Sukanya Samriddhi Yojana
(SSY), too, will remain attractive. Parents who wish to save for their girl child’s education or marriage will find its 8.4 per cent tax-free return appealing. The scheme has a long tenure of 21 years, and investors should be prepared for limited liquidity.
Public Provident Fund (PPF), which will offer a tax-free interest rate of 7.9 per cent, will continue to be used by investors to make the debt allocation in their retirement portfolio. “Once you complete 15 years and extend the tenure, PPF becomes extremely flexible. You can put in money at any point and withdraw it whenever you like,” says Deepesh Raghaw, founder, PersonalFinancePlan.in, a Sebi-registered investment advisor. While both Employees Provident Fund (EPF) and PPF enjoy EEE (exempt-exempt-exempt) tax status, PPF offers retirees an advantage. “You cannot keep contributing to EPF after retirement. And if you do not withdraw your EPF corpus after retirement, you will have to pay tax on the interest you earn. But you can continue contributing and withdrawing from PPF life-long, and the income remains tax-free,” adds Raghaw.
All the three products mentioned above – SCSS, SSY and PPF – offer Section 80C tax benefit. They are the best products in the small savings basket, according to experts.
National Savings Certificate (NSC) offers a return of 7.9 per cent. However, the interest income is taxable. The interest earned gets reinvested and is also eligible for Section 80C benefit. The question mark, however, is whether you will be able to enjoy this benefit, since many investors would exhaust their ~1.5 lakh limit with other instruments.
The case for investing in time deposits and the monthly income scheme is not strong. “The rates are not very attractive. Senior citizens especially can get slightly better rates from bank fixed deposits of comparable tenure. And they offer no tax benefits,” says Pandya.
Debt funds can potentially outperform many small savings schemes
on post-tax returns due to the indexation benefit they enjoy after three years. But experts are currently wary of asking conservative investors to invest in them. “Given the defaults and downgrades that are taking place, conservative investors, especially senior citizens, may stay away from long-duration debt funds for the present, and at best invest in liquid funds or overnight funds,” says Nikhil Banerjee, co-founder, Mintwalk.