Want better returns than FDs? Here are top five government-backed schemes you can consider

Bank fixed deposits are a preferred investment option for parking excess cash, especially for risk-averse investors seeking stable, assured returns on their principal. As of May 2026, FD rates offered by major public and private lenders generally range between 6 and 7.25% per annum, with senior citizens usually receiving an additional 0.5% over the regular rates.

Meanwhile, NBFCs and small finance banks offer higher interest rates, up to 8.30% per annum for general depositors and up to 8.80% for senior citizens. However, this yield comes with a higher risk than that of traditional public-sector and major private banks.

If you are looking for alternative schemes that are backed by the government and offer higher interest rates than most FDs, there are several options available with additional features, such as tax benefits. Here's a list of such schemes to consider, along with their features and eligibility:

Post Office Time Deposits

Post Office Time Deposits are fixed-income instruments that are guaranteed by the sovereign. These instruments permit any individual to make investments for a fixed tenure and earn assured returns on the same.

The scheme offers four fixed tenures, with interest rates currently going up to 7.5% for the 5-year tenure. Here are the tenures and applicable interest rates for the April to June 2026 quarter:

• 1 year: 6.9% per annum
• 2 years: 7% per annum
• 3 years: 7.1% per annum
• 5 years: 7.5% per annum

Post Office TDs are compounded quarterly and paid annually. Individuals can open their accounts either individually or jointly with up to three adults. Even minors aged 10 or older can hold accounts.

However, depositors must note that, unlike banks, which often offer seniors a higher rate, this scheme's interest rates are the same as those for general citizens.

The minimum deposit for this scheme is ₹1,000, with no upper limit. The 5-year TD also qualifies for tax deduction and rebates under Section 80C (only under the old tax regime).

Post Office Monthly Income Scheme (POMIS)

The Government of India also backs the Post Office Monthly Income Scheme. It offers an interest rate of 7.4% per annum for the April to June 2026 quarter, which is higher than most FDs for regular depositors.

The scheme offers a fixed tenure of 5 years and allows investors to start with a minimum deposit of ₹1,000. The maximum investment limit is ₹9 lakh for a single account and ₹15 lakh for a joint account. Any individual can open an account and start investing in this scheme.

The scheme does not offer tax benefits under Section 80C, and the interest earned is also fully taxable. Premature withdrawal is permitted after one year, subject to applicable penalties.

Senior Citizen Savings Scheme (SCSS)

The Senior Citizens Savings Scheme is a popular fixed-income investment option for retirees due to its government backing, regular quarterly payouts and higher interest rates than most FDs.

The scheme currently provides an interest rate of 8.2% per annum. The scheme has an initial maturity period of five years, which can be extended in three-year blocks.

The minimum deposit required is ₹1,000, and investments must be made in multiples of ₹1,000. The maximum total investment allowed across all SCSS accounts is ₹30 lakh per individual. An SCSS account can be opened either individually or jointly with a spouse.

Any individual aged 60 or older can open an SCSS account and invest in the scheme. Individuals aged 55 to 60 are also eligible, provided they have retired under a superannuation or voluntary retirement scheme and open the account within one month of receiving their retirement benefits. In addition, retired defence personnel can invest in SCSS from the age of 50 years.

The scheme offers a tax deduction of up to Rs. 1.5 lakh per financial year under Section 80C of the Income Tax Act. However, the interest earned is fully taxable according to your income tax slab, and tax deducted at source (TDS) applies if your interest income exceeds Rs. 1 lakh per annum.

National Savings Certificate

The National Savings Certificate (NSC) scheme is a solid, government-backed fixed-income investment that provides an annual interest rate of 7.7% on deposits made in the April–June 2026 quarter.

The minimum investment that you can make in this scheme is ₹1,000. Additional deposits can be made in multiples of ₹100 and there is no cap on the maximum investment that you can make. Any individual can invest in this scheme.

The scheme offers a tax deduction of up to Rs. 1.5 lakh per financial year under Section 80C of the Income Tax Act (only for old tax regime).

NSC comes with a fixed maturity period of 5 years. In this, the interest benefit is credited annually and is automatically reinvested until the end of the fourth year. The total value is cumulatively added to the certificate value and paid to the investor at maturity.

Sukanya Samriddhi Yojana (SSY)

The Sukanya Samriddhi Yojana (SSY) is a favoured investment scheme meant for only young females. Guardians may start an SSY account in the name of their female child aged under 10 years at a Post Office or with various lenders.

The SSY scheme currently offers an interest rate of 8.2% per annum. Hence, the returns level exceeds many of the set investment earnings offered by major lenders such as State Bank of India, HDFC Bank, ICICI Bank, Bank of Baroda, Punjab National Bank, and others.

The account matures after 21 years from the opening date. However, it can be terminated early in the event of the female child's marriage after she reaches the age of 18 years.

The scheme requires a minimum deposit of ₹250, with a maximum investment of ₹1.5 lakh per financial year.

The scheme offers a "triple tax benefit" under the Exempt-Exempt-Exempt (EEE) category, meaning the investment, interest, and maturity proceeds are all tax-free.