The post office schemes carry a sovereign guarantee on the amount invested, therefore, are considered highly safe.
Considering the current rate of interest on bank fixed deposits, the post office schemes may still appear attractive.
For the quarter of October to December 2020, the government has kept the interest rates on small saving schemes unchanged. Based on the yield on government bonds, at the beginning of every quarter of the financial year, the interest rates on the post office savings schemes are revised by the government. There was no change even in the previous quarter of July to September compared to the April to June 2020 quarter. It was only in the April to June 2020 quarter which saw a revision in the rates.
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.
The revision in interest rates, however, does not impact the existing investors in some of the small saving schemes. That is because the rates remain constant in some of the post office schemes for the entire tenure. 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) see a revision in the rate as and when the government revises the rate at each quarter of any financial year.
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. The 1-year time deposit, the rate of interest stands at 5.5 per cent.
Considering the current rate of interest on bank FD, the post office schemes may still appear attractive. 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 most of them have a long duration, make sure you have liquid funds at your disposal before parking for the long term. Invest in them by linking to your long term needs and keeping asset allocation across equity and debt into consideration. Importantly, the post office schemes carry a sovereign guarantee on the entire amount invested thus are considered highly safe.