The government has ratified a four-decade-low interest rate of 8.1 per cent on employees’ provident fund (EPF) deposits for 2021-22. The EPF is for people employed in the formal sector. However, those who want to invest in such safe social-security schemes can look at small saving schemes, which include PPF, senior citizen savings scheme, National Savings Certificate and Sukanya Samriddhi Account Scheme. Here’s what you need to know about these schemes and the interest rates offered by them.
What Are Small Savings Schemes?
Small savings schemes, which include post office saving deposits, 1-3-year time deposits, and 5-year recurring deposits, are savings instruments managed by the government to encourage citizens to save regularly. These also include saving certificates such as National Saving Certificates and Kisan Vikas Patra.
It also comprises social security schemes public provident fund, Sukanya Samriddhi Account, and Senior Citizens Savings Scheme. The monthly income account is also covered under the schemes.
Interest Rates Offered By Small Savings Schemes
Interest rates on small saving schemes are reviewed on a quarterly basis. For the next quarter, the revised rates will be announced by the end of this month. The revision happens in line with the movement in benchmark government bonds of similar maturity. Currently, the rates on various schemes range from four per cent to 8.1 per cent.
Post office savings deposits offer an interest rate of 4 per cent per annum, while time deposits of the tenure 1-3 years offer 5.5 per cent per annum. Five-year time deposits are giving a return of 6.7 per cent a year. Five-year recurring deposits can earn an interest of 5.8 per cent annually.
National Saving Certificates and Kisan Vikas Patra are offering annual interest rates of 6.8 per cent and 6.9 per cent, respectively. PPF, Sukanya Samriddhi Account, and Senior Citizens Savings Scheme are earning annual returns of 7.1 per cent, 7.6 per cent and 7.4 per cent, respectively.
Accounts under the Sukanya Samriddhi Yojana, which was launched in 2015 under the Beti Bachao Beti Padhao campaign for a girl child, can be opened in the name of a girl child below the age of 10 years. The scheme is eligible for tax benefit under Section 80C of the Income Tax Act. The tenure of the deposit is 21 years from the date of opening of the account and a maximum of Rs 1.5 lakh can be invested in a year.
The Monthly Income Account is offering 6.6 per cent per annum interest.
EPF Revised Rates
The government has approved a four-decade-low interest rate of 8.1 per cent on employee provident fund deposits for 2021-22, according to news agency PTI quoting an EPFO office order. The decision will impact about five crore subscribers of the Employees’ Provident Fund Organisation (EPFO).
The retirement fund body had in March decided to pay an 8.1 per cent rate of interest on the provident fund deposits for the financial year 2021-22, against 8.5 per cent earlier. The 8.1 per cent EPF interest rate is the lowest since 1977-78, when it stood at 8 per cent.
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