The government revises small savings schemes interest rates every quarter. For the quarter April-June 2024, the government has kept the interest rates of post office schemes unchanged from the rates prevailing during the January March 2023 quarter.
“The rates of interest on various Small Savings Schemes for the first quarter of FY 2024-25 starting from 1’t April, 2024 and ending on 30th June, 2024 shall remain unchanged from those notified for the fourth quarter (1st January, 2024 to 31st March, 2024) of FY 2023-24,” stated an office memorandum issued by the Ministry of Finance on March 8, 2024.”
The Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), Mahila Samman Savings Certificate, Senior Citizen Savings Scheme (SCSS) and National Savings Certificate (NSC) are some of the popular small savings schemes.
While investors with a high-risk appetite are savouring the high returns of 30 per cent given by Nifty50 in the fiscal year 2024, there are millions of conservative investors who remain content with their considerable exposure to fixed-income instruments.
In order to safeguard a portion of their money, some aggressive investors also allocate a portion of their portfolio to debt instruments. Small savings plans are the most often used fixed-income products, and a lot of investors choose them because of their guaranteed and predictable returns.
The current rates of interest which will continue to be in force from April 1, 2024, are as follows:
| Financial Instrument | Rate of interest (%) | Compounded frequency |
| Post office savings Account: | 4 | Annually |
| 1-year time deposit | 6.9 | Quarterly |
| 2-year time deposit | 7 | Quarterly |
| 3-year time deposit | 7.1 | Quarterly |
| 5-year time deposit | 7.5 | Quarterly |
| 5-year recurring deposit | 6.7 | Quarterly |
| Senior Citizen Savings | 8.2 | Quarterly and Paid |
| Monthly income account | 7.4 | Monthly and paid |
| National Savings Certificate (NSC) | 7.7 | Annually |
| Public Provident Fund (PPF) | 7.1 | Annually |
| Kisas Vikas Patra | 7.5 | Annually |
| Sukanya Samriddhi Account Scheme | 8.2 | Annually |
(Source: Department of Economic Affairs)
As we can see in the table above, Senior Citizen Savings and Sukanya Samriddhi Account offer the highest interest rate i.e., 8.2 per cent. National Savings Certificate offers 7.7 per cent and Kisan Vikas Patra (KVP) offers 7.5 per cent.
How the interest rates of small savings schemes are set
The government evaluates the interest rates of small savings plans periodically. The mechanism for calculating these prices was proposed by the Shyamala Gopinath Committee. According to the committee’s recommendations, interest rates for various schemes should be 25 to 100 basis points higher than the yields on government bonds with the same maturities.
The government raised the interest rates on a few post office small savings plans for the quarter ending December 31, 2023. All schemes have kept their interest rates, with the exception of the recurring deposit rate. The Public Provident Fund (PPF) interest rate remained constant at 7.1%.
Tax benefits
Not all the small savings schemes come with tax benefits. As per Section 80C of the Income-tax Act of 1961, these post office schemes are included NSC, SCSS, SSY, and PPF.
The schemes that do not come with section 80C benefit are:
- Kisan Vikas Patra (KVP)
- Post Office Time deposits (except 5-year tenure)
- Post Office Monthly Income Scheme
- Mahila Samaan Savings Scheme
- Post Office Recurring Deposits.
Some Scheme details with minimum investment and rate of interests
Post Office Savings Account: It is very similar to a bank savings account. It can be opened by depositing a minimum amount of ₹500 while the minimum withdrawal amount is ₹50. There is no maximum limit. The interest rate offered is 4 per cent per annum on individual and joint accounts.
National Savings Certificate: Investors can open an account by investing a minimum of ₹1,000 and there is no maximum limit. The rate of interest is 7.7 percent which is compounded annually but payable at maturity.
PPF: Depositors can invest a minimum of ₹500 while the maximum amount is ₹1.5 lakh in a financial year. The rate of interest is 7.1 per cent per annum compounded yearly.
Kisan Vikas Patra: Investors can invest ₹1,000 and in multiples of ₹100 and there is no maximum limit. The rate of interest offered is 7.5 per cent compounded annually.
Sukanya Samriddhi Account Scheme: One can open this account by investing a minimum of ₹250 while the maximum is ₹1.50 lakh in a financial year. The rate of interest is 8.2 per cent per annum with effect from January 1, 2024.
