Interest rates

Postal Plans: Will small savings plan interest rates be raised for the third quarter of FY23?

CIFAR expects rates for small savings plans will likely be revised.

In its latest report, the ICRA explained that the interest rates on the small savings plans ~ are fixed on a quarterly basis and are linked to the average end-of-month G-Sec yields of the corresponding maturity at the price the last three months (called the reference period). Rates for these programs were last revised for the first quarter of fiscal 2021.”

In addition, the ICRA note pointed out that for the 1Y and 2Y, 5Y Recurring Deposits and 5Y Kisan Vikas Patra Term Deposit Schemes, the interest rates are calibrated to approximate the interest rates of similar instruments. of the banking sector, and therefore, do not benefit from a spread compared to comparable G-sec returns since April 2016.

“The spreads between 1Y and 2Y term deposits and their comparable G-sec yields would turn negative if the rates for these plans were not revised upwards for the third quarter of fiscal 2023; moreover, they would be lower spreads from the fourth quarter of fiscal 2019, when small savings rates were last revised upward,” the ICRA note added.

Similarly, the ICRA note states that “the spreads between the 5-year recurring deposits/5-year RD yields and G-sec of the corresponding maturity would fall into negative territory if they remained unchanged for the third quarter. of the 2023 financial year compared to the reference period of the quarter”.

Whether the government will raise interest rates for small savings plans will be closely watched.

Check the latest rates for small savings plans

Post Office Savings Account (CS)

Here, an individual can open an individual or joint account. The minimum investment for opening the account is 500, while there is no maximum limit. A 4% interest rate is offered.

Interest is calculated on the basis of the minimum balance between the 10th of the month and the end of the month and allowed in whole rupees only. However, no interest will be granted in any month if the balance between the 10th and the last day of the month falls below 500.

There is a tax benefit available in this account. For all savings accounts, interest up to 10,000 earned in a financial year is exempt from tax under Section 80TTA of the Income Tax Act. This also means that if the total interest earned by a depositor during a financial year is less than 10,000 then he or she won’t have to pay tax on it.

La Poste Recurring Deposit Account (RD) 5 years

As its name suggests, this plan has a duration of 5 years. It offers an interest rate of 5.8% per annum, compounded quarterly. The minimum investment in this plan is 100 and in multiples of 10. There is no maximum limit.

Once 12 installments have been deposited and the account has been maintained for 1 year, the depositor is eligible to avail the loan facility. The program can be extended for another 5 years by submitting an application to the relevant post office.

According to the India Post website, the maturity value of 5.8% for 100 denominations under the scheme is:

5 years = 6,969.67 After extension with deposit.

6 years = 8,620.98

7 years = 10,370.17

8 years = 12,223.03

9 years = 14,185.73

10 years = 16,264.76

Postal Term Account (TD)

Four programs are offered under the term deposit at the post office, namely — 1 year term deposit, 2 year term deposit, 3 year term deposit and 5 year term deposit. These accounts can be opened with a minimum of 1,000 and in multiples of 100. There is no upper limit on investment. The amount of the deposit will be refundable after the expiry of a period of 1 year, 2 years, 3 years or 5 years (as the case may be) from the date of opening.

According to India Post, no deposit will be withdrawn before the expiration of six months from the date of deposit. If the TD account was closed after 6 months but before 1 year, the PO savings account interest rate will apply. However, for 2, 3 and 5 year TD accounts, if closed prematurely after 1 year, interest will be calculated at 2% less than the TD interest rate (i.e. 1/ 2/3 years) for full years, and for a partial period of less than one year, the savings interest rates on purchase orders will apply.

Investment in TD 5 Year Accounts also entitles you to tax benefits up to 1.5 lakh under Section 80C of the Computers Act.

For term deposits of 1 year, 2 years and 3 years, the government offers an interest rate of 5.5% each per annum. For example, the annual interest will be 561 out 10,000 deposit.

Meanwhile, the interest rate is 6.7% on a 5-year TD. For example, the annual interest will be 687 on the Deposit 10,000 under the account.

