Interest rates

Make the most of small savings plans like Ppf; Interest rates, locks, further details here

Even though small savings plans don’t offer huge returns on investment, they are a disciplined way to save money, regardless of age. Interest rates offered by small savings schemes are linked to government bond yields and are reviewed on a quarterly basis. The Post offers a number of these deposit systems with sovereign guarantees and tax benefits. Apart from this, the government runs some schemes such as the PPF through the public sector banks.

Among the various schemes offered by India Post, the Public Provident Fund (PPF) scheme, National Savings Certificate, National Monthly Income Scheme and Sukanya Samriddhi Yojana are the most popular. People can invest in any of these schemes by opening an account at the post office.

To open an account, the investor should obtain the account opening form from the post office and complete it with the KYC form. They will have to indicate the preferred scheme in which they wish to invest.

Here is a ready account of the features of some small savings plans:

Public Provident Fund (PPF)

In addition to being one of the safest investment options, the PPF also helps save taxes under Section 80C of the Income Tax Act. PPF offers income tax deductions up to Rs 1.5 lakh per financial year and interest earned from the contribution is also tax exempt.

Individuals can make a minimum contribution of Rs 500 and the upper limit is Rs 1.5 lakh during a financial year. The plan currently offers an interest rate of 7.1% per annum (compounded annually). It has a lock-in period of 15 years, after which individuals can extend the scheme in increments of five years. PPF accounts can also be opened at banks.

National Savings Certificate (NSC)

Another popular small savings plan is the National Savings Certificate (NSC), which also offers tax benefits to the investor. The minimum deposit in the NSC is Rs 1,000, while there is no upper limit set for this account. The duration of the scheme is five years. Currently, the government offers an interest rate of 6.8% compounded annually. However, interest is payable at maturity.

National Monthly Income Scheme

Individuals can deposit a minimum amount of Rs 1,000 in this program. The maximum investment limit is Rs 4.5 lakh in a single account. In a joint account, the maximum investment limit is Rs 9 lakh. The plan currently offers interest of 6.6% per annum payable monthly.

The account cannot be prematurely closed until it has completed one year. If investors close the account after one year and before three years, a penalty equal to 2% of the principal is deducted by the government. Similarly, if the investor closes the account after three years and before five years, 1% is deducted from the principal.

In order to secure the future of a little girl, the government had launched the Sukanya Samriddhi Yojana. The current interest rate offered by this scheme is 7.6% per annum, calculated on an annual basis. The minimum deposit to the scheme is Rs 250 and the upper limit is Rs 1.5 lakh per financial year. Deposits can be made for a period of 15 years from the date of opening. However, the plan will expire after 21 years from the date the account is opened or upon the daughter’s marriage.

(Edited by : Shoma Bhattacharjee)