Hike in Interest Rates on Small Savings Schemes

Finally some good news for small saving investors! The government is raising interest rates on small saving schemes such as National Savings Certificate (NSC) and Public Provident Fund (PPF) Deposits by 20-50 basis points. The new interest rates will however be applicable on investments from 1st April 2012 and not on those which you have already invested.

With the season of duty hikes and provident fund rate cut, many individuals lost hopes for good returns on their mandatory deposits like Employee Provident Fund. As a result, NSC and PPF which are voluntary deposits will earn you 8.8-8.9% instead of 8.6% per year. Also, the short term deposits in post offices will fetch you more than the longer tenure products such as PPF or the 10-year NSC. However, savings bank accounts in post offices have not seen any change on 4% interest return.

A scheme like the PPF which has a minimum term of 15 years, comes with not only the 80C tax benefits to tax payers to get a concession of up to Rs.1 lakh a year, but also interest earned on these deposits is tax-free. Then, at the new rates, the actual return for someone in the tax slab of 30% will work out to 12%.

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