Bringing a good news for investors, the government has kept the post office small savings schemes interest rates unchanged for the October-November-December 2021 quarter. The rate of interest would remain unchanged for PPF, NSC and other small savings schemes at least for the next three months. In consonance, with the norms, the government sets the interest rate for small saving schemes at the outset of every quarter for the next three months. The rate of changes in interest rate is based on the average yield of the government securities.
This decision by the government brings a sigh of relief for the fixed income investors those who invest in these avenues for minimizing the risk. 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.
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. 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. This was announced by the finance ministry via a circular dated September 30, 2021. As per the ministry circular, PPF will continue to earn 7.1 per cent, the NSC will fetch 6.8 per cent, and the Post Office Monthly Income Scheme Account will earn 6.6 per cent.
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.
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