News Excerpt:

The government's small savings schemes portfolio has experienced a significant surge, led by the Senior Citizen Savings Scheme (SCSS) and the Monthly Income Scheme (MIS), both reporting a more than twofold increase compared to the previous year.

More about the news:

• Till early February, the government had collected Rs 2.77 Lakh Crore in small savings as against the target of Rs 4.37 Lakh Crore.

• The government has so far achieved about 64% of the revised estimate for Financial Year 2024.

Small Savings Schemes:

• Small savings schemes are investment avenues offered and managed by the government that allow individuals to save and accumulate wealth.
• Government also uses small savings schemes to mobilise resources for development.  
• Currently, the government offers different types of small saving schemes:

• • Sukanya Samriddhi Yojana (SSY)

• • • SSY is a unique savings scheme for the welfare of girl child.
    • Account can be opened in the name of a girl child till she attains the age of 10 years

• • Mahila Samman Saving Certificate:

• • • MSSC accounts may be opened by women or girl of any age group
    • Account can be opened with a minimum deposit of ₹1000/- and maximum deposit of ₹2 Lakhs for a period of two years.
    • The scheme was launched in 2023.

• • Kisan Vikas Patra.

• • • KVP is a risk-free investment option offered by the Indian post office.
    • There is no maximum limit for deposit in KVP.
    • KVP does not qualify for deductions under Section 80C of the Income Tax Act.

• • National Savings Certificate. (NSC)

• • • NSC is a fixed-income investment scheme suitable for small and medium-income investors to save tax under Section 80C of the Income Tax Act, 1961, while earning returns. 
    • You can buy an NSC with a minimum deposit of Rs 100 at the nearest post office. 
    • It comes with a lock-in period of 5 years.

• • Senior Citizen Savings Scheme (SCSS).

• • • SCSS is a savings instrument for individuals above the age of 60. 
    • The Government of India introduced this scheme in 2004, intending to provide senior citizens with a steady and secure source of income for their post-retirement phase.
    • The maximum amount that can be deposited in the account is Rs 30 lakhs. 

• • Post Office Time Deposit Scheme.

• • Post Office Monthly Income Scheme (MIS).

• The government reviews the interest rates of small savings schemes on a quarterly basis. 
• The Shyamala Gopinath Committee proposed the methodology for determining these rates to be market linked. 
• In line with the committee's suggestions, interest rates for different schemes are advised to be linked with the yields of government bonds.

Benefits of investing in a small savings scheme:

• Small savings schemes are government-backed so investors can enjoy assured returns on their investments.
• Many of these small savings schemes like PPF, and SCSS qualify for income tax benefits. 
• These small saving schemes can be good options to diversify your portfolio.

The government funds its fiscal deficit using the proceeds from the small savings.

• All deposits under small savings schemes are credited to the 'National Small Savings Fund' (NSSF) which was established in the Public Account of India in 1999.
• The money in the account is used by the centre government to  finance its fiscal deficit. 
• Following recommendations of the Fourteenth Finance Commission most states were excluded from borrowing from NSSF.
• The commission had noted that since state governments have little to do with the administration and administered rates on small savings instruments, they should not be forced to take financing from the fund. 
• Most states (except Arunachal Pradesh, Delhi, Kerala and Madhya Pradesh) opted out, leaving the Centre more room to use these funds.
• The balance in the Fund is invested in Central and State Government Securities.