Best Government Investment Schemes to Invest In 2024

Government Investment Schemes help tackle One of the biggest fears for the majority of investors, i.e. losing money to market volatility. Although market-linked securities reward investors for the risk taken, not everyone has a high appetite for risk. Some prefer growing their money safely and steadily. For this category of investors, one of the safer investment options is government securities. Government securities are low-risk investments that offer steady returns. Read to learn about the different types of government securities available for Indians.

Best Government Investment Schemes

What Are Government Investment Schemes?

Government investment schemes are securities that the government introduces to help citizens improve their financial standing. The government offers these schemes to all citizens. All men, women, working, business class, and unemployed can invest in them.  

If you want to invest in government schemes, you can visit any post office or authorized banks in India that can help you invest without hassle. The primary advantage of investing in government schemes is that they are risk-free and offer guaranteed returns. Some schemes also give tax deductions allowing you to save money on income tax.

There are multiple investment schemes introduced by the government for various reasons. Before investing in any one scheme, it is best to evaluate them and select one that suits your requirements the best.

Best Government Investment Schemes: In Detail

Following are the different government investment schemes that offer high returns.

1. Public Provident Fund (PPF)
   

   A Public Provident Fund (PPF) is a long-term savings and investment scheme. It was first introduced in 1968 to mobilize small savings and encourage investing. It is a perfect investment avenue for long-term goals such as retirement due to its long duration.

   PPF is a fixed-income scheme that pays a guaranteed interest to investors. The Ministry of Finance decides the interest rate of the PPF scheme every quarter. For the April-June 2023 quarter, the interest rate of the PPF scheme is 7.1% per annum.

   You can open a PPF account at any authorized bank with a minimum investment of Rs 500 per annum. The maximum investment amount is Rs 1.5 lakhs per annum. The tenure of the PPF scheme is 15 years and can be extended in blocks of five years as per your wish. As per the scheme rule, you must invest at least once every year for 15 years, or else the account will become inactive. You can invest in lumpsum or in instalments throughout the year. Ideally, it is best to invest before the 5th of every month to get interested for the entire month.

   You cannot open a joint PPF account. However, you can add a nominee to your account at the time of opening or later during the tenure. In case of emergencies, you are only allowed to withdraw your money partially from the seventh year. You can also avail of a loan against your PPF account between 3rd and 6th year. The maximum amount of loan is 25% of the available amount, and the tenure is 36 months.

   To open a PPF account, you must be a citizen of India. Non-Resident Indians (NRI) and Hindu Undivided Families (HUF) cannot open a PPF account. The bank will ask for some documents such as Aadhar, PAN Card, Driving License, Passport, and Voter ID. Along with this, you will need to fill out the account opening and nomination forms and submit a passport-size photograph.

   After the scheme matures, you can withdraw the money from your PPF account or extend it for another five years. The best part is that the investment, interest, and maturity proceeds are tax-free. So, when you invest in PPF, you can claim a tax deduction under Section 80C. At the time of maturity, you need not pay any tax on the interest and maturity amount.

2. National Savings Certificate (NSC)
   

   National Savings Certificate is a fixed-income investment scheme to encourage savings among small and middle-income investors. You can invest in NSC through any post office or an authorized bank with a minimum investment of Rs 1,000. The scheme doesn’t have any maximum investment limit.

   Only Indian citizens can invest in the scheme individually, jointly or on behalf of a minor for a tenure of five years. NRIs, HUF, and private and public limited companies cannot invest in NSC. Investing in NSC requires identity proof such as PAN Card, Aadhar Card, Voter ID, Driving License, and Passport. You will also need address proof such as Aadhar Card, Passport, Utility Bills, or bank statement.

   Being a fixed-income scheme, it pays an annual interest of 7.7% compounded annually. The Ministry of Finance revises the interest rate every quarter. The interest is automatically reinvested into the account every year for four years, helping you benefit from the power of compounding. You cannot withdraw your investment or the interest for a duration of five years. The government allows withdrawal only if the account holder passes away or has a court order. After five years, you can encash the certificate at any post office or bank, not necessarily in the same branch that you have invested.

   Investment in NSC qualifies for tax deduction under Section 80C of the Income Tax Act, 1961. Hence you can claim a maximum of Rs 1,50,000 per annum. The interest and maturity proceeds are taxable as per your income tax slab.

3. Sukanya Samriddhi Yojana (SSY)
   

   Sukanya Samriddhi Yojana is a government scheme aimed at improving the life of a girl child. It was launched in 2015, promoting the Beti Bachao Beti Padhao (BBBP) campaign. It is run jointly by the Ministry of Women and Child Development, the Ministry of Human Resource Development, and the Ministry of Health and Family Welfare.

