Self-employed individuals, especially the ones with small and medium-sized businesses, are usually seen struggling with the consistency in their income as compared to people working on a fixed recurring salary.
Moreover, they’re also unable to enjoy the security and benefits offered by employee provident funds. After retirement, self-employed people usually struggle to even meet their daily expenses.
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If you also have an irregular income, you need to have your capital invested in reliable saving plans to help you achieve your short, mid, and long-term financial goals. This will allow you to safeguard your future in case of any eventualities.
Here’s a list of seven small saving schemes that are crucial for self-employed individuals:
National Pension System
The national pension scheme is a government-initiated savings scheme that helps self-employed individuals to build a financial corpus for their retirement. It allows you to contribute regularly to the plan during the financial year and is available for all residents of India between the ages of 18-60 years.
The investments you make towards this plan are spread across government securities, stocks, and fixed income instruments as per your preference. Moreover, all the payouts are eligible for tax benefits and deductions under section 80C of the Income Tax Act. After reaching 60 years of age, you can withdraw 60% of the accumulated wealth without any taxes.
However, the remaining 40% of the amount requires to be invested in an annuity plan. The service provider for the annuity is also required to be selected by you.
To fulfill your future financial goals as per your risk-taking capacity, you can choose to invest in mutual funds as well. It invests your money in market-linked financial resources like debt, equity, stocks, real estate, gold, and so on according to your investment goals. There are various types of mutual funds available for you to choose from based on your requirements and risk profile.
If you’re an aggressive investor, you can consider investing in mid-cap funds that increase your chances of gaining higher returns. On the other hand, mutual funds also provide various debt funds for conservative investors as well. You can also choose from various options that feature high credit quality at a shorter duration. That’s why they’re considered to be ideal as small savings schemes for self-employed individuals.
Bank Fixed Deposits
If you’re looking for a safe small savings scheme, you may consider investing in fixed deposits through your existing bank. It keeps your funds protected from the volatile conditions of the market and provides you a predefined rate of interest for a particular time frame.
Fixed deposits can also be used as collateral for taking loans at a lower interest rate than credit cards or personal loans. Moreover, the savings from this scheme are also eligible for tax benefits and deductions under section 80C of the Income Tax Act. You can enjoy a tax deduction of up to Rs. 1.5 Lakhs every financial year. However, your funds will be locked in for a period of at least five years.
Public Provident Fund
The Public Provident Fund is a government-regulated small saving scheme that enjoys its status as one of the safest fixed-income investments, as it is backed by the Government of India. If you want higher returns than other fixed-income schemes and bank fixed deposits, you should definitely consider investing in a public provident fund.
As of now, the small saving scheme interest rate is somewhere around 7.1% that’s revised every quarterly. The plan features a lock-in period of 15 years that makes it a very convenient option for long-term financial goals like retirement. To gain a loan against your PPF balance, you need to wait until three-six years after opening your account, based on various conditions.
Post Office Saving Schemes
Post offices feature a variety of savings schemes for people with different financial requirements. It is suggested to choose a post-office-based scheme only when you’re gaining higher returns than a bank, and the scheme is backed by a credible sovereign guarantee. There are various options available such as a time deposit account, recurring deposit account, monthly income scheme, and so on.
National Savings Certificate
The National Savings Certificate is a fixed-income savings scheme that can be availed through any post office located across India. It is a highly known small savings scheme that ensures guaranteed returns on your investment. The scheme demands a lock-in period of five years, and it can also be used as collateral for loans in banks. Currently, the small saving scheme offers you an interest rate of 6.8%, and is also eligible for tax benefits under section 80c of the income tax act of India, with deductions of up to Rs. 1.5 Lakhs per financial year.
Property has always been considered as a preferable option for self-employed people with long-term goals. Earlier, people used to purchase commercial or residential properties and put them on lease or rent to gain profits. However, nowadays people are making banquets out of their properties for higher profits. You can also invest in a real estate investment trust to gain a lump sum amount of money from real estate without actually having to manage the property.
As you may already read above, self-employed individuals have a wide range of assets to choose from and grow their capital for a financially sound future. Before investing in any saving scheme you need to take your time to analyze the risk and liquidity associated with the particular scheme to make the most out of it. Additionally, you can also consider diversifying your portfolio into multiple asset classes.