Various Investment Options from Taxpayers Perspective: A comparison

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Various Investment Options from Taxpayers Perspective: A comparison

There are various investment options available with the taxpayers for making investment. The investment decision is not only driven by rate of interest but also by the tax benefit available with the instruments. From taxpayers perspective, few of the common investments options are as under:

  1. Pubilc Provident Fund, most commonly pronounced as PPF
  2. Kisan Vikas Patra, most commonly pronounced as KVP
  3. Senior Citizen Saving Scheme, most commonly pronounced as SCSS
  4. National Saving Certificate Scheme, most commonly pronounced as NSC
  5. Post Office Saving Account Scheme
  6. National Savings (Monthly Income Account) Scheme or National Saving Time Deposit Scheme, most commonly pronounced as NSSor National Saving Recurring Deposit Scheme
  7. Sukanya Samriddhi Scheme, , most commonly pronounced as SSS

The comparative features of various schemes are as under:

S. No.
Particulars
Public Provident Fund
[PPF]
Senior Citizen Saving Scheme [SCSS]
Kisan Vikas Patra
[KVP]
National Saving Certificate Scheme
[NSC]
1
Who Can Invest
Any Person
Investment can be made by following individuals:-
1. Whose age is 60 years or more
2.  Whose age is between 55 years to 59 year and who has retired on superan-nuation or
3. Whose age is 50 years or more and who has retired from defence services (excluding Civilian Defense Employees)
Any Person
Any Person
2
Who Can be the Beneficiary from the investment
Beneficiary can be Individual himself
or
a minor
or
a person of unsound mind on whose behalf individual is acting as a guardian
3
Rate of Interest
7.10% p.a
8.6% p.a.
7.6% p.a.
7.10% p.a.
4
Mode of calculating Interset
Interest is calculated monthly on lowest balance between close of 5th day and last day of the month. The interest is credited to the account at end of each financial year
Computed on monthly basis and paid on quarterly basis
Interest is computed on yearly compounding basis (interest is deemed to have been reinvested)
5
Maturity Period
15 Years
5 Years
5 Years
6
Maturity Amount
Double after 9 years and 5 months
Rs. 1462.54 payable on a certificate of Rs. 1000 denom-ination
7
Premature Withdrawal
Allowed up to 50% of the amount standing to the credit of the account. One can refer – https://thetaxtalk.com/2018/09/10/personal-loan-credit-card-loan-vs-ppf-loan-partial-withdrawal-facility-from-ppf-account/
OR
https://thetaxtalk.com/2018/01/29/know-the-liquidity-of-your-ppf-account-thetaxtalk/
8
Premature Closure
Allowed after 5 years on following grounds:-
1. Higher education of account holder or dependent children or
2. In the event of life threatening disease
3. Change in residency status of the account holder
Withdrawal can be made any time
Allowed under the specified circums-tances
1. In the event of death of holder
2. On forfeiture by a pledgee
3. When ordered by a court of law
9
Is Joint Account Allowable
No
Yes
10
Number of Account Permissible
One Account
An Individual can operate more than one account, however total deposit in all accounts shall not exceed the maximum limit
No Limit
No Limit
11
Minimum Investment
Initial Investment is Rs. 500 and in multiples Rs. 50 thereafter
Initial Investment is Rs. 1000 and in multiples Rs. 1000 thereafter
Initial Investment is Rs. 1000 and in multiples Rs. 100 thereafter
Initial Investment is Rs. 1000 and in multiples Rs. 100 thereafter
12
Maximum Investment
Rs. 150000 in a financial year
Rs. 1500000 or retirement benefits
Whichever is lower
No Limit
No Limit
13
Maximum Number of Deposit during the year
Any No. of deposit can be made subject to maximum investment limit
14
Deduction Under Section 80C
Allowable
Allowable
Not Allowed
Allowable
15
Taxability of Interest
Exempt
Interest is taxable under the head Income from Other Sources.
However deduction can be claimed under section 80TTB (up to Rs. 50000) if investor is a senior citizen
Interest is taxable under the head Income from Other Sources.
However deduction can be claimed under section 80TTB (up to Rs. 50000) if investor is a senior citizen
Interest earned on deposit during the tenure of NSC are deemed to be reinvested in NSC. Such Interest can be claimed as deduction under section 80C. A senior citizen can claim deduction either under section 80C or under section 80TTB in respect of such interest