Postal Monthly Revenue Scheme (MIS) Account

A depositor can open this account with a minimum of 1,000. However, a maximum of up to Deposits of 4.50 lakh are allowed in a single account and 9 lakh in joint account.

Here, an interest rate of 6.6% is offered per annum which is payable monthly from the opening date and so on until maturity. However, it should be noted that if the interest payable each month is not claimed by the account holder, such interest will not earn any additional interest. In particular, interest is taxable in the hands of the depositor.

The account has a lifespan of 5 years. If the account is closed after 1 year of seniority but before 3 years from the date of opening the account, 2% of the principal will be deducted. However, if the account is closed after 3 years but before 5 years from the date of opening, 1% will be deducted from the principal amount.

Seniors Savings Plan (SCSS)

This account is for seniors. People over 60 can open an account. In addition, retired civilian employees over 55 and under 60 and retired defense employees over 50 but under 60 are also eligible for the account.

There is an interest rate of 7.4% offered per annum. Interest is payable from the deposit on March 31, September 30 and December 30 initially, and thereafter interest is paid on March 31, June 30, September 30 and December 30.

A minimum deposit of 1,000 is allowed in the account which can be extended up to a maximum of 15,000,000. The account can be opened individually and jointly.

In particular, interest earned up to 50,000 in a fiscal year and the prescribed TDS is taxable. However, no TDS will be deducted if Form 15G/15H is submitted and accrued interest does not exceed 50,000.

But the investment is applicable for tax exemption up to 1.5 lakh under Section 80C.

The account can be prematurely closed at any time after the opening date. There is a 5 year term for this plan.

Public Provident Account (PPF) over 15 years

Under this plan, an interest rate of 7.1% is offered, which is compounded annually. A minimum deposit of 500 is allowed on the account while maximum deposits can be up to 1.5 lakh during one exercise. Interest is credited to the account at the end of each fiscal year.

PPF accounts have a loan facility available, however, after the one year expiration of the account. For example, if the account is opened in fiscal year 11, the loan can be used against the program in fiscal year 13.

Deposits are eligible for tax benefits up to 1.5 lakh under Section 80C. Plus, interest earned is tax-free in this account.

The maturity period is 15 years.

Sukanya Samriddhi (SSA) Accounts

This account is for a girl. The government offers an interest rate of 7.6% which is calculated on an annual basis. A minimum of 250 deposits are allowed and can go up to a maximum of 1.5 lakh in a financial year. Deposits can be made in a lump sum, while there is no limit on the number of deposits per month or per fiscal year.

Like the PPF account, deposits are also eligible for tax benefits under Section 80C. While interest earned is tax exempt. Interest is credited to the account at the end of each fiscal year.

The account can be opened by a guardian on behalf of the girl under 10 years old. While this account can be opened for a maximum of two girls in a family. In the case of twins, triplets, more than two accounts can be opened. The account will be managed by the guardian until the girl reaches the age of majority (i.e. 18 years old).

The overall maturity period of the account is when the girl turns 21. Or at the time of the girl’s marriage after reaching the age of 18.

National Savings Certificates (NSC)

This scheme has a duration of 5 years. It offers an interest rate of 6.8% compounded annually but payable at maturity. For instance, 1,000 deposits will increase to 1,389.49 after 5 years.

In the system, a depositor can invest a minimum of 1,000. There is no maximum limit.

The plan can be opened individually and jointly (up to 3 adults). In the case of a minor, a guardian can open the account in the name of the minor. However, a minor over 10 years old can open an account in his name.

NSCs can be pledged or transferred as security, by submitting the prescribed application form to the relevant post office, together with a letter of acceptance from the pledgee.

Deposits here enjoy a tax benefit under Section 80C.

Kisan Vikas Patra (KVP)

The scheme offers an interest rate of 6.9% which is compounded annually. The amount invested doubles in 124 months, i.e. 10 years and 4 months. A minimum deposit of 1,000 is allowed under the scheme, while there is no maximum limit.

Eligibility to open the account is the same as for National Savings Certificates (NSC). However, any number of accounts can be opened under the program.

The Deposit will mature at the maturity period prescribed by the Department of Finance from time to time, as applicable on the date of the Deposit.

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