When it comes to growing your money securely, fixed deposits (FDs) have long been a go-to option for Indian investors. However, with changing financial needs and better alternatives available, FDs are no longer the only choice. Today, several saving options offer higher returns, safety, and more flexibility than traditional FDs.
If you’re looking for the best saving plan in India that combines return, security, and easy access, it’s worth exploring a mix of government-backed schemes, market-linked investments with low volatility, and life insurance-based plans like endowment policies.
Why look beyond fixed deposits?
While fixed deposits offer capital protection and fixed interest, their returns—typically between 5% to 7.5%—may not always beat inflation. Also, interest earned on FDs is fully taxable, reducing the post-tax returns further. Additionally, premature withdrawals can attract penalties, making them less flexible during emergencies.
Investors today want more: tax efficiency, better liquidity, and growth that keeps up with rising costs. Fortunately, there are several alternatives that fulfil these expectations.
Best saving plans in India with better returns and flexibility
1. Public Provident Fund (PPF)
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Interest Rate: ~7.1% (compounded annually)
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Lock-in: 15 years
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Safety: Backed by Government of India
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Liquidity: Partial withdrawal from 6th year onwards
PPF offers tax-free returns and is ideal for long-term wealth accumulation. Though it has a longer lock-in period, partial withdrawals and loan facilities offer some liquidity.
2. Liquid Mutual Funds
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Expected Returns: 4%–6%
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Lock-in: None
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Safety: Low-risk, short-term government and corporate instruments
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Liquidity: Withdrawals processed in 24 hours
Liquid mutual funds are suitable for short-term needs and emergency funds. They are more tax-efficient than FDs, especially if held for over three years due to indexation benefits.
3. Recurring Deposits (RDs)
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Returns: 5%–8%
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Tenure: 6 months to 10 years
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Liquidity: Premature withdrawal allowed (with penalty)
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Safety: Bank-backed, low risk
RDs allow monthly savings and are perfect for salaried individuals looking to build a corpus without making a lump sum investment.
4. National Savings Certificate (NSC)
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Returns: 7.7%
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Lock-in: 5 years
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Safety: Government-backed
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Tax Benefit: Under Section 80C
Though the interest is taxable, it is compounded annually and re-invested, qualifying for further 80C deductions.
5. Post Office Monthly Income Scheme (POMIS)
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Returns: ~7.4% monthly
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Lock-in: 5 years
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Liquidity: Premature exit allowed after 1 year (with penalty)
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Safety: Government-backed
This is ideal for retirees or conservative investors seeking regular income with low risk.
6. Endowment Policy
An endowment policy is a life insurance plan that combines insurance with disciplined savings. It provides a lump sum on maturity or to the nominee in case of the policyholder’s demise during the policy term.
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Returns: ~4%–6% (plus bonuses, if applicable)
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Safety: Guaranteed maturity benefits
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Liquidity: Loan facility available after a few years
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Tax Efficiency: Premiums qualify under Section 80C; payouts may be exempt under Section 10(10D)
Endowment policies are suitable for conservative investors looking for stable returns and life cover in one plan.
7. Debt Mutual Funds
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Returns: 6%–8%
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Liquidity: Usually within 1–2 business days
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Risk: Low to moderate, depending on fund type
If you’re looking for alternatives to FDs with similar safety and better returns, short-duration or low-duration debt funds can be a good fit.
Combining safety, returns, and access
For optimal results, consider diversifying your savings:
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Use PPF and NSC for long-term security
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Choose liquid mutual funds and RDs for emergencies
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Add an endowment policy for life protection and guaranteed maturity benefits
Each of these saving plans has its strengths. By combining them, you ensure both growth and availability of funds when needed.
Conclusion
The best saving plan in India is not necessarily the one with the highest return but one that offers a healthy mix of safety, growth, and flexibility. Fixed deposits can still be a part of your portfolio, but supplementing them with options like PPF, NSC, liquid funds, or an endowment policy can improve overall returns without adding unnecessary risk.
By choosing wisely and reviewing your saving strategy regularly, you can meet short-term financial needs and long-term life goals with confidence.