S. No.
Particulars
Post Office Saving Account Scheme
National Savings (Monthly Income Acoount) Scheme
National Saving Time Deposit Scheme
National Saving Recurring Deposit Scheme
Sukanya Samriddhi Scheme
[SSS]
1
Who Can Invest
Any Person
Any Person
Any Person
Any Person
Any Legal or natural guardian in the name of a girl child
2
Who Can be Beneficiary
Any Girl Child
[Investment cannot be done for other beneficiary]
3
Rate of Interest
4% per annum
7.6% per annum
1 Year Account : 6.9% per annum
2 Year Account : 6.9% per annum
3 Year Account : 6.9% per annum
5 Year Account : 7.7% per annum
7.2% per annum
8.4% p.a.
4
Calculation of Interest
Calculated on monthly basis on lowest balance available between close of 10th day and end of the month. Interest is credited at the end of each year
Calculated and paid monthly
Computed on monthly basis and compound on quarterly basis. Interest is however payable anually at the end of each year
Calculated monthly but credited at the end of the year
5
Maturity Period
No maturity period
1 year/ 2 years / 3 years / 5years
21 Years from the date of Opening of Account or at the time of marriage,
Which ever is earlier
6
Maturity Amount
Rs. 7231.38 payable after making 60 monthly deposits of Rs. 100 each
7
Premature Withdrawal
Allowed up to 50% of amount standing to the credit of the account for specified purpose
8
Premature Closure
Alowed after 1 year from the date of opening of account
Alowed after 6 month from the date of opening of account
Allowed after 3 years from the date of opening of the account
1. In the event of death of beneficiary and
2. In the event of life threatening disease after completion of 5 years
9
Is Joint Account Allowable
Yes
Yes
Allowed
Yes
No
10
Number of Account Permissible
Only one account can be opend as a single account. However multiple joint each accounts can be opned provided account holder has equal share.
Multiple but total deposit shall not exceed the maximum limit
No Limit
No Limit
One account in the name of each beneficiary Girl Child
11
Minimum Investment
Initial Investment is Rs. 500 and in multiples Rs. 10 thereafter
Initial Investment is Rs. 1000 and in multiples Rs. 1000 thereafter
Initial Investment is Rs. 1000 and in multiples Rs. 100 thereafter
Initial Investment is Rs. 100 and in multiples Rs. 10 thereafter
Initial Investment is Rs. 250 and in multiples Rs. 100 thereafter
12
Maximum Investment
No Limit
Rs. 450000 in case of single account and Rs. 900000 in case of joint account
No Limit but there will be just one deposit
No Limit
Rs. 150000 in a financial year
13
Maximum Number of Deposit during the year
14
Deduction Under Section 80C
Not Allowed
Not Allowed
Not Allowed
Not Allowed
Allowable
15
Taxability of Interest
Exempt up to Rs. 3500 in case of single account and Rs. 7000 in case of joint account. Balance amount remaining after claiming deduction Section 80TTA/80TTB is taxable under the head Income from Other Sources
Taxable
Interest is taxable under the head Income from Other Sources.
However deduction can be claimed under section 80TTB (up to Rs. 50000) if investor is a senior citizen
Interest is taxable under the head Income from Other Sources.
However deduction can be claimed under section 80TTB (up to Rs. 50000) if investor is a senior citizen
Exempt

One can read the following relevant article as well for better understanding of few of above scheme:

  1. https://thetaxtalk.com/2015/10/19/senior-citizen-saving-scheme-investment-cum-tax-saving-option-senior-citizen/
  2. https://thetaxtalk.com/2019/03/08/sukanya-samriddhi-yojana-ssy-at-a-glance/
  3. https://thetaxtalk.com/2020/04/20/sukanya-samriddhi-account-rules-2016/
  4. https://thetaxtalk.com/2016/08/22/sukanya-samriddhi-account-new-scheme-for-a-girl-child-in-india/
  5. https://thetaxtalk.com/2020/04/20/senior-citizens-savings-scheme-rules-2004/
  6. https://thetaxtalk.com/2020/04/18/the-public-provident-fund-scheme-1968/
  7. https://thetaxtalk.com/2020/04/12/whether-huf-can-claim-deduction-u-s-80c-by-investing-in-the-ppf-account-of-its-members

These are some of the most common points on which the comparision can be carried out by the taxpayer before investing. Readers can share the views at mukesh.motwani63@gmail.com

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