Govt’s Gift to Investors: Interest Rate Increased for PPF, NSC & Other Saving Schemes : Fe
Government recently increased the rates of PPF, Sukanaya Samriddhi, NSCs, Senior Citizen Saving Schemes and other small saving schemes for the coming quarter (Oct-Dec). Interest rate on PPF has been increased from 7.6% to 8%, on Sukanaya Samriddhi Scheme from 8.1% to 8.5%. Interest rates on other saving schemes are also being increased in the range of 0.3% to 0.4%. (Details of each scheme are given in the end).
Basis of Increase in Interest Rates
In Feb, 2016 Government decided to revise the interest rates on these saving scheme every quarter in reference to interest on Government Bonds having comparable maturity period.
As RBI has increased its Repo rate by 0.50% in last six months (0.25% in June and 0.25% in August), consequently interest rates on fixed deposits have also been increased by Banks. Therefore, it becomes necessary for Ministry of Finance to increase rate of interest on National Saving Schemes, to keep them attractive.
DETAILS OF EACH SCHEME INCLUDING THEIR TAX TREATMENT
Public Provident Fund (PPF): For Every Individual
Scheme Features
Current Interest Rate is 8%.
Account can be opened by Individuals with Public Sector Banks, Private Sector Banks or Post Office (Duly authorized by Ministry of Finance).
Only one account can be operated by an individual. Though additional accounts can be opened in the name of minor son/daughter.
Maximum amount of investment is Rs.1,50,000 in a Financial Year (in maximum 12 tranches). Minimum amount of investment is Rs.500.
Interest is paid annually in the account. (Calculation is done on monthly basis; taking each month’s lowest balance between 5th & last day of that month).
Maturity period of PPF is 15 years, each time extendable for another bloc of 5 years by account holder.
Premature Closure: In 2016, Government allowed premature closure after completion of five financial years for specified reasons like medical, higher education etc.
Partial withdrawal is allowed once in a year starting from 7th Financial Year.
Loan Facility is allowed between 3rd to 6th financial years.
Tax Treatment:
Interest income is exempt from Taxation u/s 10(11) of Income Tax Act.
Investment amount can be claimed under section 80(C).
Sukanaya Samriddhi Scheme (If you have Girl Child Go for it instead of PPF)
Scheme Features
In 2014 Government started this scheme with the objective of achieving Girls Welfare and their Financial Protection.
Current Interest Rate is 8.5%.
Account can be opened by Individuals with Authorized Public Sector Banks, Private Sector Banks or Post Office.
Natural/Legal guardian can open the account.
For up to two girl children or three in case of twins happened at the time of second child till she attains age of 10.
Maximum amount of investment is Rs.1,50,000 in a Financial Year (no limit on number of tranches). Minimum amount of investment is Rs.1000.
Amount of deposit can be for maximum 14 years.
Maturity of Account: 21 years.
Partial Withdrawal: 50% after attaining 18 years of age by daughter for Higher Education or marriage purpose.
Premature Closure: Allowed in the event of death of the account holder (unfortunate Girl Child) or in cases of extreme compassionate grounds such as medical support in life threatening diseases to be authorized by an order by the Central Government.
Tax Treatment:
Interest income is exempt from Taxation u/s 10(11A) of Income Tax Act.
Investment amount can be claimed under section 80(C)
5 Year Senior Citizen Saving Scheme (SCSS)
Scheme Features
Objective is to provide assured income to our respected senior citizens.
Current Rate of interest is 8.7%. (Interest is paid quarterly).
Account can be opened by with Authorized Public Sector Banks, Private Sector Banks or Post Office.
One who has attained age of 60 years or more, 55 years or more (in case of VRS), 50 years or more (in case of defense personnel).
Maximum amount of investment is Rs.15,00,000/-(Rs. 15 lakhs).
Tenure is 5 years, extendable for another 3 years.
Premature closure allowed after one year with charges.
Tax Treatment:
Investment amount can be claimed under section 80(C).
Interest income is taxable, although Budget, 2018 has made interest income exempt up to Rs.50,000/- (Section 80TTB)
National Saving Certificates
Scheme Features
5 years NSCs are issued by Post Office.
Current Rate of Interest is 8%.
Minimum investment is Rs.100/-, maximum no limit.
Interest accrues annually, re-invested in certificates.
Maturity is at 5 years, but can be transferred to other individual.
Tax Treatment:
Investment is eligible for deduction under 80C.
Interest is taxable, although interest reinvested in NSC is eligible for 80C.
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Current Rate of Interest of all schemes are
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