Finance Ministry has notified the reduction in interest rates on Small Saving Schemes for January -March 2018 quarter by 20 basis points (0.2%) as compared to October- December 2017 quarter.
Interest Rates on Small Savings Scheme – Overview:
The latest reduction in interest rates applies to National Savings Certificate (NSC), Kisan Vikas Patra (KVP), Sukanya Samriddhi Account and Public Provident Fund (PPF).
- However, interest on investments in the five-year Senior Citizens Savings Scheme and savings deposits has been retained at3 per cent and 4 per cent respectively.
- Financial experts expect the Commercial banks to follow suit and lower the deposit rate.
- It is to be noted that, since April 2016, interest rates on all small savings schemes have been recalibrated on a quarterly basis.
Post this decision, the applicable interest rate on investment in various Small Savings Schemes is as under:
|Small Savings Scheme||Annual Interest Rate|
|Public Provident Fund (PPF)||7.6%|
|National Savings Certificate (NSC)||7.6%|
|Kisan Vikas Patra (KVP)||7.3% (11 months maturity)|
|Sukanya Samriddhi Account||8.1%|
|5-year Senior Citizens Savings Scheme||8.3% (Unchanged from previous quarter)|
|Savings Deposit||4.0% (Unchanged from previous quarter)|
|Term Deposits (1-5 year maturity)||6.6% to 7.4%|
|5-year Recurring Deposit||6.9%|
Some Popular Small Saving Schemes at a Glance:
Public Provident Fund (PPF):
This scheme is a preferred long term investment option for a conservative investor. It is backed by Government of India, thus providing the dual advantage of safety and attractive interest rate.
- Returns from investment in PPF are exempted from Income Tax. Minimum investment required is Rs. 500/-. Maximum Investment permitted in one financial year is Rs. 150000/-
Kisan Vikas Patra (KVP):
It is a savings certificate scheme which was launched by India Post in year 1988. Fearing misuse of KVP in money laundering and terrorist financing, it was closed in year 2011 on recommendations of Shayamala Gopinath Committee.
- It was re-introduced in year 2014 wherein the investor is required to complete Know Your Customer (KYC) formalities. KVP certificate is available in various denominations viz. Rs. 1000, Rs. 5000, Rs. 10000 and Rs. 50000.
- There is no upper limit for investing in KVP. Investing in KVP does not accrue any tax benefit.