Close Menu
    What's Hot

    What Really Happens If You Stop Paying Your Loan EMIs?

    June 2, 2025

    New Rules for Ration Cards in UP: Only Eligible People Can Apply

    June 2, 2025

    Suzlon vs Inox Wind: Which Renewable Stock Looks Strong in FY25?

    June 2, 2025
    Facebook X (Twitter) Instagram
    Facebook X (Twitter) Instagram
    Invest PolicyInvest Policy
    Subscribe
    • Insurance
    • Investment
    • Tax
    • Stocks
    • MF
    • Money
    • Property
    • Schemes
    • More
      • Documents
      • Cards
      • Loan
      • Hindi
    Invest PolicyInvest Policy
    Home » Small Savings Scheme or Fixed Deposit – Where Should You Invest for Better Benefits?
    Money

    Small Savings Scheme or Fixed Deposit – Where Should You Invest for Better Benefits?

    Naresh SainiBy Naresh SainiMay 13, 2025No Comments5 Mins Read
    Facebook Twitter LinkedIn Telegram Pinterest Tumblr Reddit WhatsApp Email
    Small Savings Scheme or Fixed Deposit – Where Should You Invest for Better Benefits?
    Share
    Facebook Twitter LinkedIn Pinterest Email

    In India, most middle-class families look for safe and stable investment options. Two of the most preferred and trusted choices are Fixed Deposits (FDs) and Small Savings Schemes. These options may not promise massive returns like mutual funds or the stock market, but they offer peace of mind with guaranteed returns and low risk.

    However, the decision can be confusing when it comes to choosing between the two small savings schemes or fixed deposits. Each has pros and cons based on interest rates, liquidity, lock-in period, tax benefits, and overall returns.

    Let us understand both in detail and see which suits your financial goals better.

    What Are Fixed Deposits?

    Fixed Deposit (FD) is an investment offered by banks and post offices where you deposit a lump sum amount for a fixed period, and the bank pays you interest on it. FDs are known for their low risk and assured returns. They are ideal for those who want to preserve capital and earn a steady income.

    Key Features of Fixed Deposits:

    • Minimum investment starts from ₹1,000
    • Tenure ranges from 7 days to 10 years
    • Premature withdrawal is allowed with a penalty
    • Interest is taxable as per your income slab
    • Interest can be paid monthly, quarterly, or at maturity
    • Senior citizens get higher interest rates (usually 0.25–0.50% more)

    As of May 2025, major banks like SBI, HDFC, and ICICI offer interest rates between 6.5% and 7.5% for 1–5 year tenures. For senior citizens, rates go up to 8.0% in some cases.

    What Are Small Savings Schemes?

    Small Savings Schemes are government-backed investment options that help citizens save money systematically. They are operated through post offices and some banks. These schemes are ideal for long-term savings, tax benefits, and secure returns.

    See also  Is ‘Buy Now, Pay Later’ Really Worth It? Here's What to Know

    Types of Small Savings Schemes:

    1. Public Provident Fund (PPF) – Lock-in: 15 years | Interest: 7.1%
    2. National Savings Certificate (NSC) – Lock-in: 5 years | Interest: 7.7%
    3. Kisan Vikas Patra (KVP) – Lock-in: 115 months | Interest: 7.5%
    4. Senior Citizen Saving Scheme (SCSS) – Lock-in: 5 years | Interest: 8.2%
    5. Monthly Income Scheme (MIS) – Lock-in: 5 years | Interest: 7.4%
    6. Sukanya Samriddhi Yojana (SSY) – Lock-in: Until girl turns 21 | Interest: 8.2%
    7. Post Office Recurring Deposit (PORD) – Lock-in: 5 years | Interest: 6.7%
    8. Time Deposits (1, 2, 3, and 5 years) – Interest: 6.9% to 7.5%

    (Interest rates as per April–June 2025 quarter announced by Ministry of Finance [1])

    Comparing Returns: FD vs Small Savings Schemes

    Investment OptionInterest Rate (May 2025)Tax-Free Returns?
    Bank FD (Regular)6.5% to 7.5%❌ No
    Bank FD (Senior Citizen)7.0% to 8.0%❌ No
    PPF7.1%✅ Yes
    NSC7.7%❌ Only under 80C
    SCSS8.2%❌ Only under 80C
    Sukanya Samriddhi Yojana8.2%✅ Yes
    Kisan Vikas Patra7.5%❌ No
    Monthly Income Scheme7.4%❌ No

    As you can see, small savings schemes mainly offer higher returns than fixed deposits, especially schemes like SCSS and SSY.

    Safety and Risk Factor

    Both FDs and small savings are considered safe investment options. Here’s how:

    • DICGC insures fixed Deposits in banks for up to ₹5 lakh per depositor per bank. If the bank fails, your money up to ₹5 lakh is safe.
    • Small Savings Schemes are backed by the Government of India, which means they have sovereign guarantees. There is almost zero risk of default.
    See also  UPI Lite X: Make UPI Payments Without Internet – Here’s How It Works

    Small savings schemes offer a stronger assurance than regular bank FDs regarding safety.

    Tax Benefits Comparison

    Fixed Deposits:

    • Interest is fully taxable under “Income from Other Sources”.
    • You can claim tax deduction only under Tax Saver FD (5-year lock-in) for up to ₹1.5 lakh under Section 80C.
    • No tax benefit on regular FDs.