   The primary aim of the scheme is to ensure the protection and survival of girls, encourage girl child education, and reduce sexual and gender discrimination against children. Parents of a girl child can open an SSY account at any bank or post office provided the girl child is below ten years. Only one account per girl child and a maximum of 2 SSY accounts per family is allowed.

   The minimum investment amount is Rs 250 per annum, and the maximum is Rs 1,50,000. Parents are required to invest every year until the child turns 15 years. The scheme will mature only after the girl child turns 21 years, and the money can be used for her education or marriage. SSY offers a fixed interest of 8% per annum. The interest rate is revised every quarter by the government and is paid only at the time of maturity.

   The investment is locked in until the girl child turns 21; however, partial withdrawal (up to 50%) is allowed when she turns 18. You can also withdraw the entire amount prematurely for treatment of the critical illness of the account holder or in case of her death. At the time of maturity, the entire principal and interest are paid to the girl child upon submitting proof of citizenship, residency, and identity.

   To invest in SSY, the parents need to submit an SSY scheme form, the birth certificate of the child, and identity and address proof of the parent or guardian. The investment, interest, and maturity proceeds of the SSY scheme are completely tax-free in the hands of investors.

4. National Pension Scheme (NPS)
   

   National Pension Scheme is a retirement pension scheme introduced by the Government of India to promote long-term savings and provide retirement benefits. PFRDA (Pension Fund Regulatory and Development Authority) regulates the scheme.

   Under NPS, subscribers contribute a pension every year until the age of 60 and can enjoy regular pensions for a lifetime starting from the time they retire. All Indian citizens, including NRIs between the age of 18 and 60, can join the NPS. NRI accounts will be closed if they change their citizenship.

   To invest in NPS, you must approach an entity which is the Point of Presence (POP). All banks, private and public, are authorized POPs. To find POPs near you, you can visit the PFRDA website. To open an NPS account, you will need to submit an NPS application form along with proof of identity, residence, and date of birth. For proof of identity PAN Card, Aadhar Card, or Passport can be used. For proof of address, a Passport and Aadhar can be used, and for proof of date of birth, you can use your birth certificate.

   Once you successfully subscribe to the scheme, you will be assigned a 12-digit unique number called Permanent Retirement Account Number (PRAN). This works just like a bank account number and will help identify your NPS account. You can open only one NPS account in your lifetime, and it is portable across sectors and locations.

   There are two kinds of NPS accounts, Tier 1 and Tier 2. A Tier 1 account is mandatory, whereas a Tier 2 account is voluntary. So, if you want to invest in NPS, you will have to open a Tier 1 account, and in case you wish to increase your contribution, you can open a Tier 2 account. The major difference between the two is that Tier 1 account has restrictions on withdrawing money, whereas Tier 2 has no such restrictions.

   The minimum investment amount for NPS is Rs 6,000, and there is no limit on the maximum investment amount. In case you fail to pay the minimum investment amount, your account will freeze. The investment in NPS qualifies for tax deduction under sections 80C and 80CCD. A maximum limit of Rs 1.5 lakhs is allowed under Section 80C, and another Rs 50,000 is allowed under Section 80CCD.

   NPS doesn’t pay fixed interest as it invests your money in market-linked securities. The money you invest is managed by pension fund managers. The government has authorized eight banks to act as pension fund managers, and you can choose your pension fund manager when you first invest in the scheme.

   The scheme has two investment choices, active and auto choice. In active choice, you can decide how the money has to be invested with respect to asset allocation. In the case of auto choice, the asset allocation is decided based on your age. You have to choose between the two choices when you first invest, and you can change it only once in a financial year.

   You must actively contribute to NPS throughout the tenure of the scheme, which is until you turn 60. Upon turning 60, you must use at least 40% of the maturity corpus to buy an annuity plan, which will pay you a regular pension throughout your life. You can withdraw the rest of the 60% in a lump sum, of which 40% is tax-free, and the rest 20% is taxable as per your income tax slab.

   The scheme also allows you to defer your withdrawal until you turn 70. If you want to prematurely withdraw your investment in NPS, you can only withdraw 20% of the corpus, and the remaining 80% must be used to buy an annuity plan.

5. Sovereign Gold Bonds (SGB)

   Sovereign Gold Bonds are government securities that are an alternative to physical gold. Their value is denominated in grams of gold. Owing to the widespread popularity of gold, the government introduced them in November 2015, and the Reserve Bank of India (RBI) issued them.

   When you invest in SGBs, you are buying gold digitally. Buying gold digitally has several benefits. For example, you need not worry about storage or theft. The bonds represent physical gold of the highest purity, and hence you need not worry about the quality. These bonds trade at the market value of gold, and hence you can receive the market value of gold at the time of redemption.

