Looking for tax-savers ahead of March 31? Check out these small saving schemes that offer 80C deductions

Some small saving schemes such as PPF and Sukanya Samriddhi Account can offer tax benefits along with secure returns

The last date for making tax-saving investments to avail deductions of up to Rs 1.5 lakh under Section 80C is March 31.

These breaks are available only under the old regime, which will cede further ground to the new tax system from April 1, 2025, when the new financial year begins.

For this financial year, if the old tax regime benefits you, you must act now to make the most of the tax-saving options instead of leaving it for the end.

Government-backed small-saving schemes are among the most popular and secure instruments that offer tax benefits under Section 80C.

While they offer high interest rates and stable returns, interest rates are reviewed every quarter. Do keep in mind the implications of a possible rate review by the finance ministry at March-end, given that the Reserve Bank of India earlier this month cut the repo rate by 25 basis points.

Here are some small-saving schemes, their features, returns and limitations:

Public Provident Fund

A favourite with salaried and self-employed alike, Public Provident Fund (PPF) offers an interest rate of 7.1 percent, subject to quarterly reviews by the finance ministry. You have to invest at least Rs 500 and can take it to Rs 1.5 lakh in a financial year.

It comes with a long maturity period of 15 years, excluding the financial year of account opening, though premature withdrawals are allowed. It can be extended for five years once it nears maturity.

You can make one withdrawal during a financial year after five years, not including the year of account opening. For instance, if you opened the account in 2017-18, you can make one withdrawal in 2023-24.

The maximum you can withdraw is 50 percent of the balance at the end of the fourth preceding financial year or at the end of the preceding year, whichever is lower.

Also read: PPF, Sukanya Samriddhi: 5 new rules for your small-savings account. Here’s what you need to know

Sukanya Samriddhi Account

At 8.2 percent a year, the Sukanya Samriddhi Account scheme has the highest interest rate, compounded yearly, among small-savings instruments. You can start with as little as Rs 250. The interest earned is also tax-free.

A guardian of a girl child below the age of 10 can open this account to save for her education. He or she can continue making the deposit for the next 15 years.

However, it will mature only after 21 years. The proceeds can also be completely withdrawn if the girl gets married after turning 18.

Such withdrawals can be made at the time of the wedding – these will not be permitted one month before and three months after the girl gets married. The rules, though, allow partial, premature withdrawal of up to 50 percent of the balance at the end of the preceding financial year, once the girl turns 18 or passes her 10th standard examinations.

Also read: Government leaves small-saving scheme rates unchanged in December 2024

National Savings Certificate

Now, less popular, these NSCs come with a five-year tenure. The minimum deposit amount is Rs 1,000. They offer an interest rate of 7.7 percent, compounded annually but paid at maturity. Premature closure is not allowed except in a few cases such as the death of the account holder, forfeiture by a pledgee (a gazetted officer) and on the orders of a court.

You can pledge or transfer your NSC as security by applying at your local post office. It has to be accompanied by an acceptance letter from the pledgee.

Senior Citizens Savings Scheme 

Individuals above 60 can invest in the Senior Citizens Savings Scheme which has a five-year lock-in period. The minimum deposit is Rs 1,000 and the maximum Rs 30 lakh. These deposits qualify for deductions up to the overall limit of Rs 1.5 lakh under Section 80C.

The rate of interest offered is 8.2 percent per annum, payable every quarter (April 1, July 1, October 1 and January 1). In case of premature closure, the depositors stand to lose 1-1.5 percent of the principal amount.

Five-year time deposits

The national savings time deposits come with one, two, three and five-year tenures. The five-year deposit is eligible for deductions under section 80C. The minimum deposit required is Rs 1,000. Currently, it offers an interest rate of 7.5 percent. In the case of premature closure, the interest rate will be 2 percentage points less than the rate applicable to the tenure.

Don’t focus solely on tax benefits

Given that these instruments come with lock-in periods of at least five years, you should opt for them if you don’t need money in the near future.

While they do offer tax benefits, invest in these schemes only if they are a good fit for your financial planning strategy.