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Government relaxes rules for PPF, SCSS and time deposit accounts; all you need to know


The following list summarizes the nine categories of small savings schemes currently provided by the Indian government.

Recurring Deposit (RD)

Objective: To create a systematic deposit over a predetermined period.

Interest rate: Up to 7.5% per annum.

Term: 5, 10, or 15 years.

Amount of Investment: Minimum Rs. 100 per month.

Tax Implications: Taxable interest income.

Public Provident Fund (PPF)

Objective: Accumulating long-term savings for retirement or other purposes.

Interest rate: Currently at 7.1% per annum.

Term: 15 years.

Amount of Investment: minimum size 500 per year.

Tax Implications: Interest income deferred until maturity.

Sukanya Samriddhi Yojana (SSY)

Objective: Saving for higher education or marriage of girl child.

Interest rate: Currently at 8% per annum.

Term: Up to 21 years.

Amount of Investment: minimum size 250 per month.

Tax Implications: Tax-exempt interest income.

Mahila Samman Savings Certificate

Objective: Encouraging savings among women.

Interest rate: Currently at 7.5% per annum.

Term: Up to 2 years.

Amount of Investment: Minimum Rs. 1000 per year.

Tax Implications: Tax-exempt interest income.

Kisan Vikas Patra (KVP)

Objective: Using savings from rural households.

Interest rate: Currently at 7.5% per annum.

Term: 113 months

Amount of Investment: Fixed amount (based on tenure).

Tax Implications: Capital gains on maturity are tax exempt.

National Savings Certificate (NSC)

Objective: Providing fixed income investment options.

Interest rate: Currently at 7.7% per annum.

Term: 5 years

Amount of Investment: Fixed amount (based on tenure).

Tax Implications: Taxable interest income.

Senior Citizens Savings Scheme (SCSS)

Objective: Offering seniors a secure investment option.

Interest rate: Currently at 8.2% per annum.

Term: Up to 5 years.

Amount of Investment: Up to 30 lakhs.

Tax Implications: Tax-exempt interest income.

How have the rules changed for these savings schemes?

Small savings schemes are alternative investment options regulated by the Department of Economic Affairs (DEA) within the finance ministry. The Central Government has recently implemented new regulations aimed at amending existing provisions, with the aim of promoting greater inclusion in these schemes.

Senior Citizens Savings Scheme

The government has extended the initiation of SCSS account from one month to three months. This extension aims to improve flexibility for senior citizens, enabling them to open an account at their convenience. The objective is to offer a more attractive and adaptable investment option to the senior demographic.

The updated regulations came into force after the gazette notification issued on November 9, 2023. As set out in the notification, interest on deposits in an account established under the senior citizens’ savings scheme will be calculated based on the scheme rate applicable on the maturity date or the extended maturity date.

Public Provident Fund (PPF) Scheme.

The Public Provident Fund (Amendment) Scheme, 2023, which was announced on November 9, 2023, brings various changes to the PPF scheme, particularly a revision of the regulations relating to premature closure of accounts.

These criteria include the requirement for funds to address life-threatening illnesses affecting the account holder or their immediate family, covering higher education expenses, or resulting from changes in the account holder’s residency status. According to the report, substantiated documents such as medical reports, evidence of educational admission, and relevant immigration papers must be provided to substantiate these declarations.

However, there is no change in the regulation mandating premature closure of a PPF account, resulting in a penalty, expressed as a one percent reduction in the interest rate while the account is maintained.

The National Savings Time Deposit Scheme

There has been a minor change in the interest rate for premature withdrawals from five-year Time Deposit accounts. Previously, if a five-year account was closed after four years, interest would be calculated based on the rate applicable to three-year Time Deposit accounts. However, with the updated regulations, the interest will now be calculated at the rate applicable to the Post Office Savings Account.

This change is an advantage for depositors as the interest rate for the Post Office Savings Account exceeds the interest rate of the three-year Time Deposit accounts. From November 2023, the interest rate for the Post Office Savings Account is four per cent, and the interest rate for three-year Time Deposit accounts is 6.5 per cent.

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Updated: 21 November 2023, 09:08 AM IST

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