   The minimum investment in SGBs is one gram of gold, and the maximum is 500 grams per person per financial year. The bond pays a fixed interest of 2.5% per annum on the nominal value. This means you can enjoy the dual benefits of fixed interest and capital appreciation. The tenure of the bond is eight years; this means the investment is locked-in for the duration of eight years. However, after the fifth year, you can sell the bonds in the secondary market.

   The interest is entirely tax-free, and so are maturity proceeds. However, if you sell the bond before the tenure of eight years, the capital gains are taxable as per the income tax rules.

6. Senior Citizen Savings Scheme (SCSS)
   

   Senior Citizen Savings Scheme is a savings scheme for senior citizens that pays regular interest to subscribers. The primary aim of the scheme is to ensure a regular source of income for senior citizens. In this scheme, senior citizens can invest a lumpsum amount, either individually or jointly and get regular income in the form of interest payments.

   SCSS account can be opened in any of the authorized banks or the post office with a minimum investment of Rs 1,000 and a maximum investment of Rs 30 lakhs. You can either open an individual account or a joint account provided you and the second account holder are 60 years and above. The scheme allows you to open multiple SCSS accounts, provided the total investment across all accounts doesn’t cross Rs 30 lakhs.

   To invest in the SCSS scheme, you either need to be 60 years or above or a retired civilian aged above 55 and below 60, and the investment is made within one month from retirement. Retired defence employees above 50 and below 60 also can invest in the scheme if the investment is made within one month of retirement.

   At present, the government pays an interest of 8.2% per annum. The interest is paid every 1st of April, July, October, and January. The scheme matures in 5 years and can be extended for another three years if the application for extension is given in the fourth year.

   You can prematurely withdraw the deposit within one year of account opening without a penalty. If you withdraw after one year and within two years, 1.5% will be deducted from the principal, and 1% will be deducted from the principal if you withdraw after two years but within five years.

   The investment in SCSS qualifies for tax deduction under Section 80C of the Income Tax Act, 1961. The interest and maturity proceeds are taxable as per the investor’s income tax slab rate.

7. Atal Pension Yojana
   

   Atal Pension Yojana is a guaranteed pension scheme designed for the unorganized sector. The scheme is regulated by Pension Fund Regulatory and Development Authority (PFRDA). All citizens aged 18-40 years can subscribe to this scheme and get a guaranteed pension at the age of 60.

   It pays a minimum pension of Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000, or Rs 5,000 monthly, depending on the contribution. The minimum contribution is Rs 42 and can go up to a maximum of Rs 1500 a month, varying based on the age of the contributor. You can contribute monthly, quarterly, and half-yearly through the auto debit facility.

   To open an Atal Pension Yojana account, you need to be a citizen of India. You would need a savings bank account in a bank or a post office. Additionally, you would need proof of identity, such as a PAN card and Passport and proof of address, such as an Aadhar card. You can only open one Atal Pension Yojana account, and it is mandatory to appoint a nominee for the account.

   At the age of 60, you can receive a monthly pension from the scheme. In case of your death, your nominee will be eligible to receive the pension. The scheme also allows premature withdrawal before the age of 60. However, the government will give you only your monthly contributions along with the income earned on the contributions.

8. Pradhan Mantri Jan Dhan Yojana
   

   Pradhan Mantri Jan Dhan Yojana was introduced in 2014 to ensure greater financial inclusion in the country. The scheme improves access to financial services such as basic savings accounts, need-based credit, micro-insurance, and remittance facilities to the unorganized sector. This scheme mainly aims to improve financial access across India, especially in the unorganized sector.

   The scheme allows individuals to open a zero balance account for free and get access to various facilities such as cheque book, debit cards, and overdrafts. You can open a Pradhan Mantri Jan Dhan Yojana account at any of the authorized banks in India.

   You can open a Pradhan Mantri Jan Dhan Yojana account individually or jointly. To open this account, you will need an Aadhar card, Passport, Voter ID, Driving License, and mobile number. The minimum age to open this account is ten years, and there is no maximum entry age.

   Just like any other savings account, it pays a fixed interest on the deposits. You can get an overdraft facility of Rs 5,000 a month. The scheme also gives accidental insurance cover of Rs 1 lakh and life cover of Rs 30,000 for individuals who joined between 20th August 2014 to 31st January 2015.

9. Kisan Vikas Patra (KVP)
   

   Kisan Vikas Patra is a post office savings scheme introduced in 1988. The primary aim of this scheme is to inculcate long-term financial discipline among citizens. Kisan Vikas Patra was originally intended for farmers, but it is now open to every citizen of India.

   Under the scheme, you can invest an amount of Rs 1,000, Rs 5,000, Rs 10,000, or Rs 50,000 for a period of 10 years. The minimum investment is Rs 1,000, and there is no limit on the maximum investment amount. You can earn a fixed interest of 7.5% per annum compounded annually, and your investment will double in 9 years and seven months.

