The Union Budget has given fresh incentives for small saving schemes by increasing the income tax deduction limit under Section 80 C from Rs 1 lakh to Rs 1.5 lakh.
A lot of Section 80C instruments such as PPF, NSC, 5-year term deposits and Senior Citizen Savings Scheme fall under the category of small savings schemes.
The government is also planning to reintroduce Kisan Vikas Patra, as a step towards financial inclusion. KVP was discontinued from December 2011 amid fear of they being used to launder money. Kisan Vikas Patra was a very popular investment tool as it was a bearer document, which did not carry the investor's name, it could be transferred freely. The details of the scheme is yet to be announced.
"Anyone who held the document could encash it without the requirement of PAN or any other identity proof. This was, therefore, used to park black money and hence was discontinued. It is to be seen if it is indeed introduced, the earlier concerns of it being used to launder money is addressed or not," says Pankaj Mathpal, a certified financial planner.
The tenure of Kisan Vikas Patra used to be the period in which the money was doubled. When it was discontinued it was doubling the money in 8 years 7 months at a rate of 8.4%.
"We do not yet know at what interest rate the new instrument would offer to investors. Without that we do not know how good it would be," says Karthik Javeri, a certified financial planner.
Meanwhile, the Budget has also announced a National Savings Certificate with insurance cover to provide additional benefit to small investors.
A special savings scheme with the aim at saving for the education and marriage of the girl child will also be launched. It is not known if the tax benefits of Section 80 C would be extended to this scheme.
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