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How EPF Interest Rates Compare With Other Savings Schemes?

Image for representation.

Image for representation.

Despite the recent rate cut, the EPF scheme remains one of the most attractive investment avenues for investors due to comparatively higher returns and tax benefits.

The Employees’ Provident Fund Organisation (EPFO) on Thursday recommended to cut interest rates for provident fund deposits by 15 basis points to 8.5% for FY20. The rate of interest is decided by EPFO on a yearly basis. In FY19, the EPF interest rate stood at 8.65%, while it was 8.55% in FY18.

Despite the recent rate cut, EPF scheme remains one of the most attractive investment avenues for investors due to comparatively higher returns and tax benefits. Take a look at how the EPF scheme compares to other small savings schemes in the country. Remember though that interest rates on small savings schemes are revised every quarter, depending on the yield on government securities. The interest rates mentioned below are valid for the January-March 2020 quarter:

1) Public Provident Fund (PPF): PPF, one of the safest and most popular small savings schemes in the country, fetches 7.9% interest rate and the interest is compounded on a yearly basis. Contributions made towards the scheme as well as the interest that is generated from the contributions are tax exempt.

2) National Savings Certificate (NSC): The government-backed NSC currently fetches 7.9% interest rate annually for investors. The duration of the scheme is five years. Individuals can invest in the scheme through post offices.

3) Kisan Vikas Patra (KVP): KVP offers interest rate of 7.6% (compounded annually) with maturity of 113 months and is offered by post offices in India.

4) Sukanya Samriddhi Yojana Account (SSY): The girl child savings scheme Sukanya Samriddhi Yojana Account fetches 8.4% (compounded annually). An account for the same can be opened at post offices or banks.

5) Senior Citizens Savings Scheme (SCSS): SCSS was launched to help individuals who are 60 years and above. The duration of SCSS is five years and the rate of interest under the scheme is 8.6% per annum.

6) Post Office schemes: The five-year Post Office Monthly Income Scheme (MIS), where interest is paid out monthly, currently offers 7.6%.

7) Post office term deposits: Post office term deposits of 1-3 years offer interest rate of 6.9% per annum, while five-year deposits fetch 7.7%. Post office 5-year recurring deposits offer an interest rate of 7.2%.