National Savings Scheme

National Savings Scheme (NSS) is a scheme introduced by the government of India to encourage savings among its citizens. The plan offers guaranteed returns and encourages long-term financial planning. Individuals who invest in these schemes receive significant tax benefits. This helps them build a corpus that can be used to fund their goals or make investments later.

The primary motive for opening a savings plan by a government is to promote saving as an activity. There is a wide array of schemes under the name with varied interest rates and terms. Each scheme supports a different goal, and individuals can choose according to their requirements. The scheme is often confused with the National Savings Certificate, which are two different concepts.

The National Savings Scheme (NSS) is a scheme introduced by the government of India to encourage savings and offer a specified rate of interest for the deposits made over time. There are different types of savings schemes that enable the mobilization of money, which the country's National Savings Institute takes care of. The National Savings Scheme interest rates are determined periodically by the Ministry of Finance.

The schemes are operated through Indian post offices and banks across the country. They cater to all sections of society and help them save their hard-earned money at minimal risks. The initiative's highlight is that individuals can make modest contributions and get guaranteed returns. The returns make taxpayers eligible for deductions and exemptions as per the tax laws. 

From an individual's perspective, the schemes help save money and maintain consistency in moving toward their financial goals. Individual goals may include affording a vacation or a house, funding kids' education, and even retirement. The schemes help in building a significant amount of money to help these goals.

From a broader perspective, the schemes help India achieve financial inclusion. They help the country mobilize funds for a number of development projects. The schemes can also help the government fund welfare programs. Plus, savings that citizens make facilitate inflation control.  

Let us explore the characteristics of these schemes to understand how they differ from other kinds of investments that one makes: 

1. Lucrative Returns - The scheme has been designed to yield good returns. The NSS witnesses quarterly adjustments in the rate of return, thereby preparing the scheme to generate inflation-adjusted returns, making them yield better value than a normal savings account. 
2. Guaranteed Returns - The NSS returns are guaranteed and do not involve market risks that apply to other usual investments. In short, these ensure fixed returns, and hence, they are the most sought-after savings options.
3. Government-backed Scheme - Since it is a scheme implemented by the government, the returns are guaranteed. These are the best options for investors who are looking for a risk-averse deal or anyone who is a beginner and not ready to take risks. 
4. Tax Benefits - The schemes provide tax benefits to individuals, which include deductions under section 80C of the Income Tax Act.   

The National Savings Scheme exists in different forms. Based on the nature of users or participants, be it a regular investor, senior citizen, or girl child, some of the types that are commonly found include the following:

#1 - Post Office Savings Account  

The post office's National Savings Scheme demands a minimum deposit of ₹500 with no upper limits. The scheme can be opened both individually or jointly and shall also be opened on behalf of a minor. Children aged above 10 years can also open independent accounts under the post office NSS. A deduction up to an interest amounting to ₹10,000 can be available for deduction as per section 80 TTA of the Indian Income Tax Act. 

#2 - National Savings Recurring Deposit Account Scheme   

Under this scheme, one can start with depositing ₹100 per month, and later on, they can decide on a multiple of ₹10 irrespective of the maximum limit specified. It can be opened individually and jointly (limited to three adults). Guardians can open accounts for minors. There are options for making advance deposits for 6 and 12 months, and you can earn a rebate. The maturity period is five years, and extension with or without deposits is provided for another five years.  

#3 - National Savings Time Deposit Account  

The scheme demands a minimum deposit of ₹1000, and after that, deposits can be made in multiples of ₹100 with no upper limit. Minors can open accounts with the help of guardians. The account provides deposit accounts for 1, 2, 3, and 5 years. The accounts can be closed after six months, and premature withdrawal is allowed after six months (provided it is within one year). Deposits of five years qualify for deductions as per section 80C of the Income Tax Act. 

#4 - National Savings (Monthly Income Account) Scheme   

The scheme demands a deposit of a minimum ₹1000/- and continued deposits in the multiples thereof. It comes with a maturity of five years. The maximum amount of ₹ nine lacs is allowed in a single account, and joint accounts have a limit of ₹15 lacs. Minors can open accounts with the help of guardians. Closure is allowed prematurely after a year but before three years (with a deduction of a 2% deposit). A deduction of 1% is applicable if closure is done after three years.  

