Saving money is a core principle of personal financial management. It provides you with a safety net, gives you the ability to compound wealth, and gives you the ability to achieve your objective. In India, there are many public and private savings schemes to choose from that are uniquely designed for the various savers and investors who want to invest small amounts of money every month with periodic payouts. The purpose of all saving schemes is to have a mixture of safety, tax benefits, and the ability to develop wealth over time.

If you are committing to making monthly investments, it is important to choose an option that suits your investment goals. Below, we will explore the best monthly savings schemes that are available in India, with descriptions about their features and benefits, to help determine which scheme is right for you.

1. The Public Provident Fund (PPF)

What is the PPF?

The Public Provident Fund (PPF) scheme is a government-backed long-term savings investment option that has tax benefits and guaranteed returns. It is one of the safer investments, with a useful savings scheme, which can help generate a retirement corpus

Features of PPF:

• Interest Rate: The rate of interest on PPF is set by the government and is adjusted quarterly. Right now, it is around 7.1% to 7.75% annually.
• Investment Amount: You can invest as little as ₹500 per annum, if you choose, and you can invest a maximum of ₹1.5 lakh per annum.
• Tax Benefits: PPF investment qualifies for tax savings under section 80C of the Income Tax Act, and it also earns tax-free interest, as well as any amount remaining as a balance when you withdraw it after maturity.
• Loan Facility: You can borrow against your PPF balance after the 3rd year.
• Tenure: The PPF account has a tenure of 15 years;r, it can also be extended in increments of 5 years.
  

Who is it Best For? PPF is suitable for individuals looking for a low-risk, long-term investment option with the benefit of tax savings. It’s ideal for retirement planning or saving for children’s education, or marriage.

How it Works: You can deposit money into your PPF account on a monthly or yearly basis, depending on your preference. The interest is compounded annually, and the returns accumulate over time. The minimum contribution is ₹500 per year, and you can make up to 12 monthly contributions in a year.

2. Senior Citizens Savings Scheme (SCSS)

What is SCSS?

The SCSS (Senior Citizens Savings Scheme) is especially designed for senior citizens aged 60 years and above. This scheme provides quarterly interest payouts on your investment, which is a good source of regular income, and hence, SCSS is one of the most popular schemes among retirees.

Features of SCSS:

• Interest Rate: The interest rate is 8.0% per annum in comparison to other fixed income schemes.
• Investment Amount: Minimum investment is ₹1,000, and the maximum amount permissible is ₹15 lakh.
• Tax Benefits: Investment amounts under SCSS are tax-deductible expenses under Section 80C up to a limit of ₹1.5 lakh; however, interest earned is taxable.
• Interest Payout: Interest is paid quarterly, which is an attractive feature for retirees looking for regular income.
• Tenure: SCSS has a tenure of 5 years, which can be extended for 3 years. 
  

Who is it Best For? SCSS is best for senior citizens searching for a secure investment with a guaranteed return. SCSS is especially beneficial for individuals looking for a regular source of income post-retirement.

How it Works: SCSS can be opened simply by lump sum investment, and interest is earned quarterly. You can take the interest out and invest it, or use it elsewhere, or withdraw the interest and take it.

3. Fixed Deposits (FDs)

What is a Fixed Deposit Account?

A Fixed Deposit (FD) is one of the most secure and popular savings methods. In an FD, you deposit a lump sum for a set tenure, and the bank or financial institution pays interest on it, depending on the amount and tenure of the deposit.

Features of Fixed Deposits:

• Interest Rate: The interest rate for FDs is generally 5% to 7%, but it can vary depending on the bank and tenure.
• Investment Amount: The minimum deposit amount can be as low as ₹1,000.
• Interest Compounding: The interest can be paid monthly, quarterly, or annually, so for monthly interest payments, FDs can be a good option for anyone looking for income each month.
• Tax Benefits: There are no tax benefits for FDs, though it is subject to tax, especially if they earn significant income. Tax-saving fixed deposits provide tax deductions under 80C of the Income Tax Act.
• Premature Withdrawal: Premature withdrawal of your FD can be made, however, it may incur a penalty of lower interest rates.
  

Who is it Best For? FDs are good for safety margins to guarantee returns during known periods. Monthly payout FDs are suitable for individuals who need some periodic income, like pensioners or salaried individuals.

