interest rate (on the day of account opening) will remain the same throughout the tenure of SCSS. It will not change even if there are changes to the interest rate thereafter.

How will you receive the interest ?

You can receive quarterly interest in one of the following ways.

  • Quarterly interest can be credited into Savings Bank (SB) Account present in the same deposit office.
  • Quarterly interest of SCSS accounts present at CBS (Core Banking Solution) Post Offices can be credited in any Savings Bank (SB) Account present at any other CBS Post Offices.
  • Money order

Process for Premature Closure of SCSS account

  • If you close the account pre-maturely after 1 year, then 1.5% of the deposit amount will be deducted and you will receive the remaining amount.
  • If you close the account pre-maturely after 2 years, then 1% of the deposit amount will be deducted and you will receive the remaining amount.

Nomination Facility of Senior Citizens Savings scheme account

  • You can nominate either at the time of account opening or after opening the account but before maturity.

Income Tax Benefits of SCSS account

  • Investment made in SCSS are also eligible for tax deductions in the following manner.
  • The principal amount deposited in SCSS is eligible for a tax deduction of up to Rs. 1.5 Lakh per annum under section 80C of the Income Tax Act, 1961.
  • Interest on SCSS is taxable as per the tax slab applicable to the person. In case the interest amount earned is more than Rs. 50,000 for a fiscal year, Tax Deducted at Source (TDS) is applicable to the interest earned. This limit for TDS deduction on SCSS investments is applicable from AY 2020-21 onwards.
  • ICICI Bank
  • Bank of Baroda
  • State Bank of India
  • Canara Bank
  • Punjab National Bank
  • Union Bank of India
  • Vijaya Bank
  • UCO Bank
  • Bank of India
  • IDBI Bank

Interest Earnings Projection Table

Deposited AmountInterest Rates(%)Deposited Period in Years Quarterly interest pay out (INR)
5,00,0007.40%59,250
6,00,0007.40%511,100
7,00,0007.40%512,950
8,00,0007.40%514,800
9,00,0007.40%516,650
10,00,0007.40%518,500
11,00,0007.40%520,350
12,00,0007.40%522,200
13,00,0007.40%524,050
14,00,0007.40%525,900
15,00,0007.40%527,750
Interest Earnings Projection Table

FAQ About Senior Citizens Savings Scheme

What is the Compounding Frequency of Senior citizen saving scheme?

Compound interest is not applicable in this scheme. Simple interest calculation is followed in this scheme.

Is there any Account Transfer faciality available in Senior citizen saving scheme?

SCSS account can be transferred from one deposit office to another deposit office.

What is the eligibility criteria of joint senior citizen saving account?

The age of first depositor is supposed to be above 60 years. However, there is no age limit for the second applicant. The joint account can be opened only with the spouse. However, the entire amount in a joint account will be attributable only to the first account holder.

What is the maximum age of senior citizen saving account opening?

Any individual, above the age of 60, can open a Senior citizen savings account.

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