Home   »   Government Modifies Interest Rates on Small...

Government Modifies Interest Rates on Small Savings Schemes

In a recent decision, the Union government announced adjustments in the returns on specific savings schemes, leaving the Public Provident Fund (PPF) rate untouched for the sixth consecutive quarter. The Sukanya Samriddhi Account Scheme (SSAS) will now yield 8.2%, up from the previous 8%, while the 3-year time deposit rate increases marginally to 7.1% from 7%. Despite expectations of a broader reset, the PPF rate remains stagnant at 7.1%.

Rate Freeze on PPF and SSAS

The PPF rate, static since April 2020, contrasts with the SSAS, which witnessed an increase from 7.6% to 8% in April this year. Both PPF and SSAS returns continue to enjoy tax exemptions.

RBI’s Recommendations and Unchanged Rates

The Reserve Bank of India (RBI) suggested a PPF return of 7.51% for the October to December 2023 quarter, as per the formula-based rates regime established in 2016. However, the government opted to maintain the existing rate. Additionally, the RBI’s recommendation to hike 5-year recurring deposit rates to 6.91% was overlooked, with the rate remaining steady at 6.7% for January to March 2024.

Link to Government Bond Yields

The rates for the upcoming quarter are determined by government bond yields between September and November 2023 for matching maturities, as per the adopted formula. The decision comes after a series of rate hikes in select small savings schemes over the past six quarters.

Questions Related to Exams

  1. What decision did the Union government make regarding the returns on the Sukanya Samriddhi Account Scheme (SSAS) and 3-year time deposits for the first quarter of 2024?
  2. How does the recent announcement impact the returns on the Public Provident Fund (PPF), and how long has the PPF rate remained unchanged?
  3. What are the tax implications for the returns on the PPF and SSAS schemes?

Please Try to Answer in the Comment Section!!

Government Modifies Interest Rates on Small Savings Schemes_40.1

Government Modifies Interest Rates on Small Savings Schemes_50.1

TOPICS: