Deposits in public provident fund (PPF) have witnessed a 50 per cent year-on-year rise in October, which shows that the enhanced investment limit has made the scheme attractive for small investors.
Data from the finance ministry reveals that deposits to the PPF have been steadily on the rise since July to Rs 8,495.16 crore by October 30 as against Rs 5,532.61 crore in the corresponding period a year ago.
This has also given a boost to the National Small Savings Fund (NSSF) where all deposits under small savings schemes are credited and is used as a source of financing for states and the Centre.
The data reveals that deposits to the NSSF have shot up to Rs 25,040.87 crore in the first seven months of the fiscal, overshooting the Budget Estimate of a mere Rs 1.96 crore.
“The PPF was always a good investment option. For the past few years, small savings seemed to have lost their lustre but now with the higher investment limit, contributions seem to have got a boost,” said an official familiar with the matter.
Finance minister Arun Jaitley had announced in his Budget 2014-15 speech that the tax deduction limit under Section 80C of the Income Tax Act, 1961, would be increased by Rs 50,000 to Rs 1.5 lakh annually.
Continued curbs on gold have also worked towards encouraging retail investors to park savings in PPF and other formal investment avenues.
“Last year, too, there was a jump in investments to the PPF but we still did not meet the Budget target. This fiscal, we are keeping our fingers crossed. While contributions to the PPF have increased, it is only in the last quarter that they see a big push,” said the official.
The interest rate on PPF is higher at 8.7 per cent compared to bank deposits and most other small savings products, he pointed out.
The Centre has set a target of Rs 26,531.11 crore from PPF this fiscal of which it has achieved 32 per cent between April and October 2014. In 2013-14, contributions to the PPF amounted to Rs 19,085.38 crore or 73 per cent of the revised target of Rs 26,010.90 crore. The Budget Estimate for 2013-14 was even higher at Rs 28,570 crore.
“With a higher investment limit, it is obvious that the contributions will see a jump. Also the PPF is one of the best investment options in the current scenario and is under the EEE tax regime,” pointed out Sunil Sinha, director, India Ratings.
However, despite the re-launch of the Kisan Vikas Patra, interest in savings deposits and certificates has not been encouraging.
In the six-month period ending October, only Rs 415.93 crore have been deposited in these instruments as against Rs 3,029.42 crore during the corresponding period a year ago.
* The Centre has set a target of Rs 26,531.11 crore from PPF this fiscal between April and October
* In the full fiscal 2013-14, contributions to the PPF amounted to Rs 19,085.38 crore
* But investor interest in savings deposits and certificates has not been encouraging
* In the six-month period ending October, only Rs 415.93 crore has been deposited as against Rs 3,029.42 crore in the year-ago period