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Small Savings Schemes Q2 FY18-19 Interest Rates Steady

The Govt. has maintained the interest rates on various Post Office Small Savings Scheme for the 2nd quarter of the current financial year 2018-19.

This announcement was made by the Department of Economic Affairs, Ministry of Finance vide its Office Memorandum — Revision of interest rates for Small Savings Schemes — dated July 2, 2018.

The interest rates were not revised in the 1st quarter too.

Last financial year i.e. 2017-18 saw a total reduction of 0.40% as under:
- Apr-Jun 2017 : 0.10%
- Jul-Sept 2017 : 0.10%
- Oct-Dec 2017 : no revision
- Jan-Mar 2018 : 0.20%

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. For your information, the revised 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.

Accordingly, the interest rates on various Post Office Small Savings Schemes for Quarter-2 2018-19 — i.e. Jul 1st to Sept 30th, 2018 — are detailed below:

Public Provident Fund (PPF) : 7.6% p.a. [compounded annually]

5-year National Saving Certificate (NSC) : 7.6% p.a. [compounded annually]

Monthly Income Scheme : 7.3% 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 : 6.6% p.a.
2-year Deposit : 6.7% p.a.
3-year Deposit : 6.9% p.a.
5-year Deposit : 7.4% p.a.
(All on quarterly compounding basis)

5-year Recurring Deposit : 6.9% p.a. [compounded quarterly]

Kisan Vikas Patra : 7.3% p.a. [compounded annually] 
(The scheme will double your money in 118 months)

Sukanya Samriddhi Scheme : 8.1% p.a. [compounded annually]

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


By the way, I hope you have switched to the MORE MODERN and MORE TAX EFFICIENT fixed-income investments viz. the debt mutual funds.

Debt mutual funds continue to be an excellent alternative to Post Office Small Savings Schemes and Bank Fixed Deposits. Contrary to popular belief, they are quite safe and risk-free in nature and a great way to earn tax-free risk-free income.

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.

In this regards, do you know how to select the low-risk high-yield debt funds?

Having said that, if you still wish to stick to the fixed, assured-rate investments with 100% safety, you have one saviour... the 7.75% Savings (Taxable) Bonds issued by the Govt. of India. You will surely love this dear old almost-forgotten scheme. Once upon a time it was a favourite among many investors. 

Last quarter the the Ministry of Finance had made a couple of other announcements too with regards to the Post Office Small Saving Schemes.

A. Payment of interest and maturity value through the Savings Account.
The recent provision stipulating that "interest and maturity proceeds of Small Savings Instruments operated by Department of Posts shall be credited in Basic Savings Account opened in Post Office", was withdrawn. Hence, the interest and maturity proceeds of Small Savings Schemes will be paid to the depositors through any of the following modes:
- Depositor's Savings Account standing at Post Office
- Depositor's Savings Account standing at any Commercial Bank
- Cheque
- Cash

B. Aadhaar for Small Savings Schemes
The depositors were required to submit their Aadhaar number at the time of opening of account / purchasing certificates under various Small Savings Schemes latest by March 31, 2018. However, the last date for submission of 'Aadhaar' number was extended until further orders.

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