People in India have traditionally thought of small savings plans as the dutiful footnotes of personal finance: they are useful, save you money on taxes, and are low-risk. They are on the outskirts of investing talks, and people don’t often talk about them or make them sound good.
But today, something more interesting is going on. The Indian government is quietly but firmly pushing taxpayers into a new tax system that does away with deductions in favour of simpler slabs. Many of the traditional reasons for these plans seem to have lost their strength. So, what will happen to their job?
This article argues that small savings plans like the Public Provident Fund (PPF), the Sukanya Samriddhi Yojana (SSY), and the National Savings Certificate (NSC) are still useful even when tax planning focused on deductions is becoming less useful. Instead, they are being changed and recast as tools for long-term, tax-resistant, purposeful saving. If you think they are out of date, you don’t understand how their function in Indian household finance is changing.
The New Policy Terrain: From Deduction to Design
The financial year 2020–21 was a turning point when the government unveiled a new tax structure with lower rates and fewer exemptions. It was announced as the default regime by FY 2023–24. This revealed that the Center wants to make tax structures easier in the long run and for people to stop thinking about exemptions.
Section 80C, which used to be the best way for middle-class people to save money, is now mostly useless in this new world. And since that very provision has historically been what made small savings plans appealing, one could suppose that their policy importance is decreasing.
That style of thinking is excessively narrow. These plans include characteristics that go far beyond 80C, but their core selling point – especially for long-term, non-speculative capital – stays the same.
PPF: Last Place Where Compounding Isn’t Taxed
The Public Provident Fund is one example. At first glance, the new restrictions make it less appealing for tax purposes because the initial deduction for donations is no longer accessible. But the most essential point is that the exemption on both interest earned and maturity revenues stays the same.
This is not a little benefit. PPF is a special case since it allows for untaxed compounding over a long period of time in a country where other fixed-income products, such as FDs, debt mutual funds, and government bonds, are taxed on interest every year.
When you think of it this way, the PPF isn’t so much about lowering your taxes in the year you put money in as it is about protecting your returns over time. If you expect to retain it for 15 to 25 years, this tax sheltering can give you far better effective yields than most short- or medium-term options. In a world with too many financial choices and things that can change suddenly, the chance to put some of your money into a commodity that grows quietly, tax-free, and predictably is curiously becoming more valuable, not less.
SSY: Where Social Policy and Behavioural Design Cross Paths
The Sukanya Samriddhi Yojana, which is meant to help ladies with money, makes this point even clearer. People often remark that its structure is bad because it has a 21-year maturity, a big penalty for shutting early, and no liquidity until age 18. But this strictness is on purpose. It provides discipline based on goals, which is a behavioural design component that makes sure the money is saved for school or marriage.
This discipline is connected to India’s highest tax-free interest rate for modest deposits (8.2% presently), and it’s not a coincidence. It illustrates a policy that has two goals: to induce women to save for the long term in a culture where trust is low, and to get sovereign-grade returns for doing so.
In the old tax structure, the 80C benefit was a welcome extra. The plan must be able to stand on its own under the new system, and it does. The software helps users stay on track with their goals, not just make money. That function adjustment is perhaps more in line with what excellent public finance should attempt to do.
NSC: Is a Product Losing Its Policy Direction?
On the other hand, the National Savings Certificate is showing signs of design fatigue. Unlike PPF and SSY, its tax benefits are very similar to those of 80C. It boasts a 7.7% annual interest rate and is backed by the government, but you have to pay taxes on the interest. If you don’t use the 80C deduction (on either the principal or the interest that is reinvested), the return after taxes goes down a lot.
NSC is still useful for some things, including when you need a 5-year lock-in with a consistent payout or when you’re still under the old tax rules. However, it’s not easy to justify in modern portfolios that are formed under the new tax rules. Tax exemption doesn’t make it any more flexible, and the fact that it has a predetermined horizon doesn’t fit with the flexibility that debt instruments today need.
It teaches us something when it falls. It tells us that in a world after deductions, products shouldn’t utilise tax reasons; they instead rely on design integrity. This can be accomplished by providing tax-free returns or by advocating a behavioural value.
The Deeper Function: Small Savings as Financial Behaviour Anchors
So, the way people think about small savings programs is steadily changing. The old rule, which said to earn the most 80C benefits from all options, caused instrument arbitrage. Now that the structure has changed, I need to ask a fresh question: How will this strategy change the way I handle money over time?
PPF is the base of wealth that lasts a long time, doesn’t need much work, and isn’t taxed. SSY becomes a lockbox for a future task that is important to both you and society. NSC used to be a passive 80C filler, but now it has to show that it is worth anything, and that is hard for it to achieve.
This revolution is not just about technology; it’s also about culture. These programs offer the kind of structured, constrained commitments that personal finance needs more of, not less, as society moves from saving for taxes to saving for a purpose.
Final Thought
If you are not sure if small savings programs are “still worth it,” you don’t know how they’ve changed. The most important question is: what types of financial tools foster long-term thinking and self-control in a system that no longer rewards people for trying to gain deductions?
In that light, PPF and SSY are still significant, although they are becoming less common. They are like tranquillity in a world where money flows swiftly. They allow money grow slowly, without anyone noticing, and without any consequences. These are all things that should get a lot more attention than they do.
Today, their value is not in avoiding taxes, but in making money that is tax-free and hard to say no to. In that sense, they are not parts of an old system. They are the initial steps toward a better one.
The author is co-founder & Executive Director, Prime Wealth Finserv Pvt. Ltd. Views expressed are personal.
