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Post Office Small Savings Schemes Q3 Interest Rates (NOT) Revised

Last week, Ministry of Finance announced the interest rates on the Post Office Small Savings Schemes, applicable for the third quarter of the financial year 2017-18.

By now, you would surely be aware that, as per the present policy, interest rates on Small Savings Schemes are reset periodically on a quarterly basis.

As per the tweet by the Ministry of Finance on Sept 29th, interest rates for the period October to December 2017 REMAIN UNCHANGED.

Prior to this, in the current financial year the Govt. had twice reduced the rates — by 0.1% on both occasions — in Quarter 1 i.e. Apr-Jun 2017 and again in Quarter 2 i.e. Jul-Sept 2017.

Accordingly, the unchanged interest rates on various Post Office Small Savings Schemes for Q3 2017-18 — i.e. Oct 1 to Dec 31, 2017 — are detailed below:

Public Provident Fund (PPF) : 7.8% p.a. [compounded annually]

5-year National Saving Certificate (NSC) : 7.8% p.a. [compounded annually]

Monthly Income Scheme : 7.5% p.a. [monthly compounding and paid out]

Senior Citizens Savings Scheme : 8.3% p.a. [quarterly compounding and paid out]

Time Deposits
1-year Deposit : 6.8% p.a.
2-year Deposit : 6.9% p.a.
3-year Deposit : 7.1% p.a.
5-year Deposit : 7.6% p.a.
(All on quarterly compounding basis)

5-year Recurring Deposit : 7.1% p.a. [compounded quarterly]

Kisan Vikas Patra : 7.5% p.a. [compounded annually] 
(The scheme will double your money in 115 months)

Sukanya Samriddhi Scheme : 8.3% p.a. [compounded annually]

Savings Deposit : 4% p.a. [compounded annually]

Since there are no interest rate cuts on the Small Savings Schemes, they continue to comfortably beat the interest rates offered by the banks on their fixed deposits. As such, it is quite likely that the investors would continue to put their money in Post Office Schemes vis-a-vis the Bank Fixed Deposits.

Here, I repeat my earlier warning... THIS IS A BAD IDEA (especially if you pay income tax at higher rates).

You will find the Debt Mutual Funds to be lot more tax-friendly investments — and also with a lot less fuss — vis-a-vis both the fixed deposits and post office small savings schemes.

Moreover, even if by law they cannot give pre-fixed interest rates and the returns are market-linked, their performance over the last 15-20 years has been far (far) superior — without any compromise on safety and liquidity.

Must Read: How To Select The Low-Risk High-Yield Debt Funds.

For the benefit of those who might have missed my earlier blog posts, I reiterate... your phones have become infinitely smarter, but your investments are still thoroughly outdated and useless.

So, unless you wish to become extinct like the dinosaurs, you should IMMEDIATELY upgrade your investments.

But if you still wish to stick to the fixed, assured-rate investments with 100% safety, you have one saviour... the 8% GOI Savings (Taxable) Bonds. You will surely love this dear old almost-forgotten scheme. It was once in great demand during the era of those black rotary-dial phones.

The applicable interest rates apply only to the "new accounts" opened during the respective period (except PPF and Sukanya Samriddhi Scheme, where the new rate is applied on the outstanding account balance).

For the existing accounts under all other schemes, the contracted interest rate remains unchanged until maturity.

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