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Best Government Schemes |
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While evaluating Best Government Schemes, we consider only two of the three important factors for analysing investment opportunities - returns and liquidity. The third factor - risk - is not relevant and the risk of all government securities is the same.
As per our analysis, the best government schemes evaluated on returns and liquidity are -
1. Returns: Public Provident Fund (PPF)
2. Liquidity: Post Office Monthly Income Scheme
A brief description of both these schemes is given below.
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1. Public Provident Fund (PPF)
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Best fixed-income investment for high tax payers
PPF is a very attractive fixed income investment for small investors primarily because of
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 An 9.5% post-tax return - effective pre-tax rate of 13.57%+ assuming a 30% tax rate
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| A tax-rebate - deduction of 20% of the amount invested from your tax liability for the year, subject to a maximum Rs 60,000 for a tax rebate
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| Low risk - risk attached is Government risk
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So, what\'s the catch? Lack of liquidity is a big negative. You can withdraw your investment made in Year 1 only in Year 7 (although there are some loan options that begin earlier). If you are willing to live with poor liquidity, you should invest as much as you can in this scheme before looking for other fixed income investment options.
To get more details on this scheme, see our Public Provident Fund Detailed Report.
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2. Post Office Monthly Income Scheme
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Offers regular income, no TDS
The monthly income scheme offers 9.5% monthly interest and a 10% bonus if you hold your investment for the entire term of 6 years.
This scheme is best suited for retired individuals or individuals who have regular income needs.
Besides the low (Government) risk, the fact that there is no tax deducted at source (TDS) in this scheme is another attractive feature.
To get more details on this scheme, see our Post Office Monthly Income Scheme Detailed Report.
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