This article will give you information about the latest amendments and changes in interest rates of various small savings scheme. The following are the various types of small savings scheme:
1) Sukanya Samriddhi Account (SSA): The interest rate has reduced to 8.5% from 8.6% now. The main purpose of introducing this scheme is to promote welfare of the girl child. ‘Sukanya Samriddhi Account’ can be opened at any time from the birth of a girl child till she attains the age of 10 years, with a minimum deposit of Rs 1000. Assessee can contribute to a maximum of Rs 1.5 lakh during the financial year. Contribution made under this scheme is eligible for deduction under section 80C for a maximum limit of Rs 1.5 lakh per year. Interest earned on this account is fully exempt from tax in the year of accrual as well as in the year of receipt. Interest is paid at the rate of 8.6%. Read more on Sukanya Samriddhi Account
2) Kisan Vikas Patra (KVP): KVP Rate will be cut to 7.7 per cent from 7.8 percent now. Kisan Vikas Patra is a saving certificate scheme which was first introduced in 1988 by India Post. KVP certificates are available in denomination of Rs 1,000, Rs 5,000, Rs 10,000 and Rs 50,000. The minimum limit is Rs. 1000 but there is no maximum limit on the amount that can be invested. Investors also have the choice of the National Savings Certificate, which offers a rate of 8.1% for five years and 8.7% for 10 years. This investment, too, is not eligible for tax deduction. The amount invested can be withdrawn after 100 months or 8 years 4 months. The maturity period of KVP is 2 years and 6 months. Assessee cannot withdraw the amount invested in KVP before maturity date.
3) Public provident fund (PPF): The interest rate has changed from 8.1 to 8.0%. If you are a salaried employee then your employee must have deducted your contribution of PF if not then still you can voluntary contribute to provident fund. As current rate of interest is 8.1% and is tax free means more benefits waiting for you at the time of retirement. Your contribution is eligible for deduction under 80C. However new rate is reduced to 8.0%
4) Senior Citizen Savings Scheme (SCSS): The interest rate has been reduced changed from 8.6% to 8.5% now. Senior Citizen Savings Scheme (SCSS) is the most profitable scheme among all the small savings schemes but is meant only for senior citizens. The account may be opened by an individual, who has attained age of 60 years or above on the date of opening of the account. Persons who has attained the age 55 years or more but less than 60 years and has retired under a Voluntary Retirement Scheme or a Special Voluntary Retirement Scheme on the date of opening of the account within three months from the date of retirement. There is no age limit for the retired personnel of defense services provided they fulfill other specified conditions.
Current rate of interest is 8.6% per annum payable quarterly which is now change to 8.5%. Please note that the interest is payable quarterly instead of compounded quarterly. Thus, unclaimed interest on these deposits won’t earn any further interest. Interest income is chargeable to tax.
5) Post-office Monthly income scheme: The Scheme will earn 7.7 % now from 7.8% earlier. Post-office Monthly income scheme is one among all the small savings schemes. An individual can invest maximum INR 4.5 lakh in MIS (including his share in joint accounts). The account may be opened by an individual. Currently interest is paid at the rate of 7.8 % on such accounts but it will be reduced to 7.7%.
6) Post office time deposit: Post Office term deposits of one, two and three years command an interest rate of 7.9 per cent but from October 1st , 1-year time deposit will get 7 per cent, 2-year time deposit will earn 7.1 per cent and 3-Year time deposit will attract interest of 7.3 per cent. Five-year time deposit will fetch 7.8 per cent interest in the first quarter as against 7.9 per cent while the same on five-year recurring deposit has been slashed to 7.8 per cent from 7.9 per cent. This is similar to fixed deposits which are available for various time durations like 1year and up to 5 years. Currently you are beneficial if you invest for 5 years plan as it offer Interest at the rate of 7.9 % of interest.
7) Recurring deposits (Post office): Recurring deposit is a deposit scheme which allows customers add to their savings by investing money which earns interest over a fixed period of time. Under Recurring deposit individual deposits a particular amount of his choice monthly and time being interest is compounded on that amount till the maturity period. Recurring deposit is made open for the individual for a fixed period of time and money is deposited as per conditions or at specified time intervals like monthly, quarterly and half yearly. It best option for investment as there is no requirement to invest huge amount. The current rate of interest on recurring deposit is paid at the rate of 7.4 % but after the amendment made by government the interest rate will be reduced to 7.3 % after October 2016.
8) National Savings Certificate (NSC): The interest rate will be reduced to 8.0% from 8.1% earlier. NSC is a tax saving time instrument with a maturity period of five and Ten Years. Presently, the interest is paid @ 8.1% p.a. on 5 year NSC and 8.8 % Per Annum on 10 year NSC. Interest is Compounded Half Yearly. While the minimum investment amount is Rs 100, there is no maximum amount. Premature withdrawals are allowed only in case of special circumstances such as death of the holder. NSC investments are eligible for a deduction of up to Rs 150,000 p.a. under Section 80C. Furthermore, the accrued interest which is deemed to be reinvested qualifies for deduction under Section 80C. However, the interest income is chargeable to tax in the year in which it accrues. For more information you can refer our article: Why to invest in National Saving Certificate?
9) Employees Provident Fund (EPF): In case you are a salaried employee then your employee must have deducted your contribution of PF from your salary. As the employer contribution is exempt and your contribution is eligible for deduction under 80C.
The interest on EPF a/c is paid at the rate of 8.7 % but the interest rate is now revised to 8.8% means more benefits waiting for you at the time of retirement. Your contribution is eligible for deduction under 80C. Read more about Exemption under Employee Provident Fund Act- FAQs