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Best Government Investment Schemes In India

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October 11, 2022


What’s Inside

When we think of government investment schemes, the general belief is that they offer stability, low risk, good ratings, and more. Another common aspect that comes to mind is trust. We trust that the scheme will perform as expected and offer the returns committed by the scheme. 

There are many government investment schemes in India. Here is a brief explanation of popular schemes offered by the government of India. Let’s learn about them to choose the best for our goals. 

Popular Government Investment Schemes 

Government Securities (G-Secs)

These are short-term tradable debt instruments issued by India's central and state governments.

Only recently have retail investors been allowed to invest in these schemes directly. Now, retail investors like you and I can invest in G-Secs through the ‘RBI Retail Direct Scheme website. The Government of India made this landmark move on 12 November 2021. 

What can we expect from a government scheme? 

The government of India guarantees G-Secs. This means these are issued and backed by the government. Therefore, they carry no credit risk - meaning the government will not default on these schemes.

Is there no risk at all in these investments? 

No, the G-Secs carry three types of risks: reinvestment, liquidity, and market risk. 

Let’s learn about how these risks impact your returns.

Risks Associated with G-Secs

Reinvestment Risk 

The interest rate (or the coupon rate, as it’s called in the case of bonds) flows every six months, and you get your principal amount on maturity. This amount needs to be reinvested on maturity. However, if the interest rate at the reinvesting time is lower than when you first invested, you will lose money.

Liquidity Risk

Let’s say you want to sell your bonds before maturity; since these securities are traded, there is a chance that you might not be able to find buyers while trying to sell your security. Thus, you might have to make a lower-cost distress sale that can lead to a loss.

Market Risk

These securities are traded; therefore, like any other instruments, they face market risk. However, you can mitigate this risk by holding them till maturity. 

Some popular types of G-Secs are Treasury bills (T-bills), Cash Management Bills (CMBs), and dated government securities. 

Instruments like fixed-rate bonds, floating-rate bonds, zero coupon bonds, inflation-indexed bonds, capital-indexed bonds, special securities, and sovereign gold bonds are also types of government securities. 

Types of Government Securities

Here are some government investment schemes with high returns that you could consider investing in.

Sovereign Gold Bonds (SGBs)

Sovereign Gold Bonds (SGBs) are unique government security instruments whose prices are linked to that of the purest form of physical gold. You can buy these bonds as per the 24-carat gold gram value. When you purchase one unit of SGB, you pay the equivalent of one gram of gold (999 purity). Every unit added will be a multiple of a gram of gold. These bonds pay an interest rate of 2.5% per annum (as of July 2022). 

The SGBs are one of the popular government securities in India and are an alternative to purchasing physical gold. 

Apart from SGBs, there’s another way of investing in dematerialized gold. A gold ETF (Exchange Traded Fund) or a gold mutual fund can also be your alternative to physical gold. You can invest in these funds through the Fi Money app. There’s plenty of information on the Fi Money app to help you select a gold mutual fund that can match your risk and return expectations. 

Public Provident Fund (PPF)

If you ask your parents about an investment option that was popular in their times, one that offered compounded returns and had low risk, they just won’t stop talking about the all-powerful PPF.

The PPF is a long-term investment instrument with a maturity period of fifteen years. It has a low-risk profile and the added advantage of tax saving.

This means that you can save up to ₹1.5 lakhs on your taxable income as per Section 80C of the income tax act every financial year by investing in a PPF. Unlike the five-year fixed deposits, you do not have to open a new PPF account every time you invest. You can invest in the same PPF account annually and redeem your returns and principal on maturity (at the end of 15 years). 

Also, just like a mutual fund SIP, you can divide your tax-saving PPF investment into a maximum of 12 installments. 

If you change your mind sometime during those 15 years, you can keep your account active by making a minimum investment of ₹500 every financial year. Sounds great, doesn't it? 

National Savings Certificate (NSC)

NSC is a tax-saving investment scheme offered by post offices in India. As per Section 80C of the income tax act, you can save taxes up to ₹1.5 lacs per annum by investing in a five-year NSC. However, unlike the PPF investments, you must get a new certificate, i.e. open a new account every time you invest in an NSC. 

On maturity, you get the compounded returns along with your principal amount. This is a comparatively low-risk scheme with interest rates revised every quarter. 

National Pension System (NPS) 

Are you looking for an alternative to mutual funds? Do you want to invest in schemes with different risk and return profiles? Do you want to save taxes beyond your invested ₹1.5 lakhs in Section 80C instruments? Then NPS can be a good option for you. 

These investments are regulated by the PFRDA (Pension Fund Regulatory and Development Authority). 

NPS is a voluntary investment instrument that offers options for different age groups and risk appetites. NPS investments can be made in two types of accounts. These are Tier 1 (retirement account) and Tier 2 (investments that can be redeemed anytime). However, you can avail of tax benefits only by investing in the Tier 1 account, which cannot be redeemed before 60 years of age. 

Both these accounts offer asset allocation in equities, debt, and alternative investments. This makes NPS a comprehensive goal-planning instrument. 

Now that we have learned about some of the popular government investment schemes, let’s learn how to choose a scheme that can be suitable for you.

Choosing the Best Government Investment Schemes 

Risk Profile 

Different government investment schemes have different risk and return profiles. Some schemes can offer stable returns, whereas some have the potential to beat inflation. Moreover, there are also investments that provide both stable and high-potential return options. While choosing from your shortlisted best government investment schemes, you can look at the one that matches your expectations concerning risk and returns. 


Different government investment schemes have different maturity periods. For example, there are PPF investments that have a 15-year maturity period. Then there are Tier 2 NPS investments that can be redeemed anytime. Therefore, you can consider looking at the maturity period while investing in these schemes. 

Regular Investing Potential

Government investment schemes like NPS and PPF offer regular investment opportunities. You can make investments in such instruments in installments. Thus, they help you divide your investments throughout the year. If you are a fan of small and regular investing, then schemes like these might not go well with your goal. 

Additional Benefits

Some government investment schemes also offer tax benefits. You can check and compare these features while selecting a scheme. 

To Sum Up

Government investment schemes offer a plethora of investment opportunities. There are numerous options available, from investing in different assets like equity, debt, and gold to investing in different risk and return profiles. Further, you can choose investments of different maturity periods with additional benefits like tax savings. All-in-all, government investment schemes can help investors get the best out of their risk profile.

Frequently Asked Questions

1. Which government scheme gives the highest rate of interest? 

At present, PPF investments offer 7.1% returns on your investment. They have a maturity of 15 years, and the interest rates are compounded and redeemed on maturity along with your principal. 

2. Which government scheme is the best? 

There are a lot of government investment schemes available to choose from. These instruments have different risk and return profiles. Based on your financial goals and risk appetite, you can choose an investment that matches them. 

3. Which government investment scheme is best for me? 

To select the best government investment schemes with high returns, you can consider factors like the risk and return profile of the scheme, regular investment potential, lock-in period, and other benefits.

4. Which is the best investment plan for female in India?

1. Mutual Funds Through Systematic Investment Plans

2. Public Provident Fund

3. Fixed Deposits

4. National Pension Scheme

5. National Savings CertificateRead more

Curious? Read on

1. What do Post Office investment schemes mean? What are their benefits
2. Sukanya Samriddhi Scheme - Definitions, returns and more
3. What is Ayushman Bharat Yojana and what are it's benefits
4. What is the National Pension Scheme in India


Investment and securities are subject to market risks. Please read all the related documents carefully before investing. The contents of this article are for informational purposes only, and not to be taken as a recommendation to buy or sell securities, mutual funds, or any other financial products.
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