After rate cuts in EPF (Employees’ Provident Fund) and increase in service tax, there is some good news for individuals. The government is raising the interest rate on small savings schemes such as National Savings Certificate (NSC), post office deposits and PPF (Public Provident Fund) by 0.2%- 0.5%.
The increase in interest rate would be effective from April 01, 2012.
For the time being the present rates of Interest are following:
|Scheme||Short Name||Tenure (Years)||Interest Rate|
|Post Office Savings Account||POSA||-||4.00%|
|Post Office Recurring Deposit||PORD||5||8.00%|
|Monthly Income Account Scheme||MIS||5||8.20%|
|Post Office Time Deposit||POTD||1 – 5||7.70% – 8.30%|
|5-Years National Savings Certificate||NSC||5||8.40%|
|Senior Citizens Saving Scheme||SCSS||5||9.00%|
|Public Provident Fund||PPF||15||8.60%|
|10-years National Saving Certificate||NSC||10||8.70%|
Also, the shorter tenure deposits, such as term deposits in post offices, are expected to fetch more than the longer tenure products such as public provident fund or the 10-year NSC. Savings bank accounts in post offices will, however, not see any change as the 4% return is in line with what most banks pay at present. The increase in small savings rates, which is expected to be notified by the finance ministry, is in sync with the new policy to link returns on the popular savings instruments with the interest rate on government bonds.
What should you do?
Though interest rate of 8.7% for PPF may be less than that offered by bank fixed deposits but returns from PPF is tax free. So PPF returns are generally higher for people in mid to high tax bracket. Also the rate of return on small savings schemes that will be notified will be for the full financial year, while bank deposit rates are expected to come down.
If you are done with your tax saving investments for this year, it makes sense to wait for the next 10 days for new interest rates to be notified officially and gain from it.
You can know all about above Small Savings Schemes by Govt. of India here.
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