#5 - Senior Citizen's Savings Scheme 

The scheme has a minimum deposit of ₹1000/- and accepts deposits in the multiples thereof. The upper deposit limit is ₹30 lacs. They are for individuals of 60 years and above on the date of opening an account. Individuals who have attained 55 years or more and less than 60 years but have achieved superannuation/ voluntary retirement or unique voluntary retirement from service are eligible to open accounts. The deposits under this qualify for deductions under section 80-c of the Income Tax Act. The interest is payable on specific dates such as 31st March or 30th June, 30th September or 31st December on the 1st working day of April or July, October or January, as the case may be. This is, however, available only for the first instance, and thereafter, interest shall be paid on 1st working day of April or July, October or January.

#6 - National Savings Certificate- VIII issue   

Under this scheme, one can start with a deposit of ₹1000. Later, the deposits can be in the form of ₹100. The maturity period is five years, and there is no maximum deposit limit. The deposit can be used to make loans from banks available. There are two types of joint accounts, and they can also be opened individually.  

#7 - Kisan Vikas Patra Scheme  

The schemes demand a minimum deposit of ₹ 1000, which can be made in multiples of ₹100 with no maximum limit. Individual accounts and joint accounts (type A and B) can be opened. The money can be transferred from one person to another and also from one post office to another. The money here doubles on maturity.    

#8 - Public Provident Fund    

The scheme demands a minimum deposit of ₹500 and a maximum deposit of ₹1,50,000 in a financial year. Withdrawals are allowed from the 7th year, and loans can be availed from the 3rd year up until the 6th year. After maturity, the amount can be extended for five years and can be retained indefinitely without making further deposits at prevailing interest rates. The deposit amount is qualified for deductions under section 80C of the Income Tax Act. The maturity period here is the maturity period.   

#9 - Sukanya Samriddhi Account  

The scheme requires a minimum deposit of ₹250 and a maximum deposit of ₹1.5 lac within a financial year. It is only meant for the girl child and can be opened until she attains the age of 10. Only one account is allowed per girl child; withdrawal is allowed for educational purposes. Premature closing is allowed at 18 years of attainment of the child. The account can be transferred to other post offices and banks. The maturity period is 21, and the deposit is eligible for deductions under 80-c of the Income Tax Act. Interest deductions are allowed under section 10 of the Income Tax Act. 

Given below are some of the examples to understand the concept better:

Example #1

Suppose Daisy, a farmer, has two girl children. Despite being from a village, she understands that there is inflation and a need to secure the children's future financially. Daisy and her husband send the girls to a nearby government school and deposit some amount from what they receive from the work they do to save the same for their girls. Under the plan, the amount will mature in 21 years and hence will give good returns.

The couple plans to withdraw the money after both their children attain the age of 21 for their higher studies. 

Example #2

In August 2024, the Indian Ministry of Finance released guidelines on the regularization of NSS accounts, indicating a significant impact on the accounts that have been illegally formed. The changes majorly touch upon the following categories: 

• Irregular savings accounts under the NSS accounts (cessation of National Savings Scheme interest rate). 
• The public-provided funds or PFFs are opened under minors and individuals with multiple PPF accounts. 
• Extension cessation on PPF accounts of non-resident Indians.  
• Regularization of Sukanya Samriddhi accounts that grandparents initiated but not guardians.

Given below are some of the benefits of NSS:    

• They provide financial security to all sections of the community. 
• The deposits earn interest and can be considered an additional source of income. 
• It helps people achieve their financial goals. 
• They help in tax savings. 
• They provide safety through assured returns.  
• They are accessible and do not have hidden charges, encouraging people with low incomes to take advantage of saving opportunities. 
• They promote financial inclusion. 
• They help reduce gender disparity and reduce social evils of female feticides through Sukanya Samriddhi, part of NSS.