The interest rate on the PO savings schemes is revised by the government at the beginning of every quarter of the financial year based on the yields on government bonds.
The government has kept the interest rates on small saving schemes unchanged for the quarter July to September 2020. The interest rate on the PO savings schemes is revised by the government at the beginning of every quarter of the financial year based on the yields on government bonds.
From 1 July to till 30 September 2020, the rate of interest for the various small saving s schemes will remain the same as that in the previous quarter.
For the quarter April to June 2020, the interest rate on PPF was reduced from 7.9 per cent to 7.1 per cent per annum, a reduction of 80 basis points. For the Senior Citizen Savings Scheme, the interest rate was cut from 8.6 per cent per annum to 7.4 per cent per annum. In the case of 1-year time deposit, the reduction was 1.4 pr cent as the rate has been cut from 6.9 per cent to 5.5 per cent.
The post office small savings investments such as National Savings Certificates (NSC), KVP, Time-deposits, Public Provident Fund (PPF), Senior Citizens Savings Scheme (SCSS), Sukanya Samriddhi Yojana (SSY) etc. are hugely popular amongst the investors looking for safe and fixed returns.
For the investor who invests in NSC, KVP, Time deposits, Senior Citizens Savings Scheme (SCSS), the rate of interest remains fixed until maturity. However, investors of PPF and Sukanya Samriddhi Yojana (SSY) sees a revision in the rate as and when the government revises the rate at each quarter of the financial years.
Know the impact
The post office schemes may still appear attractive to those investors who invest in bank fixed deposits. Currently, most leading commercial banks are offering an interest rate of around 5.5 per cent on FDs. Some of the post office small saving schemes may bear taxable interest. Therefore, before investing, know the tax liability of the interest that you will earn on PO schemes.
Further, as most of the small saving schemes have a long duration, make sure you have liquid funds at your disposal before parking for the long term. Link your long term needs and keep asset allocation across equity and debt into consideration while investing in them. Importantly, the post office schemes carry a sovereign guarantee on the entire amount invested thus are considered highly safe.