There is no change in interest rate of PPF, NSC and other small savings schemes at least for the next three months.
The government has kept the post office small savings schemes interest rates unchanged for the October-November-December 2021 quarter. There is no change in interest rate of PPF, NSC and other small savings schemes at least for the next three months. The small savings interest rates for the quarter ending December 2021, therefore, remains unchanged as that of the previous quarter. At the start of every quarter of the financial year, the government sets the interest rates on post office schemes for the next three months. The reset in small savings interest rate is based on the average yield of the government securities.
With no change in the post office small savings schemes interest rate, the fixed-income investors can heave a sigh of relief. The status quo in PO savings schemes interest rate could continue to keep them attractive compared to bank fixed deposits. Currently, most leading banks are offering interest rates of around 5.5 per cent over 1 to 10-year deposits.
The interest rate on PPF remains at 7.1 per cent per annum while for the Senior Citizen Savings Scheme, the interest rate is 7.4 per cent per annum. Sukanya Samriddhi Account holders will continue to get 7.6 per cent compounded annually on their account balance.
The 5-year Monthly Income Account Scheme is offering 6.6 per cent payable monthly, while the 5-year NSC continues to offer 6.8 per cent compounded annually. On the 1-year time deposit, the rate of interest stands at 5.5 per cent while on the 5-year deposit, the rate is 6.7 per cent per annum.
Even if the rates are changed, the new rates do not apply to all investors of all post office schemes. For NSC, KVP, Time deposits, Senior Citizens Savings Scheme (SCSS), the rate of interest remains fixed for investors until maturity. PPF and Sukanya Samriddhi Yojana (SSY) are the two prominent small savings schemes that witness a revision in the rate as and when the government revises them.
National Savings Certificates (NSC), KVP, Time-deposits, Public Provident Fund (PPF), Senior Citizens Savings Scheme (SCSS), Sukanya Samriddhi Yojana (SSY) etc., will continue to offer the same rate as that of the previous quarter of July- August-September quarter of 2021.
Public Provident Fund (PPF) continues to be a favourite with many investors. Few factors that make PPF a popular choice among long time investors are –
Firstly, the interest earned in PPF is tax-free under Section 10 of the Income Tax Act, 1961 and does not add to one’s tax liability, and
Secondly, the interest gets the benefit of annual compounding in PPF.
Thirdly, the investment made and the interest earned in PPF enjoys the sovereign guarantee.
Several other post office schemes are also the first choice of investors looking for fixed and assured income. Some of them also come with tax benefits under Section 80C of the I-T Act. All of them are sovereign backed investments wherein the principal invested and the interest earned are guaranteed by the government.
Sukanya Samriddhi Yojana (SSY) is an investment that earmarks funds exclusively for the needs of the girl child and can be opened in the name of a girl child below 10 years.
NSC is another tax saver that requires only a lump sum payment and there is no need to pay further contributions. On maturity, a fixed amount is received which is known right at the time of investment.
The time deposit (TD) in a post office is somewhat similar to a bank fixed deposit. While the time deposits in a post office are for 1, 2 , 3 and 5 years, it is only the 5-year TD that comes with section 80C tax benefit. Senior Citizen Savings Scheme (SCSS) is a popular investment option with those who are 60 years and above.
Considering the current rate of interest on bank fixed deposits, the post office plans may appear to be more appealing. Before investing, make sure about the tax liability of the interest that you will earn on PO schemes as some of them may have a taxable interest. Also, as the majority of them have a long duration, ensure you have liquid assets available to you prior to locking funds for the long haul. Significantly, the post office schemes carry a sovereign assurance on the full amount invested and hence carry the highest safety on the entire principal invested.