As the name suggests, most small savings schemes have an upper ceiling on the amount of maximum investments as the government not only gives higher interest rates on such schemes, but also provides tax benefits as well as sovereign guarantee to make them safe.
The most popular tax-saving scheme is Public Provident Fund (PPF) and the other one is Sukanya Samriddhi Yojana (SSY) which, apart from Post Offices, are now offered by banks as well. While a PPF account may be opened by anyone having a PAN card, SSY may be opened by the guardian of a girl child before the child becomes 10-year old.
As both the PPF and the SSY accounts provide higher interest rates than the prevailing FD rates and also provide tax deductions on the investment amount u/s 80C as well as tax-fee returns, you can’t invest an amount more than the prevailing 80C limit in these accounts. At present, the interest rate on PPF is 8 per cent and that of SSY is 8.5 per cent, while the 80C limit is Rs 1,50,000 in a financial year.
As the government provides higher interest rate and tax benefits on PPF and SSY, it has very specific guidelines on the mode of investments and limit of investments.
In case of the Public Provident Fund, a PAN card holder may open an account in his name and another account in the name of his minor child (say first child) only and not in the name of his wife. However, the total investments in both the accounts taken together can’t exceed Rs 1,50,000.
Similarly, if his wife is also earning, she may open an account in her name and another account in the name of her second minor child only. In this case also, total investments in both the accounts taken together can’t exceed Rs 1,50,000.
Hence an individual cannot have more than one PPF account and one SSY account, be it in Post Office or in any bank.
Now the question arises, what if a person invests more than the statutory limit, which is Rs 1,50,000 now, in a financial year? As per the guidelines, no interest will be given on the amount in excess of Rs 1,50,000 and the investor is allowed to withdraw the excess amount.
In case of Sukanya Samridhhi Yojana also, only one SSY account may be opened, be it in Post Office or in any bank, in the name of a girl child who is less than 10-year old. In case of SSY also, at present the investment limit is Rs 1,50,000 and no interest will be given on the amount in excess of Rs 1,50,000 and the investor is allowed to withdraw the excess amount.
However, in other small savings instruments like Kisan Vikas Patra (KVP) or National Savings Certificates, there are no upper limits for investments.
How much you may gain through PPF and SSY
Assuming that the new interest rate of 8.5 per cent remains stable throughout the tenure, Rs 74,96,802 would be accumulated in an SSY account at the end of 21 years, if Rs 1,50,000 is invested at the beginning of every year for 15 years. Again, assuming that the new interest of 8 per cent remains stable throughout the tenure, Rs 43,98,642 would be accumulated in a PPF account, if Rs 1,50,000 is invested at the beginning of every year for 15 years. Moreover, the investor will also get tax deductions on Rs 1,50,000 every year.
So, apart from tax savings, if invested Rs 1,50,000 each in PPF and SSY accounts in the beginning of every year, the investor would accumulate Rs 1,18,95,444 becoming a crorepati and that too through such investments, which have government guarantee and thus very safe.
There are other small savings instruments also on which interest rates have been increased. If more investments are made in those instruments, it would boost the return further and would make you a crorepati sooner.
The following table contains the list of such instruments and interest hikes on them.