Government of India has introduced several investment schemes in the past that offer sufficient income tax rebates. At present, the government is running 8 such small saving schemes through selected banks and Post Offices across the country. With effect from April 1 this year, the finance ministry had announced that interest rates on small savings schemes have been cut sharply for the first quarter of the financial year 2021-22. The latest cuts have reduced the interest rates on small savings schemes by a total of 110-250 bps during the current year. After this update, the interest rate on PPF interest rate has been reduced to 6.4 per cent from 7.1 per cent. It is the first time since 1974. At present, the government is of offering a maximum of 6.9 per cent of annual interest rate on Sukanya Samriddhi Scheme.
Here are the updated interest rates on various small savings plans.
Interest rate of saving deposits stands at 3.50 per cent annually. While 1-year time deposit offer around 4.40 per cent, two-year time deposit and 3-year time deposit will provide up to 5 per cent and 5.10 per cent respectively. The interest rate of 5-year time deposit stands at 5.80 per cent, while 5-year recurring deposit will offer up to 5.30 per cent interest.
Talking about the savings schemes, The Senior Citizen Savings Schemes provides 6.50 per cent, while the interest rate for Monthly Income Account is updated to 5.70 per cent. The National Savings Certificate plan renders 5.90 per cent and rate of interest of Public Provident Fund has been reduced to 6.40 per cent. While the Kisan Vikas Patra’s rate of interest has been updated to 6.20 percent, Sukanya Samriddhi Scheme offers a maximum of 6.90 per cent.
These schemes help investors enjoy benefits up to Rs 1.5 lakh in a financial year. from taxable income under Section 80C of the Income Tax Act. These cuts in the interest rate of saving schemes indicate further reductions in the coming future, so investors should carefully plan their income tax savings.