   Any citizen of India can invest in the scheme either individually or jointly. Even minors can invest in the scheme through a legal guardian. However, HUFs and NRIs are not allowed to invest in the scheme. Although it’s a long-term scheme, the investment proceeds are locked-in for 30 months. After which, you can withdraw your money whenever you want. The scheme matures after 120 months but will continue to accrue interest until you withdraw your money.

   There are no tax benefits for investing in this scheme. The investment, interest, and maturity amounts are taxable per income tax law.

10. Post Office Time Deposit Account
    

    Post Office Time Deposit Account is similar to a fixed deposit. You invest money for a fixed tenure and earn interest on it. The minimum investment in Post Office Time Deposit is Rs 1,000, and there is no limit on the maximum investment amount.

    The time deposit account can be opened for a tenure of one, two, three or five years. The interest rate varies for each tenure and ranges between 6.8% to 7.5% per annum. The interest rates are revised every quarter by the government.

    You can invest in a time deposit individually or jointly. Minors aged above ten can also invest and operate their account, and minors below ten can open a time deposit account through their legal guardian. NRIs, trust funds, and welfare funds can’t invest in post office time deposit schemes.

    To invest in the scheme, you will need PAN Card and Aadhar Card. The government has made it mandatory for all investors to declare their PAN and Aadhar numbers when opening a time deposit account. If they fail to do so, the account will be inoperational.

    Since the post office time deposit is just like a fixed deposit, your investment is locked-in for the tenure of the investment. However, you can withdraw the investment within six months to one year of opening the account without losing interest. If you withdraw after one year of opening the account, then you will lose an interest of 1%.

    Only investment in five-year time deposits qualifies for tax deduction under section 80C of the Income Tax Act, 1961. However, the maturity and interest are taxable per the investor’s income tax slab rate.

11. Post Office Monthly Income Scheme (POMIS)
    

    The Post Office Monthly Income Scheme (POMIS) is a government scheme that enables you to earn a fixed interest every month on the lump sum amount you’ve invested. The interest the scheme pays currently is 7.4% per annum, payable monthly for a tenure of five years.

    You can invest in the scheme either individually or jointly. If you want to invest individually, the maximum investment is Rs 9 lakhs, and in the case of a joint account, the maximum investment is Rs 15 lakhs. The minimum investment is the same for individual and joint accounts, which is Rs 1,000.

    The interest from this scheme can be transferred into Post Office Recurring Deposit Scheme or can be reinvested into the scheme to earn higher interest. At the time of maturity, you can either withdraw your investment or extend it for another five years to continue earning interest.

    To invest in the scheme, you must be a resident of India and an adult above 18 years old. For minors aged ten and above, a legal guardian can open and operate the account until the minor attains majority. The scheme allows you to withdraw before five years. However, there are certain consequences to it. If you withdraw before one year, there will be zero benefits. If you withdraw between the 1st and 3rd year, the post office will charge a 2% penalty, and if you withdraw between the 3rd and 5th year, the penalty is 1%.

    The scheme doesn’t offer any tax benefits to the investors but is a great alternative for earning a regular source of income.

12. Government securities
    

    Government securities are investment products that India’s central and state governments use to raise capital for development projects. The different government securities are Treasury Bills, Cash Management Bills, Dates Government Securities, Floating Rate Bonds, Treasury Inflation-Protected Securities (TIPS), Zero-Coupon Bonds, and Capital Indexed Bonds.

    All these securities are either short-term or long-term securities that are completely risk-free. They are open to residents of Indians, institutions, and companies. Having these in your portfolio will help diversify it and maintain stability.

Frequently Asked Questions

Which government scheme is best for investment?

The government has a plethora of investment schemes for different investment purposes. All are risk-free investments and serve different purposes. Based on the purpose of your investment, you can select the scheme that suits you the best.

Which saving scheme has the highest interest rate?

The Senior Citizen Savings Scheme (SCSS) offers the highest interest rate of 8.2%, followed by the Sukanya Samriddhi Yojana (SSY), which gives 8%.

Which gives more interest than FD?

The National Savings Certificate (NSC), Sukanya Samriddhi Yojana (SSY), and Senior Citizen Savings Scheme (SCSS) all give higher returns than a fixed deposit (FD).

Which scheme is best to save income tax?

The government has multiple investment schemes that allow you to save tax on investment, interest, maturity amount or all three. Some of them are the Public Provident Fund (PPF), National Savings Certificate (NSC), Sukanya Samriddhi Yojana (SSY), National Pension Scheme (NPS), Sovereign Gold Bonds (SGB), and Senior Citizen Savings Scheme (SCSS).