Saving Schemes like PPF, EPF, NSS, NSC and their likes are the ones that offer maximum interest rates on savings. These schemes can also be used for tax saving and easy home loans. Here is a detailed insight on these saving schemes.
National Saving Certificate
NSC is a scheme that can be used as collateral for taking loans from banks. One can use 80-90% of the amount available in the account for loan purpose. There is no maximum limit for investment under this product and there will be no tax liability on investment. Although interest under the scheme is taxable subject to section 80C deduction limit. The interest rate on this saving scheme is 7.8% which is not the highest as compared to other saving schemes with a time period of 5-10 years. One has to pay the loan till the end of maturity period of the scheme. The rate of interest on the loan is lesser than the traditional one. Generally 7-9% on the total amount of loan availed.
Employee Provident Fund Scheme:
EPF is another best way for availing home loans for salaried employees. You can withdraw 90% of the total amount if you have more than 20,000 rupees including interest and you are member for EPFO for more than three years. You earn a rate of 8.65% compounded annually on your account. The other advantage is that you can repay the loan from the EPF fund. Also, under Pradhan Mantri Awas Yojna, one can also get a linked subsidy of upto Rs. 2.2 lakhs for housing loan.
Public Provident Fund:
Public Provident Fund accounts (PPF) are quite popular for saving schemes as they offer higher interest rates and are also more flexible than Fixed Deposits of same tenure. It gives you exemption from income tax on investment as well as withdrawal with an Interest rate of 7.8%. The scheme has a maturity period of 15 years where you can withdraw funds after 6 years. The interest charged on home loan will be 2%. The maximum amount of investment per year in this scheme is Rs. 1.5 lakhs only.
Kisan Vikas Patra:
KVP offers 7.5% interest on the investment. You can avail personal or business loan on the scheme. There is no maximum limit for investment but lower limit is 1000 rupees. The minimum lock in period is 2.5 years. This scheme won’t save you from income tax on interest but investment is taxfree under section 80C. The maturity period of KVP is 100 months and the loan should be repaid within the same period. The interest rate on loan varies and the amount granted for loan depends on banks discretion.
The above four national saving schemes are secure as they are guaranteed by the Union Government. They have advantage with normal home loans as they are cheaper and convenient. Pradhan Mantri Awas Yojana is also a big benefits for eligible citizens. So you can start investing in these schemes to save your income tax and then use the accumulated number for drawing home loans.