High return investments – Top 7 small saving schemes in India

High return investments - Top 7 small saving schemes in India

High return investments – Top 7 Small saving schemes in India

This Saturday, I went to Indian post office branch to withdraw the National Saving Certificates which got matured this month. I was going through the small saving schemes and the features. I felt some of them are best investment options which are getting high return on investments.

Small saving schemes in India

Indian post office (run by Govt. of India) offers small saving schemes in India. These days, small saving schemes have become popular. Gone are the days where one used to buy a National saving certificate for tax saving purpose. There are wide varieties of schemes offered by them and they are safe investments (since they are run by Govt. of India, the investment is protected). Agreed, that some of these schemes offer low interest rates compared to other investment options. However I felt, some of them are good investment options yielding high return on investment.

Before I move in providing the features, I want to tell you about the important feature I noticed in small saving schemes (which are now being offered by some of the banks too in India). Some of these small saving schemes are offered with compounding interest by Quarter. Such schemes would actually provide higher returns on investment comparing to other investment options, as the interest payable every Quarter would be compounded and the yearly interest is paid.

For e.g. If you invest Rs 1,000 at 8% interest p.a, for one year, your money would be Rs 1,080. However if the interest rate is compounded every quarter the interest rate would be as below

Interest for Quarter -1 = Rs 1,000 x 8% x 3/12 months = 20. Now your Quarter-2 investment amount would become Rs 1,020 (Rs 1,000 + Rs 20).

Interest for Quarter – 2 = Rs 1,020 x 8% x 3/12 months = 20.4. Now your Quarter-3 investment amount would become Rs 1,040.4 (Rs 1,020 + Rs 20.4).

Interest for Quarter – 3 = Rs 1,040.40 x 8% x 3/12 months = 20.8. Now your Quarter-4 investment amount would become Rs 1,061.2 (Rs 1,040.4 + Rs 20.8).

Interest for Quarter – 4 = Rs 1,061.2 x 8% x 3/12 months = 21.22.

Now at the end of the year, your investment is 1,082.43 (Rs 1,061.2+21.22)

If you observe the actual return received is 8.2% (Rs 82.43 interest on Rs 1,000 investment) against what is indicated as 8%. This is the advantage of investing in quarterly or half yearly compound interest rate saving schemes.

Top small saving schemes in India

Below are the top small saving schemes in India offering high return on investment. This list is not comprehensive as other schemes offered are with low interest rates.

1)   5 year time deposit scheme: The interest rate offered is 8.5% p.a. Quarterly interest compounding scheme. The effective yield would be 8.7% p.a. Principal is exempted u/s 80c of Indian Income tax act, 1956.

2)   5 year national saving certificate: This is my favorite saving scheme for tax saving purpose. The interest rate offered is 8.6% p.a. Principal is exempted u/s 80c of Indian Income tax act, 1956. However, I would now prefer to invest in 5 year time deposit scheme which offers 8.7% p.a. interest rates (compounded quarterly) which provides high return on investment comparing to NSC.

3)   5 year Monthly Income scheme: If you are looking for steady fixed income which is payable monthly, this investment option is good. It offers 8.5% p.a. interest rate. If you invest Rs 1 lakh, you would get a monthly income of Rs 712 (approx) for 5 years as interest.

4)   5 years recurring deposit : The scheme offers 8.4% interest rate per annum.

5)   10 year national saving certificate: The interest rate offered is 8.9% p.a. Principal is exempted u/s 80c of Indian Income tax act, 1956. If you invest Rs.1 lakh, your money would be Rs.2.38 lakhs after 10 years

6)   5 year senior citizens saving schemes : This is good scheme for senior citizens. The interest paid is 9.3% p.a. Principal is exempted u/s 80c of Indian Income tax act, 1956.

7)   Time deposits: There are 1, 2,3 and 5 year time deposits schemes. The interest rates are 8.2%, 8.3%, 8.4% and 8.5% respectively. With quarterly compound interest the effective yield would be 0.2% more then what is being offered.

Conclusion: These small saving schemes are safe investments and provide high return on investment. Investor can invest in good saving schemes which fit the investor need.

Readers, what is your opinion on these small saving schemes in India? Please give your comments

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Happy investing in small saving schemes in India

Article by Suresh

Suresh KP i.e. me have written 500+ articles on this blog. I love doing analysis and identifying the Best investment options.


  1. Allimuthu says:

    Sir you represent the small savings in india. I need to know the scheme name in the post office to giving the quarter compound interest..

  2. nitin says:

    Hi sir,
    What is the procedure for depositing money in fix term.what documents I have to be kept ready.

  3. shilpa malhotra says:

    Hi Sir,

    We have recently got married and are really looking forward to your guidance about how to go ahead for savings.

    We end up with savings averagely 15ooo Rs every month that is beings kept in savings account as it is

    Can you please suggest how to utilize or bifurcate it.

    • Suresh KP says:

      Hi Shilpa, My suggestion is you should read these 2 articles. Once you read and start implementing, post your questions. 1) http://myinvestmentideas.com/2012/08/managing-costs-18-ways-reduce-expenses-save-money/  2) http://myinvestmentideas.com/2014/08/how-to-achieve-financial-independence-faster/

  4. vinodhchakravarthy says:

    Dear Sir,
    I have a new born and would like to deposit around 15 k in her name for a period of 20 years ( also would contribute to the same in the coming years).. kindly advise the best possible means for me
    Also for my personal savings kindly advise whether post office saving is better or bank saving is better..

    Vinodh chakravarthy

    • Suresh KP says:

      Hi Vinod, There are multiple investment options you can choose for. 1) Invest in recurring deposits in bank or post office. This is safest and you can earn 9% annualised returns 2) Invest in large cap or balanced mutual funds which would suit for your requirement. You can choose for ICICI focussed fund or HDFC Top-200 or HDFC prudence or HDFC balanced fund.

  5. Patange S G says:

    Hi Sir,

    What happens to the investment in NSC if the invester dies before maturity of NSC.

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