Small Savings Schemes Latest Interest Rates (January-March 2021)

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No Change in Small Savings Schemes Interest Rates (Q4 FY21)

Introduction

A big sign of relief for the fixed income investors. Government has decided to keep Small savings schemes interest rates unchanged for quarter January-March 2021, although the yield on dated Government securities is seeing a downtrend. Thus, government’s move will encourage more people to invest in small savings schemes.

For the April-June quarter of FY2020-21, Government had slashed the interest rates on Small Savings Schemes by 0.7-1.40%. Since the Reserve Bank of India’s (RBI) has cut its policy rates in the seventh Bi-monthly MPC meet.

In this article we will see the updated Interest Rates on Small Savings Schemes – EPF, PPF, SCSS, SSY, NSC, KVP for Q4 FY2020-21 (January-March).

Financial Planning Knowledge Bank by Invest Yadnya
Financial Planning Knowledge Bank by Invest Yadnya

If you are planning to invest in any of these savings schemes, you should know about their interest rates. For all the small savings schemes interest rates are aligned with Government security rates of similar maturity, with a little spread.

Interest Rates on Different Small Savings Schemes

Small Savings Schemes
Small Savings Schemes

Below you can find the interest rates for various small savings schemes:-

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Public Provident Fund (PPF)

  • PPF is a long-term investment for a period of 15 years. The government will review the PPF rates quarterly.
  • Interest rate on PPF Scheme has been kept unchanged at 7.1% for the 4th quarter of FY2020-21 (January-March)
  • Compounding Frequency : Annually
PPF Interest Rates Q4 2021
Public Provident Fund (PPF) Interest Rates January-March 2021

Employee Provident Fund (EPF)

  • Employee Provident Fund is a long term investment tool. Interest rate on EPF contributions is revised every year.
  • The interest rate on investments in EPF was 8.65% per annum for FY2018-19, the EPF interest rates have come down from 8.65% to 8.50% for FY2019-20. It is lowest since FY2012-13.
Employee Provident Fund (EPF) Interest Rates FY20
Employee Provident Fund (EPF) Interest Rates FY20

Senior Citizen Savings Scheme (SCSS)

  • The government will review the SCSS rates quarterly. But, once a subscriber has enrolled, the rates will remain unchanged for the tenure. Deposit has a maturity period of 5 years.
  • The interest rate for Senior Citizens Savings Scheme has been kept unchanged at 7.4% per annum for the 4th quarter of FY2020-21 (January-March).
  • Compounding Frequency : Annually
SCSS Interest Rates January-March 2021
Senior Citizen Savings Scheme (SCSS) Interest Rates January-March 2021

National Savings Certificate (NSC)

  • From FY2016–17 onwards, the interest rate on the NSC will be revised every quarter as per the prevailing government-bond rates.
  • However, once you have invested in the NSC, the rate applicable that time will remain the same throughout the tenure of the investment. Certificate comes with the maturity period of 5 years.
  • The interest rate on National Savings Certificate ie. NSC (5 year VIII Issue) has been kept unchanged at 6.8% for the 4th quarter of FY2020-21 (January-March).
  • It is compounded annually but is payable at maturity.
  • The 10 year option of the NSC has been discontinued.
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NSC Interest Rates January-March 2021
National Savings Certificate (NSC) Interest Rates January-March 2021

Kisan Vikas Patra (KVP)

  • The KVP rates will be notified every quarter as per the prevailing government security rates. Scheme aims at doubling the investment in 124 months (10 years 4 months) with the applicable interest rate.
  • However, once you have made an investment, the rate will remain unchanged for you throughout the tenure.
  • KVPs has kept the interest rates unchanged at 6.9% for the 4th quarter of FY2020-21 (January-March).
  • Compounding Frequency : Annually

Sukanya Samriddhi Yojana (SSY)

SSY Interest Rates for January-March 2021
Sukanya Samriddhi Yojana Interest Rates for January-March 2021

Conclusion

  • Although the yield on dated Government Securities is seeing a downtrend, the Government has decided to keep the interest rate on small saving schemes unchanged for the quarter January-March 2021.
  • Department of Economic Affairs, Ministry of Finance has made an announcement regarding it on December 31, 2020.
  • It is a big sign of relief for the investors who have or want to invest in Small Savings Schemes. Government’s move will encourage more people to invest in small savings.
  • Not changing the rate is critical as it will help more money to be collected under small savings. This will in turn help the Government to borrow more from small savings funds. 
  • In the quarter April-June 2020, Government had reduced small savings schemes interest rates to bring them in consonance with the interest rates prevailing in the economy.
  • Shyamala Gopinath Committee had suggested that the interest rates of different small savings schemes should be 25-100 bps higher than the yields of the government bonds of similar maturity.
  • Thus, after the RBI’s magnificent policy repo rate cut in its seventh Bi-monthly Monetary Policy Committee FY2019-20, the interest rates of these schemes for the April-June quarter of 2020-21, had been slashed by between 70 bps and 140 bps.
  • Those who depend primarily on income from these schemes may now need to revisit their portfolio. Individuals with investments in fixed deposits or small savings schemes should consider the real rate of return from these instruments before investing.



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