10 Best Government-backed Investment Schemes in India

Jul 29, 2022

Listen to 10 Best Government-backed Investment Schemes in India

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To financially secure your future and create wealth, it is crucial to thoroughly understand and analyse different investment instruments before making your investment decision. However, having in-depth knowledge about all the investment options could be challenging as financial institutions offer a plethora of financial instruments you can invest in. Hence, it makes sense to concentrate more on the investment options that align with your investment objectives and risk appetite. Most of us seek inflation-beating high returns with no or minimal risk to the investment. Unfortunately, risk and returns go hand-in-hand, and it is impossible to earn high returns without high risk.

If you are looking for zero to low-risk investment options to balance out your portfolio, the first thing that would come to your mind would be Bank Fixed Deposits. However, you should also consider investing in other instruments that are risk-free and may offer similar or even higher returns than Fixed Deposits. The Government of India offers several such investment options through banks, post offices, and other financial institutions that cater to the needs of investors. The Small Savings Schemes interest rates are notified on a quarterly basis. However, the Finance Ministry has kept these rates, including NSC and PPF, unchanged for the July-September quarter. With the policy rates being increasing, the move is in favour of conservative investors who prefer fixed income instruments. Since these plans offer decent returns with low to zero risk, investing in them can help you ensure peace of mind.

Here is the list of the 10 Best Government-backed Investment Schemes in India:

1. National Pension Scheme (NPS):

National Pension Scheme (NPS) is a retirement benefits scheme offered by the Government of India to facilitate post-retirement regular income to the subscribers. Under the NPS, a unique Permanent Retirement Account Number is allotted to each subscriber. It offers flexibility to the investor to choose to allocate the funds in equities and government securities. There is no maximum limit on the amount that can be invested in NPS. However, only investments up to Rs 50,000 are eligible for tax deduction under Section 80CCD (1B) of the Income Tax Act. Additionally, investments up to Rs 1,50,000 are eligible for tax deduction under Section 80C of the Income Tax Act.

2. National Savings Certificate (NSC):

National Savings Certificate (NSC) is another fixed income generating savings scheme introduced by the Government of India. The minimum investment amount is Rs 100, and there is no maximum investment limit. The government fixes the interest rates based on inflation and other factors. The scheme typically comes with two distinct maturity periods of 5 and 10 years. Furthermore, the NSC can be used as collateral to avail of a loan from different financial institutions.

3. Public Provident Fund (PPF):

Since the scheme's introduction, Public Provident Fund (PPF) has emerged as a powerful tool for creating long-term wealth for investors. The investors build their retirement corpus by regularly contributing to the PPF account over a long period of time. The PPF has gained immense popularity, especially among small savers, due to the attractive interest rates and tax benefits that it offers. PPF scores over other investment options mainly because it offers tax exemption under section 80C of the Income Tax Act, and the returns from PPF are also not taxable. You can estimate the value in your PPF using the online PPF calculator. The PPF account holder can avail of a Loan Against PPF from the third to the sixth year of PPF account opening at just a 1% per annum interest rate. Click here to download the free copy of our complete guide to Public Provident Fund (PPF).

10 Best Government-backed Investment Schemes in India
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4. Sukanya Samriddhi Yojana (SSY):

Launched by Honourable Prime Minister Narendra Modi in 2015, Sukanya Samriddhi Yojana is a government-backed welfare scheme developed as a part of a 'Beti Bachao, Beti Padhao' campaign, specifically designed for the financial needs of the girl child.

Sukanya Samriddhi Yojana is a government-backed saving scheme designed for the equal rights and betterment of the girl child in India. The scheme aims at financially securing the future of a girl child by helping the parents build a corpus for their child's future goals, such as higher education, wedding, etc.

The scheme allows parents or legal guardians to open the account in the name of a girl child aged 10 or below. The minimum investment starts at Rs 250 and can go up to Rs 1,50,000. Deposits can be made in the account till the completion of 15 years from the opening of the account. Although the returns are higher compared to other fixed-income schemes, you should know that the scheme has a lock-in period of 21 years. That said, a partial withdrawal is permitted after the girl child completes 18 years. You can open an SSY account in any bank or post office.

Click here to know if the Sukanya Samriddhi Yojana can be a good investment plan for your girl child.

5. Atal Pension Yojana (APY):

Atal Pension Yojana (APY) is a social security scheme offered by the Government of India for the workers of the unorganised sectors. It is one of the country's best investment plans for economically weaker sections as it helps them voluntarily save for their retirement. Depending on the subscriber's age at the time of subscribing to APY and their contribution, they will receive a monthly pension of Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000, or Rs 5,000. The minimum entry age is 18 years, whereas the maximum entry age is 40 years. Since it offers a pension from the age of 60 years, the minimum period of contribution is 20 years.

6. Sovereign Gold Bonds (SGBs):

Sovereign Gold Bonds are gold bonds issued by the Reserve Bank of India (RBI) on behalf of the Government of India. In other words, SGBs are government securities denominated in grams of gold. In November 2015, the Indian government launched the Sovereign Gold Bond (SGB) Scheme to provide investors with a substitute for holding physical gold. The investors are required to pay the issue price in cash, and the bonds will be redeemed in cash on maturity.

Along with the price fluctuation gain, the SGB also offers a fixed interest rate of 2.5% per annum on the issue price. The interest is credited to the investor's registered bank account semi-annually. This is the biggest advantage over physical gold, as physical gold can only benefit you with capital appreciation. Since it is a paper-based instrument, the SGB eliminates the risk and cost of storage. It is considered a liquid investment option as premature redemption is allowed after the 5th year. Besides, in case of an emergency, you can sell the bonds or opt for a secured loan by using SGBs as collateral, with the same Loan to Value ratio applicable to the physical gold loan.


7. Prime Minister Vaya Vandana Yojana (PMVVY):

Prime Minister Vaya Vandana Yojana was introduced with the objective to provide monthly pensions to senior citizens while protecting their investments from falling interest rates. Individuals above the age of 60 can subscribe to the scheme and it has a term of 10 years. After three years of investment, subscribers are allowed to avail of a loan against PMVVY. You should know that the pension ceiling in the scheme is decided based on the subscriber's family and their aggregate income.

8. Senior Citizens Savings Scheme (SCSS):

If you are looking for a post-retirement government-backed saving plan, you should consider the Senior Citizen Savings Scheme (SCSS), which is one of the most popular schemes in the category. The scheme was launched to safeguard the future of senior citizens aged 60 years and above. It provides a higher interest rate compared to similar low-risk investment options and has a tenure of 5 years which can be further extended up to 3 years. Currently, the SCSS is offering a rate of interest of 7.4% p.a.

9. Pradhan Mantri Jan Dhan Yojana (PMJDY):

Pradhan Mantri Jan Dhan Yojana (PMJDY) was introduced by the Government of India to provide financial services and products for individuals who do not have any banking relationships. Since the scheme mainly targets the low-income group, it offers a zero-balance savings account. The account can be opened by individuals aged 18 and above. It also allows minors above 10 years to open an account under the PMJDY along with a guardian. Moreover, under the scheme, individuals can avail of an overdraft facility on their savings accounts based on bank transactions and operations.

10. Government Securities:

First of all, government securities are not an investment scheme, but individuals can choose to invest in government securities as per their requirements. These government securities, such as bonds and treasury bills, come with a maturity period of 91 days to 40 years, depending on the securities. This high-income generating investment option can also be used as collateral to borrow funds. However, it is advisable to thoroughly understand the terms and conditions before investing, as the terms and conditions vary for different securities.


Warm Regards,
Ketki Jadhav
Content Writer

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