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 saving 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 long-term government-backed investment option that has tax benefits and guaranteed returns.  This is one of the safest options with a usable savings scheme, which can generate a retirement corpus.    

Features of PPF:

• Interest Rate: The PPF interest rate is determined by the government and is revised quarterly. Currently, it’s around 7.1% to 7.75% annually. 
• Investment Amount: You can contribute as little as ₹500 per year, and the maximum allowable contribution is ₹1.5 lakh annually. 
• Tax Benefits: PPF contributions qualify for tax deductions under Section 80C of the Income Tax Act. Moreover, the interest earned and the amount withdrawn after maturity are tax-free. 
• Loan Facility: Loans against the PPF balance can be availed from the 3rd year onwards. 
• Tenure: The PPF account has a tenure of 15 years, which can be extended in blocks 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 Senior Citizens Savings Scheme (SCSS) is tailored specifically for senior citizens above the age of 60. It provides a regular source of income through quarterly interest payouts and is one of the most popular schemes among retirees.

Features of SCSS:

• Interest Rate: The interest rate is set at 8.0% per annum, which is higher than most other fixed-income schemes. 
• Investment Amount: The minimum investment is ₹1,000, and the maximum is ₹15 lakh. 
• Tax Benefits: The investment in SCSS is eligible for tax deductions under Section 80C up to a limit of ₹1.5 lakh. However, the interest earned is taxable. 
• Interest Payout: Interest is paid quarterly, making it an ideal scheme for retirees looking for regular income. 
• Tenure: SCSS has a tenure of 5 years, which can be extended by another 3 years.
  

Who is it Best For? SCSS is perfect for senior citizens who are looking for a secure investment with guaranteed returns. It’s especially useful for those looking for a regular income post-retirement.

How it Works: SCSS accounts can be opened with a lump sum deposit, and the interest is paid quarterly. You can withdraw the interest and reinvest it elsewhere or use it as monthly income.

3. Fixed Deposits (FDs)

What is a Fixed Deposit Account?

A Fixed Deposit (FD) is one of the most secure and popular savings options. In an FD, you deposit a lump sum amount for a fixed tenure, and the bank or financial institution offers an interest rate based on the amount and tenure.

Features of Fixed Deposits:

• Interest Rate: The interest rate offered on FDs typically ranges from 5% to 7%, depending on the bank and the tenure. 
• Investment Amount: The minimum deposit amount is as low as ₹1,000. 
• Interest Payout: The interest can be paid monthly, quarterly, or annually, depending on the preference. For monthly payouts, FDs are ideal for those looking for regular income. 
• Tax Benefits: While there are no tax benefits directly associated with FDs, the interest earned is subject to tax. Tax-saving fixed deposits qualify for deductions under Section 80C of the Income Tax Act. 
• Premature Withdrawal: Premature withdrawal is allowed, though it may attract a penalty in the form of reduced interest rates.
  

Who is it Best For? FDs are ideal for risk-averse individuals who want guaranteed returns over a fixed period. Monthly payout FDs are best suited for those who need regular income, such as pensioners or salaried individuals.

How it Works: You deposit a lump sum amount in an FD for a specific tenure. The interest is compounded at regular intervals, and the payouts can be made monthly if you choose that option. It’s a reliable and safe investment choice.

4. National Savings Monthly Income Scheme (MIS)

What is MIS?

The National Savings Monthly Income Scheme (MIS) is a government-backed scheme offered through post offices across India. It’s designed to provide a fixed monthly income through guaranteed returns.

Features of MIS:

• Interest Rate: 7.75% per annum (subject to change by the government). 
• Investment Amount: The minimum investment is ₹1,500, and the maximum investment is ₹4.5 lakh in an individual account and ₹9 lakh in a joint account. 
• Tax Benefits: There are no tax benefits under Section 80C, and the interest earned is taxable. 
• Interest Payout: The interest is paid monthly, making it an excellent choice for those needing regular income. 
• Tenure: The tenure is 5 years, after which the principal amount can be withdrawn.
  

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 monthly. 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 a similar scheme to the National Savings MIS, but it’s offered through India Post. This scheme is a risk-free, government-backed investment offering monthly returns.

Features of POMIS:

• Interest Rate: The current interest rate on POMIS is 7.7% per annum (subject to change). 
• Investment Amount: The minimum investment is ₹1,500, and the maximum is ₹4.5 lakh in an individual account and ₹9 lakh in a joint account. 
• Tax Benefits: The scheme does not offer any tax deductions under Section 80C, and the interest earned is taxable. 
• Interest Payout: The interest is credited to your bank account monthly. 
• Tenure: The tenure is 5 years.
  

Who is it Best For? POMIS is ideal for those looking for a low-risk, government-backed investment with the convenience of monthly payouts. It’s popular among retirees and individuals looking for guaranteed, regular income.

How it Works: The scheme allows you to invest a lump sum amount and receive monthly interest payouts. The principal is returned to you after 5 years, making it suitable for people needing a fixed monthly income.

6. Sukanya Samriddhi Yojana (SSY)

What is SSY?

The Sukanya Samriddhi Yojana is a government-backed savings scheme aimed at encouraging parents or guardians to save for the future of their girl child. It offers one of the highest interest rates in the country and is an excellent choice for long-term savings.

Features of SSY:

• Interest Rate: The interest rate is currently 7.6% per annum (subject to change). 
• Investment Amount: The minimum annual contribution is ₹250, with no upper limit. 
• Tax Benefits: Contributions qualify for tax deductions under Section 80C, and the interest earned is also tax-free. 
• Interest Payout: The interest is compounded annually, and the scheme offers tax-free returns. 
• Tenure: The account matures when the girl child turns 21, but contributions can be made up until she turns 14.
  

Who is it Best For? SSY is ideal for parents or guardians who want to secure the future of their daughters. It’s a great way to save for their education or marriage while enjoying tax benefits and high returns.

How it Works: The SSY allows you to make annual contributions until the girl turns 14. The interest is compounded annually and is tax-free, making it a perfect long-term savings option for children.

Conclusion

Choosing the best savings scheme from the options for your monthly savings will involve several components, including your risk tolerance, income needs, and objectives. Here is a much abbreviated summary: 

PPF: Appropriate for someone wanting to save for the long term with tax benefits. 

SCSS: Suitable for senior citizens wanting guaranteed returns and income.

FDs: Reasonable for low-risk savers with an outright guaranteed return for a particular number of months.

MIS and POMIS: Well-suited for anyone wanting a regular monthly income with little risk.

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

Identifying the best savings scheme for your needs matters when it comes to financial planning. Not only do you want to save effectively, but you may have specific goals in mind.