Public Provident Fund, Senior Citizen Savings Scheme Offering Better Returns Than Bank FDs?

Even as fixed deposits are now giving slightly more returns than earlier since several banks have recently raised their interest rates on them, small savings schemes are still offering more attractive returns. The returns on small savings schemes, such as PPF, senior citizen savings scheme, National Savings Certificate and Sukanya Samriddhi Account Scheme, range between 4 per cent and 8.1 per cent, depending upon the scheme you chose and the duration of investment.

What Are Small Savings Schemes?

Small Savings Schemes are savings instruments managed by the government to encourage citizens to save regularly. The schemes include post office saving deposits, 1-3-year time deposits, and 5-year recurring deposits. These also include saving certificates such as National Saving Certificates and Kisan Vikas Patra.

It also comprises social security schemes Public Provident Fund, Sukanya Samriddhi Account and Senior Citizens Savings Scheme. The Monthly Income Account is also covered under the schemes.

Current Interest Rates On Small Savings Schemes

Recently, the government kept the interest rates on small savings instruments unchanged for the April-June quarter. Interest rates on small saving schemes are reviewed on a quarterly basis. The revision happen in line with the movement in benchmark government bonds of similar maturity. Here’re the current rates on various small savings instruments.

The post office savings deposits offer an interest rate of 4 per cent per annum. Time deposits of the tenure 1-3 years are currently offering 5.5 per cent per annum. Five-year time deposits are giving a return of 6.7 per cent a year. Five-year recurring deposits can earn 5.8 per cent a year interest.

National Saving Certificates and Kisan Vikas Patra are offering annual interest rates of 6.8 per cent and 6.9 per cent, respectively.

Public Provident Fund, Sukanya Samriddhi Account, and Senior Citizens Savings Scheme are earning annual returns of 7.1 per cent, 7.6 per cent and 7.4 per cent, respectively.

The Sukanya Samriddhi Account was launched in 2015 under the Beti Bachao Beti Padhao campaign for a girl child. The account can be opened in the name of a girl child below the age of 10 years. The scheme is eligible for tax benefit under Section 80C of the Income Tax Act. The tenure of the deposit is 21 years from the date of opening of the account and a maximum of Rs 1.5 lakh can be invested in a year.

The Monthly Income Account is offering 6.6 per cent per annum interest.

Interest Rates On Fixed Deposits

HDFC Bank, Axis Bank and Kotak Mahindra Bank recently hiked their interest rates on fixed deposits of various tenures and amount of deposits.

For fixed deposits below Rs 2 crore, HDFC Bank now offers interest rates in the range of 5.1-5.6 per cent, depending upon the tenure and borrowers’ profile. Different interest rates are offered to different profiles like women, senior citizens, etc.

For deposits above Rs 2 crore, Axis Bank now offers interest rates in the range of 4.45-4.65.