    Small Savings Schemes:

    • PPF, Sukanya Samriddhi Yojana – EEE status: exempt at investment, interest, and withdrawal.
    • NSC, SCSS, and others – Only investment amount is tax deductible under 80C. Interest is taxable in most schemes (except PPF and SSY).

    Hence, if tax-saving is your priority, small savings schemes—especially PPF and SSY—offer much better advantages.

    Lock-in Period and Liquidity

    Here is how flexible or strict the lock-in periods are:

    SchemeLock-in / MaturityPremature Withdrawal?
    Regular Bank FD7 days to 10 years✅ Yes (with penalty)
    Tax Saver FD5 years❌ No
    PPF15 years✅ After 7 years
    NSC5 years❌ No
    SCSS5 years✅ After 1 year (with penalty)
    KVPMatures in 115 months✅ With conditions
    Sukanya Samriddhi YojanaUntil girl turns 21✅ On conditions
    Post Office RD5 years✅ With a penalty

    FDs offer better liquidity, while small savings schemes require a long-term commitment.

    FDs are easier to manage if you want emergency access to your funds. However, small savings work better if your goal is long-term savings for retirement or your child’s education.

    Who Should Choose Fixed Deposits?

    FDs are suitable if:

    • You are a senior citizen looking for regular income
    • You want a short-term saving tool (1–3 years)
    • You are risk-averse and need flexibility in tenure
    • You want to create an emergency fund
    • You don’t need Section 80C tax benefits every year
    See also  Government Approves UPI Incentive Scheme to Boost Digital Payments

    Who Should Choose Small Savings Schemes?

    Choose small savings if:

    • You are planning for long-term goals (retirement, children’s future)
    • You want tax-free interest and tax deductions
    • You want higher guaranteed returns
    • You do not need frequent access to funds
    • You trust government-backed investments more than banks

    Combining PPF and SCSS or NSC with SSY is a smart way to balance safety, returns, and tax savings for salaried individuals.

    Final Thoughts: Balance Is the Key

    Instead of choosing just one, many experts suggest a balanced approach. Use FDs for short-term and liquidity needs and small savings schemes for long-term wealth building and tax planning.

    For example:

    • Park emergency funds or 1-year goals in FDs
    • Save for your child’s marriage through Sukanya Samriddhi
    • Build retirement corpus via PPF and SCSS
    • Use NSC for 5-year goals with 80C benefit

    Investment decisions must match your financial goals, risk appetite, time horizon, and tax bracket. Review the interest rates each quarter (for small savings) and compare them with updated FD rates across banks.

    Disclaimer: This article is for informational purposes only and does not offer financial advice. Please consult a certified financial advisor before investing.

    Source: Ministry of Finance, SBI, HDFC, Post Office Schemes.

    Share. Facebook Twitter Pinterest LinkedIn Tumblr Telegram Email
    Previous ArticleWhy You Need Old ITR Copies and How to Download Easily Online
    Next Article Understand When Daughters May Be Denied a Share in Property, Despite Having Legal Rights
    Naresh Saini
    • Website
    • Facebook

    Naresh Saini, a graduate with over 10 years of experience in the insurance and investment sectors, specializes in covering topics related to insurance, investments, and government schemes. His expertise and passion for the financial industry allow him to provide valuable insights, helping readers make informed decisions. Naresh is committed to delivering clear and engaging content in these fields.

    Related Posts

    PF Withdrawal Will Soon Take Just Minutes, Not Days

    June 2, 2025

    Central Government Employees May See Salary Hike as 8th Pay Commission Plans Move Forward

    May 30, 2025

    Know How Sukanya Yojana Can Give You 69 Lakh with Monthly Deposit

    May 29, 2025

    Sent Money to the Wrong UPI Account? Follow These Steps to Get Your Money Back

    May 23, 2025

    Why PPF Alone May Not Be Enough for Retirement Planning in India

    May 13, 2025

    Understand How Rs. 1 Crore Today May Not Hold the Same Value in Future Due to Inflation

    May 13, 2025
    Add A Comment

    Comments are closed.

    Top Posts

    What Really Happens If You Stop Paying Your Loan EMIs?

    June 2, 2025

    New Rules for Ration Cards in UP: Only Eligible People Can Apply

    June 2, 2025

    Suzlon vs Inox Wind: Which Renewable Stock Looks Strong in FY25?

    June 2, 2025

    Subscribe to Updates

    Get the latest sports news from SportsSite about soccer, football and tennis.

    Advertisement

    Our main motto is to help our customers in making personal finance decisions easy and convenient as per their comfort. We are committed to provide accurate and unbiased information at your doorstep and keep it transparent among our customers.

    We're social. Connect with us:

    Facebook X (Twitter) Instagram Pinterest YouTube
    Top Insights

    What Really Happens If You Stop Paying Your Loan EMIs?

    June 2, 2025

    New Rules for Ration Cards in UP: Only Eligible People Can Apply

    June 2, 2025

    Suzlon vs Inox Wind: Which Renewable Stock Looks Strong in FY25?

    June 2, 2025
    Get Informed

    Subscribe to Updates

    Get the latest creative news from FooBar about art, design and business.

    © 2025 Invest Policy. Designed by DigiSpiders.
    • Home
    • About Us
    • Contact Us
    • Privacy Policy
    • Terms and Conditions
    • Disclaimer

    Type above and press Enter to search. Press Esc to cancel.