PPF, post office small savings interest rates cut 0.10%

Millions of small savers and PPF account holders will earn less on their post office savings schemes, with the government deciding to reduce interest rates on them marginally by 0.10 per cent.

The interest rate of Public Provident Fund (PPF) has been lowered from 8.8 per cent to 8.7 per cent with effect from April 1, 2013, said a Finance Ministry statement.

However, the rates on savings deposit schemes and on fixed deposit of up to one year run by post offices has been kept unchanged at 4 per cent and 8.2 per cent, respectively.

Further, Monthly Income Schemes (MIS) of 5 year maturity will earn an interest of 8.4 per cent.

The National Savings Certificates (NSC) having maturity of five and 10 years will now attract 8.5 per cent and 8.8 per cent interest respectively, down 0.10 per cent each.

The interest rates would be applicable for the entire 2013-14 fiscal.

The rate for senior citizens savings scheme (SCSS) will now stand at 9.2 per cent, down from 9.3 per cent.

The revision in interest rates follows a decision taken by government last year to link the small savings returns with the market rate.

The new rates are required to be announced at the beginning of a financial year.

The decision is in line with the recommendations of Shyamala Gopinath Committee, which had suggested that returns should be in sync with market rates determined by the returns offered by other securities.

Deputy Chairman Montek Singh Ahluwalia today justified the lowering of rate of interest on small saving schemes saying the returns remain favourable to depositors in real term.

“In real terms, inflation is much lower than it was two years ago. So, in real term, the interest rate is more favourable,” Ahluwalia said on the sidelines of Skoch summit.

“I don’t believe that interest rate for savers through the post office system can be delinked completely from the interest rate system in the country,” he said.

Ahluwalia said: “If you want low (interest) rate environment, you cannot say, ‘I want higher interest rate for savers and low interest rate for borrowers’. They have probably moderated (interest rate) a little bit in line with the softening of interest rates.”

The Reserve Bank has recently cut short term borrowing and lending rate by 0.25 per cent to boost economic recovery.
India’s economic growth slowed further to 4.5 per cent in the October-December quarter of current fiscal, and the gross domestic product (GDP) in the first nine months (April-December) of 2012-13 is at 5 per cent.

Central Statistical Organisation in its advance estimates has projected that Indian economy will grow at a over decade low growth rate of 5 per cent in the current fiscal.

However, according to Ahluwalia, India can achieve over 6.5 per cent economic growth next fiscal.

Tips For Maximising Benefits And Returns in PPF

  • PPF tipsPPF tips

    Invest by the 5th of the month

  • Tax rebate can be availed of by investing even in the 16th year
  • Post-Maturity continuation
  • Can be self-funding after year 7
  • Interest in your PPF account is calculated on the lowest balance between the close of the fifth day and the last day of every month and is credited to the account at the end of each financial year i.e., on 31st March. So if you invest by the 5th of the month, you will be eligible to interest for the full month in which you are investing.
  • Although, PPF is theoretically a 15-year scheme, you can make your last contribution to PPF till the last day of the 16th financial year. Your contribution to PPF on the last day of the 16th year may not get any interest, but you can claim a tax-rebate on the investment amount.
  • You could choose to extend your PPF account for a period of five years at a time, after the completion of its 15-year term. Such an extension is recommended for individuals who do not need this entire amount, nor have a better investment option.
  • If you choose to extend your account, you must submit Form H if you want to claim section 80C tax benefits on fresh contributions. If you merely retain the balance in your account, without submitting Form H, you will continue to earn 8% p.a. tax-free interest until it is withdrawn.
  • If you continue with fresh subscriptions, you are entitled to withdraw upto 60% of your balance at the beginning of each extended period in one or more installments, but not more than once a year.
  • If you merely retain the balance in your account, you can withdraw the entire sum in one, or more, installments, but again, but not more than once a year.
  • The partial withdrawal facility of the PPF scheme enables you to derive the benefits of section 80C without investing any fresh capital.
  • Assuming you have decided to invest a fixed amount in PPF every year, from the 7th year onwards you can withdraw an amount equivalent to your annual investment from your accrued PPF account, and deposit the same back as your contribution for that particular year.  

Public Provident Fund ppf query?

In Public Provident Fund(ppf) if i start off with a deposit ?
In Public Provident Fund if i start off with a deposit of rs.1000 can i increase it to rs.2000 and so on till 75000 the max is what i heard every year?or is it fixed to a specific amount say 1000 if i start of with , every year ?
1 day ago – 2 days left to answer.

Is there a maximum number of deposits per month in PPF account?

I have a PPF account in Bank of India and I have deposited two instalments(Rs. 50,000/- each time) in one month only, that is April,2012. I know maximum subscriptions should not exceed 12 per year. But are two subscriptions allowed in one month, as I have done. If I have made a mistake, how to rectify it now? The bank has raised no objection.