Interest rates on small savings schemes cut

Tribune News Service

New Delhi, March 31

It’s bad news for fixed income depositors. The government on Wednesday cut the interest rates on a slew of such schemes, including the post office small savings schemes, for three months and Senior Citizen Savings Scheme to 6.5% from 7.4 % per annum.

Also read: U-turn: Order for cut in interest rates of small savings schemes withdrawn

The interest rate on PPF has been cut to a 44-year low of 6.4% from 7.1% per annum while the five-year monthly income account scheme will offer 5.7 per cent instead of 6.6 per cent payable monthly. On the one-year time deposit, the rate of interest will be 4.4% while on the five-year deposit the rate will remain 5.8% per annum.

The biggest cut is on the one-year deposit. The new rate stands lower by 1.1%. The interest rate on post office savings account has been slashed from 4% to 3.5 %. The five-year RD scheme will get 5.3% while Sukanya Samriddhi Yojana will offer 6.9% per annum.The money in KVP will now double in 138 months (6.2 %) instead of 124 months (6.9%). Based on government yields, at the start of every quarter of the financial year, the government sets the interest rates on post office schemes for the next three months. But there is no change till maturity for investments in NSC, KVP, Time Deposits, Senior Citizens Savings Scheme.

There is a provision in PPF and Sukanya Samriddhi Yojana for a revision in the rate each quarter of any financial year. Many post office schemes come with tax benefits under Section 80C of the I-T Act.