The rate of interest on various small savings schemes for the fourth quarter of the financial year 2021-22, ending March 31, 2022, will remain unchanged, according to a circular by the Department of Economic Affairs on December 31, 2021.
Small savings schemes include Public Provident Fund (PPF), Sukanya Samriddhi Account (SSA), Senior Citizen Savings Scheme (SCSS), National Savings Certificate (NSC) and post office deposits. PPF will continue to earn 7.10 per cent, SCSS will get 7.40 per cent, and those who have post office time deposits will earn 5.5-6.7 per cent. The interest rates will be valid for the period between January 1, 2021, to March 31, 2022. New investments that will be made during the January-March 2022 quarter into these schemes will also earn the same interest rates as in the previous quarter.
Interest rates remained at an all-time low in 2021. Most of these popular small savings schemes saw rates go down by about 40 basis points to more than a percentage point between January and November 2021. The interest rates of long-term investments such as PPF have fallen by as much as 1.5 per cent in the last five years.
Falling interest rates of small savings schemes rates have hit the money goals of people across the board. While senior citizens will be the most affected as they commonly invest in small savings schemes for regular income, other medium-to-long-term investors have also been hit (read more here).
PPF is a popular long-term investment that comes with a 15 years lock-in period, though partial withdrawals are allowed after five years. Its taxability makes it an effective debt investment for goals such as building a retirement corpus. Investment in PPF is eligible for tax deduction up to Rs 1.5 lakh under Section 80C of the Income-tax Act. Besides, the returns from it are tax-free.
The National Savings Certificate, which has a minimum investment limit of Rs 100 and no maximum limit, is also eligible for tax deduction under Section 80C. SCSS is meant for senior citizens and anyone above the age of 60 years can open it, other than some exceptions. Sukanya Samriddhi Account (SSA) is meant for goals related to girl children. Parents can invest in SSA for up to two girl children. NSC, SCSS and SSA are eligible for tax deduction under Section 80C.