6 government schemes to invest in India for 2022

Every investment avenue – like national pension system (NPS), ELSS mutual funds, sovereign gold bond scheme, etc. – carries an unquestionable level of risk. Higher the risk, higher is the return. On the flip side, higher the risk, the possibility of losses also becomes higher. However, there are certain investment avenues which are not risky or carry minimal risk. Conservative or risk averse investors who want less or no market exposure can consider them owing to their government backed feature to earn satisfactory returns. 

Here are 6 government schemes, which you can consider in 2022 for investment purpose:

Public Provident Fund (PPF)

Investing in PPF is one of the prudent ways to get guaranteed returns for post-retirement. There are basically 2 reasons to invest in PPF: to avail tax free interest on an annual basis and surety to avail gains. Maximum investment limit is Rs. 1.50 lakh in a year to avail tax deduction benefit as per Section 80C. The investment plan comes with a 15-year lock in period, which further can be extended in the block period of 5 years after maturity. As of December 2021, PPF provides a return of 7.1% p.a. (compounded yearly).

National Savings Certificate (NSC)

NSC comes with a lock in period of 5 years offering a rate of 6.8% p.a. (compounded annually). While returns on NSC are guaranteed, they are subject to review as to the government’s rules on a quarterly basis. Minimum deposit amount is Rs. 1,000 in multiples of 100 with zero maximum deposit limit. You can also claim deduction on NSC investments as per Section 80C.

5-year post office time deposit account

Investment as per the 5-year post office time deposit qualifies for tax benefit as per Section 80C. Presently, the term deposit account of five years offers a rate of 6.7% payable annually but compounded quarterly. Minimum deposit amount is Rs. 1,000 in multiple of 100 with no maximum limit.

Voluntary Provident Fund (VPF)

For you as a company employee, it is mandatory to contribute 12 percent of your basic pay in employee provident fund (EPF). However, you get the choice to enhance your contribution for up to 100 percent of your basic salary and dearness allowance through VPF. Like EPF, VPF’s interest rate is reviewed by the government annually where the interest earned is tax exempt if you as an employee continue to stay in service for 5 years or above. Rate of interest of VPF is the same as EPF, which is 8.5 % p.a.

Sukanya Samriddhi Yojana (SSY)

SSY is an initiative by the Indian government to promote girl child welfare. Any legal guardian can open this account any time right after the birth of a girl until she attains 10 years of age. This account can be opened with a minimum deposit of Rs. 250 and thereafter any amount in the multiple of Rs. 50 can be deposited. Maximum amount that can be deposited is Rs. 1.50 lakh in a financial year. Lock-in period of SSY is up to 21 years from the date of opening the account or marriage of the girl child to whom the account belongs after attaining the age of 18 years, whichever is earlier. Presently, SSY interest rate is 7.6 % p.a. (compounded yearly).

National Pension System (NPS)

NPS is a government backed market linked instrument for retirement planning. If you are salaried and do not fall under the ‘corporate or government’ model, you can opt for NPS under the ‘all citizens of India’ model. Unlike ELSS mutual funds under the mutual fund category and sovereign gold bond, NPS has an edge over these investment options on providing capital security feature. Investment stays locked in until you reach the age of 60, which can be extended up to the age of 70 years. Minimum 40 percent of the accumulated corpus must be invested to avail annuity while the rest of the tax-exempt amount is withdrawn in lump sum on maturity. You can avail a tax deduction of up to Rs. 1.50 lakh as per Section 80C with an additional tax deduction of up to Rs. 50,000 as per Section 80 CCD (1B).