Savings are always good to have – especially when your income stream is non – continuous and dependent on factors that are not in your control. For farmers, whose revenue is based on rainfalls and crop yield, it is essential for them to have financial security in case things go south.
Farmers usually have a two crop per year rotation on their farms and that means that they have two different times per year that they need to have the finances to kickstart cultivation. This gives them a one year or six-month window where they have a lump sum of money besides their daily expenses. While there is this window, the investment need not be limited to it. Long term investments are also a good option for long term financial security. Investment options that are low risk and have consistent returns combined with non-taxable interest are desirable for farmers.
Personal Provident Fund (PPF)
Personal Provident Fund is the most popular investment option in India. PPF is a tax-free, government-backed long term investment plan that is cut from your income tax. The interest that you get on the PPF investment is also tax-free, making it an extremely secure investment option. PPF can be opened at a bank or a post office where your money gets invested for 15 years (can be extended by 5 years). There is a lock-in period of 5 years in place. The minimum investment is Rs. 500 and the maximum is Rs. 1,50,000 yearly. The current interest rate for PPF is 7.1%.
National Saving Certificate (NSC)
National Savings Certificate is another government-backed scheme that guarantees returns and tax saving. NSC can be started at any post office and has a lock-in period of 5 years. The interest rate (currently 8%) is decided by the government and is revised quarterly. However, once your investment has been started, the interest rate will remain constant till the end of your investment period. This makes it another safe scheme to invest in. While the investment itself is not taxable, the interest on it is taxable. The minimum amount that can be invested is Rs 500 and there is no maximum limit – but the maximum income tax savings are capped at Rs. 1,50,000.
Kisan Vikas Patra (KVP)
Kisan Vikas Patra is aimed at suburban areas where people are afraid of long term investments. KVP is a certificate that an individual buys for themselves or jointly with a family member from a post office or public sector bank for a minimum of Rs. 1000. There is no maximum limit. The promise of KVP is that it will double your investment in a given amount of time (124 months currently). The investment is locked in for 30 months and has a current interest rate of 6.9% – subject to change by the Ministry of Finance every quarter.
All these schemes are very low risk and pretty much guarantee returns. For farmers, especially, these are very lucrative investment schemes that are safe and should encourage them to invest more of their money – even in more risky investments like mutual funds as there is a certain risk reward that can be calculated with sound financial planning to maximise profits from investments.