Sukanya Samriddhi Scheme, 3-Year Term Deposit, and More

In a significant move, the Narendra Modi-led government has announced a 20 basis points hike in the interest rates for various small savings schemes, including the popular Sukanya Samriddhi Yojana and the 3-year Time Deposit, for the January-March 2024 quarter. This decision by the Union Finance Ministry is expected to impact the returns on these schemes positively.

Sukanya Samriddhi Yojana Gets a Boost

Under the latest revision, the interest rate for the Sukanya Samriddhi Yojana has been increased from 8.0% to 8.2%. This adjustment aims to provide enhanced returns for beneficiaries of this welfare-oriented savings scheme.

Changes Across Small Savings Schemes

The Union finance ministry, in its recent notification, confirmed that most small savings schemes' interest rates remain consistent, with minor adjustments for specific schemes like the Sukanya Samriddhi Scheme and the 3-year Time Deposit.

According to the revised list, the interest rate for the 3-year Time Deposit will now be 7.1%, compared to the previous rate of 7.0%. It's worth noting that earlier interest rates for Sukanya Samriddhi Scheme and 3-year Time Deposit were 8.0% and 7.1%, respectively.

Historical Perspective on PPF Rates

The Public Provident Fund (PPF) rates, which remained unchanged for over three years, saw their last adjustment in April-June 2020 when they were reduced from 7.9% to 7.1%. The recent announcement indicates a steady trajectory in small savings interest rates.

In the previous quarter (October-December 2023), the government maintained small savings interest rates at the same level, with only a marginal increase in five-year recurring deposit rates.

Interest Rates for January-March 2024

Here's a snapshot of the revised interest rates for various small savings schemes:

• Savings Deposit: 4%
• 1-Year Post Office Time Deposits: 6.9%
• 2-Year Post Office Time Deposits: 7.0%
• 3-Year Post Office Time Deposits: 7.1%
• 5-Year Post Office Time Deposits: 7.5%
• 5-Year Recurring Deposits: 6.7% (previously 6.5%)
• National Saving Certificates (NSC): 7.7%
• Kisan Vikas Patra: 7.5% (matures in 115 months)
• Public Provident Fund: 7.1%
• Sukanya Samriddhi Account: 8.2%
• Senior Citizens Savings Scheme: 8.2%
• Monthly Income Account: 7.4%

Previous Interest Rates (October-December 2023)

For comparison, here are the interest rates from the previous quarter:

• Sukanya Samriddhi Account: 8.0%
• Senior Citizens Savings Scheme: 8.2%

Tax Saving through Small Savings Schemes

Small savings schemes, categorized into savings deposits, social security schemes, and monthly income plans, play a crucial role in individual tax planning. Under Section 80C of the Income Tax Act, individuals can claim deductions of up to Rs 1.5 lakh per year from their taxable income by investing in PPF, Senior Citizens Savings Scheme (SCSS), National Saving Certificates (NSC), Sukanya Samriddhi Yojana (SSY), and the 5-Year Post Office Time Deposit Scheme.

Quarterly Revision and Committee Recommendations

The interest rates on small savings instruments, including the National Savings Certificate, Sukanya Samriddhi Account Scheme, Kisan Vikas Patra, and Public Provident Fund, are revised every quarter. This revision aligns with the market rate for the 10-year government security, based on a formula recommended by a committee led by former Reserve Bank of India Governor Shyamala Gopinath. The committee suggested that the interest rates of different schemes should be 25-100 basis points higher than the yields of government bonds of similar maturity.

The government has consistently argued that the current interest rates on various small savings schemes are comparatively better than the fixed deposit schemes offered by public and private banks. This move aims to strike a balance between providing attractive returns to savers and ensuring fiscal sustainability.