Interest Rate of Small Savings Schemes: There was no change in the interest rates on Public Provident Fund even once this year. Let us know what is the situation regarding interest on PPF next year…
The government has given a New Year gift to investors investing in small savings schemes. Interest rates on many small savings schemes including Sukanya Samriddhi Yojana have been changed. After the latest review for the last quarter of the current financial year i.e. January-March 2024, the government announced new interest rates on Friday, December 29. However, investors of PPF i.e. Public Provident Fund have been disappointed this time too.
Changes in their interest rates
In an official statement on Friday, it was said that the interest rates of small savings schemes have been increased by 10 to 20 basis points i.e. 0.20 percent. Sukanya Samriddhi Yojana has benefited the most, whose interest has now increased by 0.20 percent to 8.20 percent. Its interest has increased for the second time in a year. At the same time, interest on 3-year deposits has been increased by 0.10 percent to 7.10 percent. There has been no change in the interest of other small savings schemes.
Interest rates on small savings schemes
After the latest changes, the interest rates of various small savings schemes are as follows. These rates are for three months from January to March 2024. The interest rates for the first quarter of the new financial year i.e. the period April-June 2024 will be reviewed in March next year…
| Small savings scheme | Interest for January-March 2024 (in percentage) | Interest for October-December 2023 (in percentage) |
| savings deposit | 4.00 | 4.00 |
| 1-year deposit | 6.90 | 6.90 |
| 2-year deposit | 7.00 | 7.00 |
| 3-year deposit | 7.10 | 7.00 |
| 5-year deposit | 7.50 | 7.50 |
| 5-Year Recurring Deposit | 6.70 | 6.70 |
| Senior Citizen Savings Scheme | 8.20 | 8.20 |
| Monthly income account | 7.40 | 7.40 |
| national savings certificate | 7.70 | 7.70 |
| Public Provident Fund | 7.10 | 7.10 |
| Kisan Vikas Patra | 7.50 (115 months) | 7.50 (115 months) |
| Sukanya Samriddhi Yojana | 8.20 | 8.00 |
PPF is popular due to these reasons
PPF has been a popular option for people with small savings. By investing in this, investors get many benefits simultaneously. On one hand, it helps in securing life after retirement by saving now. In this, one gets the benefit of stable returns with less risk. Apart from this, investors also get many tax related benefits by investing in PPF.
Double benefit of income tax
Under Section 80C of Income Tax, income up to Rs 1.5 lakh can be made tax-free on contribution to PPF i.e. investment in PPF. A maximum of only Rs 1.5 lakh can be invested in this scheme during a financial year. On the other hand, the income from PPF is also completely tax-free. Be it the interest earned on PPF or the amount received after maturity, there is no income tax on both.
No change since April 2020
After the latest changes, the interest rate on PPF is stable at 7.1 percent. This year, the interest on some small savings schemes was increased twice, but in the case of PPF, there was no change even once. This time people had high expectations that the government could increase the interest on PPF. However, PPF investors are once again disappointed. Actually, there has been no change in the interest of PPF since April 2020. Now since the same interest is going to remain till March 2024. This means that the period of stable interest rates on PPF will be completed for 4 years.
The interest is so much less than the fixed formula
The interest rates of PPF are decided on the basis of the recommendations of Shyamal Gopinath Committee. The committee had suggested linking the interest on PPF to the yield of 10-year government securities, so that its investors can get the benefit of market-linked interest rates. According to the recommendations of the committee, the interest rates of PPF should be 0.25 percent more than the yield of 10-year government bonds. The yield of the benchmark 10-year bond during September-October 2023 was 7.28 percent. Thus, according to the formula, the interest rate on PPF should be 7.53 percent.
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