What are Small Savings Schemes - types, teturns and interest rates

 Amid uncertainty in the equity-linked savings instruments, the government's small savings schemes offer safe and assured returns. What are these schemes? Let us understand in this explainer

Small Savings Schemes are a set of savings instruments managed by the central government with an aim to encourage citizens to save regularly irrespective of their age. They are popular as they not only provide returns that are generally higher than bank fixed deposits but also come with a sovereign guarantee and tax benefits.
Since 2016, the Finance Ministry has been reviewing the interest rates on small savings schemes on a quarterly basis. All deposits received under various small savings schemes are pooled in the National Small Savings Fund. The money in the fund is used by the central government to finance its fiscal deficit. Now let us take a look at the different savings schemes.
The schemes can be grouped under three heads - Post office deposits, savings certificates, and social security schemes.
Under Post Office Deposits we have the savings deposit, recurring deposit, and time deposits with 1, 2, 3, and 5-year maturities and the monthly income account.
The savings account currently pays an interest of 4% per annum and can be opened individually or jointly with an initial investment of Rs 500.
The recurring deposit that pays 5.8% a year compounded quarterly matures after 60 months from the date of opening. It allows investors to save on a monthly basis with a minimum deposit of Rs 100 per month.
The post office time deposits are akin to fixed deposits. A minimum investment of Rs 1,000 is required to open a time deposit. The one-year, two-year, three-year time deposits fetch an interest rate of 5.5% while the five-year deposit earns 6.7% per annum.
Investments under the 5-year time deposit up to Rs 1.5 lakh further qualify for benefit under section 80C of the Income Tax Act.