How it Works: All you do is put a lump sum amount in an FD for a tenure. Interest is earned on a compounded basis at time intervals, and with monthly payouts, it is riskless and can be safe.

4. National Savings Monthly Income Scheme (MIS)

What is MIS?

The National Savings Monthly Income Scheme (MIS) is a government scheme through post offices in India, providing a full monthly income with guaranteed returns. MIS has the following features:

Features of MIS:

• Interest Rate: 7.75% annually (which may change from the government).
• Investment Amount: Minimum investment is ₹1,500, with a maximum investment of ₹4.5 lakh in an individual account and a maximum of ₹9 lakh in a joint account.
• Tax Equity: There are no inclusion benefits under 80C, and the interest earned is taxable.
• Interest Knot: The knot is paid monthly, meaning it is essentially an excellent product when weekly/monthly income is necessary.
• Tenure: 5 years until maturity, worth the principal amount to have sufficient winnings and benefits to cover all gains.
  

Who is it Best For? This scheme is best suited for those looking for a fixed monthly income with government-backed security. It’s great for people in their retirement years or those who need consistent returns.

How it Works: Investors deposit money into the scheme, and the interest is credited to their bank accounts on a monthly basis. This allows the scheme to cater to individuals needing a steady income.

5. Post Office Monthly Income Scheme (POMIS)

What is POMIS?

The Post Office Monthly Income Scheme (POMIS) is similar to the National Savings MIS, which is only available through India Post. It is a government investment that is risk-free and returns monthly interest payments.

Features of POMIS:

• Interest Rate: The current interest rate is 7.7% per annum (which is variable).
• Investment Amount: The minimum investment amount is ₹1,500 (increased to ₹4.5 lakh in an individual account and ₹9 lakh in a joint account).
• Tax Benefits: There are no tax deductions under Section 80C for this scheme, and your interest is taxable. 
• Interest Payout: The interest is actually credited to your bank account every month. 
• Tenure: The tenure is 5 years.
  

Who is it Best For? You would consider POMIS if you want a government-based investment outcome with monthly payouts and a very low risk profile. It is very popular with retirees who want a guaranteed income that they can rely on every month. 

How it Works: This scheme allows you to invest a lump sum amount with monthly interest payouts. The principal gets returned to you after 5 years, which works for people who need a certain income each month.

6. Sukanya Samriddhi Yojana (SSY)

What is SSY?

The Sukanya Samriddhi Yojana is a savings plan supported by the government that is meant to promote saving for the future of a girl child by her parents or guardians. It has one of the highest interest rates in the country and is a great vehicle for long-term savings.

Features of SSY:

• Interest Rate: The current interest rate is 7.6% p.a. (subject to change).
• Investment Amount: Minimum contribution per year is ₹250. There is no upper limit to the investment.
• Tax Benefits: Your contribution has tax deduction eligibility under section 80C, and the interest you earn is tax-free.
• Interest Payout: Interest is calculated on a compounding basis on an annual basis and tax-free return.
• Tenure: The maturity of the account is at the age of 21 for the girl child. Contributions can be made until she is 14 years old.
  

Who is it Best For? SSY is best suited for parents or guardians who want to guarantee the long-term future of their daughters. It is also a great alternative to save for your child’s education or marriage while getting the benefits of tax exemptions and receiving high returns.

How it Works: The Sukanya Samriddhi Yojana allows you to contribute until the girl turns 14 years of age, on an annual basis, and the interest is compounded annually, which again means you pay no tax. It makes SSY a perfect long-term savings tool.

Conclusion

Determining the most suitable savings scheme from these monthly savings options usually involves a combination of your risk tolerance, income needs, and goals. Here is a very brief overview:

PPF: good for someone wanting to save for a long time with tax deduction benefits.

SCSS: good for senior citizens wanting a guaranteed return and income;

FDs: easy for low-risk savers with guaranteed return for a stated number of months;

MIS and POMIS: good for anyone wanting a regular monthly income with low risk.

SSY: best for parents wanting to save for their daughter’s future.

Finding the savings scheme that is the best fit for your circumstances to live on is important for a variety of reasons. You want to have a successful way to save, but you may also have a specific outcome in mind.