How are interest rates on small savings schemes calculated?
Small savings schemes interest rates are linked to 10-year Government Securities (G-Secs) yields in the secondary market.
The government review rates for small savings schemes every three months by following a set formula.
The Shyamala Gopinath Committee recommended a methodology to compute interest rates for small savings schemes.
The government follows this methodology to ensure that the rates of small savings schemes remain competitive and investors are attracted to them.
Interest rates on post office small savings schemes like Public Provident Fund (PPF), Kisan Vikas Patra (KVP), National Savings Certificate (NSC), Sukanya Samriddhi Yojana (SSY), Senior Citizen Savings Scheme (SCSS), Post Office Time Deposits (POTD), Mahila Samman Savings Certificate, and Post Office Monthly Income Scheme (POMIS) have remained unchanged for the July-September quarter 2024.
According to an official notification, “The rates of interest on various Small Savings Schemes for the second quarter of FY 2024-25 starting from July, 2024 and ending on 30′ September, 2024 shall remain unchanged from those notified for the first quarter (1St April, 2024 to 30th June, 2024) of FY 2024-25.”
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Take a look at the post office schemes interest rates for the July-September 2024 period, as notified by the Ministry of Finance.
Small Savings Instruments Interest Rates for July-Sept 2024 Savings Deposit 4% 1 Year Time Deposit 6.9% 2 Year Time Deposit 7% 3 Year Time Deposit 7.1% 5 Year Time Deposit 7.5% 5 Year Recurring Deposit 6.7% Senior Citizen Savings Scheme 8.2% Monthly Income Account Scheme 7.4% National Savings Certificate 7.7% Public Provident Fund Scheme 7.1% Kisan Vikas Patra 7.5% Sukanya Samriddhi Account 8.2%
Source: Finance Ministry
Tax exemption on small savings schemes
Most of the post office small savings schemes are allowed deductions benefits under Section 80C of the Income Tax Act. Among various schemes, some like PPF, Sukanya Samriddhi Yojana, KVP, etc., also get exemption benefits on interest earned.
How are interest rates on small savings schemes calculated?
Small savings schemes interest rates are linked to 10-year Government Securities (G-Secs) yields in the secondary market. The government review rates for small savings schemes every three months by following a set formula. The Shyamala Gopinath Committee recommended a methodology to compute interest rates for small savings schemes. As per the committee’s suggestions, the interest rates on various small savings schemes are set with a range of 25 to 100 bps above the G-Secs yields with matching maturities. The government follows this methodology to ensure that the rates of small savings schemes remain competitive and investors are attracted to them.
