PPF,NSC to fetch more as small savings rates hiked

Good news for savers. Small saving schemes such as Public Provident Fund (PPF), National Savings Certificates and Post Office Deposit Scheme will fetch more in the three months period starting October 1. The Government has raised interest rate on these schemes between 30 and 40 basis points (100 bps is 1 per cent).

PPF and NSC will earn interest at 8 per cent while Senior Citizens Savings Scheme, which has a tenure of five years, will fetch 8.7 per cent.

The country’s largest bank SBI offers 6.85 per cent interest on deposit for five years and up to 10 years, while for senior citizens it is 7.35 per cent. On savings accounts, most banks offer 3.5 per cent interest. Post office savings account earns 4 per cent.

Based on the recommendations of the Shyamala Gopinath panel, interest rates on these schemes are reviewed before the end of every quarter and accordingly new rates are announced for the next quarter. In an effort of to bring the rates according to the market, these rates are aligned to the rates on Government bonds of similar maturities with certain spread which will be maximum for Senior Citizen Saving Scheme. Since yield on 10 year Government bonds have gone up, interest rates on small savings have been revised upward. Many of these schemes offer tax benefit under the Income-Tax Act which is why these schemes are popular among salaried people. Another benefit is that one does not have to pay any tax even on withdrawal from Public Provident Fund (PPF) after maturity.

Revision in new rate means money accumulated till September 30 will get interest rate at existing rates while fresh deposit between October 1 and December 31 will get higher interest. Fresh accounts opened under Kisan Vikas Patra during this three month period will take less time to mature and money will double in 9 years and 4 months as against 9 years and 10 months for accounts opened till September 30.

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