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The government of India and the banking system offers individual investors the opportunity to park their money in a number of safe and relatively liquid financial instruments. The direct and sometimes indirect sovereign guarantee on these instruments make them a very attractive proposition for investors who are either risk averse or are seeking downside protection for creating a well-diversified portfolio.  


These instruments by their very nature promise a relatively safe and stable source of income-returns. However, to understand their suitability and maximize the benefits they offer, it is essential to understand the tenure options and taxation implications associated with each of these instruments. Below is a snapshot of the liquidity (lock in) and taxes applicable on some of the most popular instruments (updated as per Budget 2019).

Bank Based Saving Instruments 

Tax on Interest Income India: Fixed Deposit FD: Savings Account

Government of India Backed Saving Schemes

Tax on Provident Fund: Tax on PPF, EPF: India
Tax on Sukanya Samriddhi and RBI Bonds

Post Office Saving Schemes

Tax on Post Office Savings Scheme: Tax on NSC, Kisan Vikas Patra
Tax on Post Office Desposits

Retirement Based Savings Scheme (Government Backed)

Tax on Senior Citizens Savings Scheme | Tax on National Pension System NPS India
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